measuredmomentsby2019 ANNUAL REPORT OUR PROMISE. Rare diseases, real strides to treat them—this is why we’re
here. No matter how uncommon the disorder, the life-limiting effects are a daily
reality for those affected. When Stu Peltz founded PTC over 20 years ago, he had
this unique insight. That’s why we’re creating life-changing treatments every day.
The Family Approach
We are not simply there for you
on the rare disease journey,
but we are with you, because
we know that family gets its
strength from one another.
We’re in this together.
In Our DNA
With every setback and
advance, we continue to push
forward every day because
this is not simply a job to us:
it’s a calling.
Rare Resolve for
Rare Disease
Our people choose to work here
because they believe in the
moments that we build—
in the labs and in the home.
The Science
of Progress
We use data and groundbreaking
science in our search for
progress—progress in
rare-disease treatments,
of course, but also in the
day-to-day lives of those affected.
A Message to Our
Shareholders
Our exceptional team is well positioned to
address whatever comes our way thanks to
the progress we have made in past years.
Stuart W. Peltz, Ph.D.,
Chief Executive Officer
1 | PTC | 2019 ANNUAL REPORT
PTC Therapeutics recently marked its
22nd anniversary, a proud moment
for the company amid a difficult
time for all of us globally. As we look
back upon 2019 in the context of our
company’s long history, I’m proud to
see that we’ve kept to our mission
of providing access to best-in-class
treatments for patients living with
rare disorders.
I’m also proud of our response to the
COVID-19 pandemic to date, which
has been to remain calm, be prudent
and thoughtful, assess the situation,
make appropriate decisions, execute,
and then monitor the situation and
change course as needed. This
approach allows us to maintain focus
on our mission and successfully adapt
to new challenges as they come.
As founder and CEO, it is gratifying to
see how more than 20 years of hard
work has built a company and team
capable of sustaining, even thriving,
in this uncertain environment. Our
exceptional team is well positioned
to address whatever comes our way
thanks to the progress we have made
in past years.
We continue to invest in our clinical
stage programs and pipeline across
our small molecule and gene
therapy platforms. We have multiple
therapeutic platforms and therapies
that were either internally discovered
and developed or brought in to
complement our deep scientific roots.
We continue to drive innovation with
our platforms and therapies thereby
creating shareholder value. We believe
our multiplatform approach creates
sustainable innovation and drives
continuous value creation.
In 2019, we further diversified our
innovative pipeline by acquiring assets
focused on inflammatory and central
nervous system (CNS) disorders,
which we call our Bio-e platform.
The platform’s novel small molecule
approach targets inflammation and
oxidative stress to treat multiple
mitochondrial diseases via the redox
pathway. In 2020, we expect to start
two potential registrational trials with
the lead Bio-e compound, PTC743.
One example of being able to use our
multiple platform approach to have
products to treat all aspects of the
OUR PIPELINEPTC | 2019 ANNUAL REPORT | 2NonsenseMutation*Investigator-initiated study with NYU- As of April 2020SplicingGene TherapyBio-eOncologyDeflazacortLatAmCommercialCOMMERCIALCLINICALRESEARCHSMATRANSLARNA™EMFLAZA®TEGSEDI™WAYLIVRA®HDPTC857 GBA-PDUNDISCLOSEDUNDISCLOSEDUS DYSTROPHINPTC596 DIPGPTC743 MEDSFAPTC596 LMSPTC743 FAANGELMANPTC299 AMLIRDsCOG DISORDERSAADC Shareholder Letter (Continued)
disease are treatments we are devel-
oping for patients living with Friedreich
ataxia. In this case we are pursuing
two distinct therapeutic approaches; a
systemic small molecule that reaches
the heart, and a gene therapy treat-
ment that has the potential to impact
neurological deterioration and stop
disease progression. We believe this
dual approach can potentially treat all
aspects of the disease.
Our gene therapy platform leverages a
differentiated approach with a current
focus on treating rare monogenic CNS
disorders where the gene therapeutic
is directly injected into a targeted
location in the brain where cells have
low turnover. This allows us to deliver
significantly lower, or micro-doses, of
the gene therapeutic to patients. This
is an advantage with gene therapy
since you don’t have the additional
challenge of producing a large amount
of product. Controlling manufacturing
is key to our gene therapy strategy.
In 2019, we secured a manufacturing
facility in Hopewell, N.J. This will allow
us to begin manufacturing our own
gene therapy products.
I am proud of our team’s collective
efforts to submit our first gene
therapy treatment to regulators
for AADC deficiency (AADCd), a
rare neuromuscular disorder that
is often misdiagnosed as cerebral
palsy or epilepsy. The clinical trials
demonstrated transformative results
for these patients. We have submitted
a Marketing Authorization Application
to the European Medicines Agency
for approval, and we are also working
towards filing a Biologics Licensing
Application with the U.S. Food and
Drug Administration (FDA).
We are also very excited about the
first compound to come from our
alternative splicing platform, risdiplam,
which is partnered with Roche and
the SMA Foundation as a potential
treatment for spinal muscular atrophy
(SMA). Results from two risdiplam
pivotal clinical trials, Sunfish and
Firefish, demonstrated benefit in
patients living with type 1, 2 and
3 SMA. Risdiplam has been well
tolerated at all doses across studies
and there have been no drug related
safety findings leading to withdrawal.
A New Drug Application has been filed
with the FDA and it has been assigned
a target PDUFA date of Aug. 24, 2020.
PTC’s commercial teams have
continued to make significant
contributions. Over the last 12
months, our Duchenne muscular
dystrophy (Duchenne) franchise
3 | PTC | 2019 ANNUAL REPORT
continued to grow in markets around
the world, resulting in annual net
revenue of $291 million in 2019. We
have treated more than 90 percent
of nonsense mutation Duchenne
patients in the EU5, with a compli-
ance rate of more than 85 percent.
And we plan to launch Translarna™ in
the United States, pending dystrophin
trial results and FDA approval.
In addition, we released long-term,
real world data of nonsense mutation
Duchenne patients on Translarna in
our STRIDE registry, which showed
long-term benefits from treatment.
Patients on treatment had a delay in
ambulation of approximately three
and a half years compared to natural
history, and importantly, Translarna
showed preservation of lung function.
Another product in the Duchenne
franchise is Emflaza® for which
we received a label expansion into
patients as young as 2 years old.
We continue to identify and treat
new patients in the 2- to 5-year-old
population. Through our efforts and
scientific publications demonstrating
the benefit of Emflaza over predni-
sone, payers continue to see the
benefit of using Emflaza in Duchenne
patients and have eased restrictions.
In Latin America, we achieved an
important milestone for our patients
with the approval of Tegsedi™ in
Brazil. Tegsedi is the first RNA-
targeted treatment approved in Brazil
for the underlying cause of hereditary
transthyretin-mediated (hATTR)
amyloidosis with polyneuropathy.
With the approval of Tegsedi, PTC
now has 3 commercially available
products in Brazil.
All of the progress that we have made
for patients over the last 12 months
would not have been possible without
the passionate people of PTC. Each
PTC employee is driven by a strong
sense of purpose. The PTC team
grew by 45 percent in 2019; we
are a multinational group with
more than 800 employees in
22 countries.
I am proud that we continue to
innovate and invest to bring the
best therapies from our laboratories
to patients around the world. I am as
energized as ever about the potential
of our company, as I see firsthand
the impact we are having on patients’
lives. Together, we will make a bigger
difference around the world as PTC
continues to evolve and thrive well
into the future.
Considering the unique and
challenging circumstances we all find
ourselves in, we are exceptionally
proud of how our team has come
together and executed thus far
in 2020. Our focus remains on
executing our strategy, while
ensuring the health and safety of
our employees and patients, which
includes providing continued access
to critical therapies.
PTC is well positioned to continue
to achieve our goals in 2020, with a
strong capital position, commercial
products that are administered at
home and are well suited for the
current environment, a diverse
rare disorder pipeline and multiple
upcoming catalysts expected to
continue to drive value creation
going forward.
Sincerely,
Stuart W. Peltz, Ph. D.
Chief Executive Officer
$291
MILLION IN ANNUAL NET
REVENUE IN 2019
45%
COMPANY GROWTH
IN 2019
800
EMPLOYEES IN...
22
COUNTRIES
85%
EU5 COMPLIANCE RATE
PTC | 2019 ANNUAL REPORT | 4
(cid:41)LOSSAR(cid:59)
AADC: AADC Deficiency is a rare central nervous
system disorder arising from reductions in the
enzyme aromatic L-amino acid decarboxylase
(AADC) that result from mutations in the dopa
decarboxylase (DDC) gene. This reduction leads to
deficits in the neurotransmitters dopamine, norepi-
nephrine, epinephrine, serotonin and melatonin.
AADC Deficiency causes severe developmental
delays, the inability to develop any motor strength
and control (global muscular hypotonia(cid:17)dystonia)
resulting in breathing, feeding, and swallowing
problems, fre(cid:83)uent hospitalizations, and the need
for life-long care. Patients with severe forms
often die in the first decade of life due to profound
motor dysfunction, autonomic abnormalities,
and secondary complications such as choking,
hypoxia, and pneumonia. No treatment options
other than palliative care currently exist for many
AADC patients.
AML: Acute myeloid leukemia (A(cid:47)L) is a cancer
characterized by the rapid growth of abnormal
cells that build up in the bone marrow and blood
and interfere with normal blood cells. Symptoms
may include feeling tired, shortness of breath,
easy bruising and bleeding and increased risk of
infection. Occasionally, spread may occur to the
brain, skin or gums. A(cid:47)L progresses rapidly
and is typically fatal within weeks or months if
left untreated.
AS: Angelman Syndrome (AS) is a severe
neurological development disorder characterized
by profound developmental delays, problems
with motor coordination (ataxia) and balance,
and epilepsy. Individuals with AS do not develop
functional speech, have seizures and sleeping
difficulties. AS is caused by a problem with
UBE(cid:21)a gene and affects all races and both
genders e(cid:83)ually. It is estimated that there are up
to 1(cid:23),000 people in the U.S. living with AS. People
living with AS re(cid:83)uire life-long care, intense
therapies to help develop functional skills and
improve their (cid:83)uality of life, and close medical
supervision involving multiple interventions. AS
may be misdiagnosed since other syndromes
have similar characteristics. There are currently
no approved treatments for AS.
DIPG: Diffuse interstitial pontine glioma (DIP(cid:41))
is a rare, rapidly fatal pediatric brain tumor. There
are less than 1,000 cases per year reported in the
U.S. and Canada. Patients are usually diagnosed
between (cid:23)-(cid:24) years of age. 98(cid:7) of patients die
within two years of diagnosis.
DMD: Duchenne muscular dystrophy (D(cid:47)D) is
the most common and one of the most severe
types of muscular dystrophy. D(cid:47)D occurs when
a mutation in the dystrophin gene prevents the
cell from making a functional dystrophin protein.
Dystrophin is a muscle membrane associated
protein and is critical to the structural and
membrane stability of muscle fibers in the skeletal,
diaphragm and heart muscle. The absence
of normally functioning dystrophin results in
muscle fragility, such that muscle in(cid:76)ury occurs
when muscles contract or stretch during normal
use. As muscle damage progresses, connective
tissue and fat replace muscle fibers, resulting in
inexorable muscle weakness. Patients with D(cid:47)D
(cid:23) | PTC | 2019 ANNUAL REPORT
typically lose walking ability by their early teens,
re(cid:83)uire ventilation support in their late teens and,
eventually, die due to heart and lung failure. The
average age of death for D(cid:47)D patients is in their
mid-twenties.
GBA Parkinsons: (cid:41)BA-Parkinson(cid:360)s disease
occurs as a result of a mutation in the (cid:41)BA gene,
which makes the glucoscerebrosidase enzyme.
Deficits in this enzyme correlate with motor
symptom dysfunction, cognitive decline, and
diminishing gait and balance. The incidence of
(cid:41)BA-Parkinsons in the U.S. is roughly (cid:23)0,000-
90,000 patients.
FA: Friedreich(cid:360)s ataxia (FA) is an inherited neuro-
muscular disorder most commonly caused by a
single genetic defect in the F(cid:58)N gene that leads
to reduced production of frataxin, a mitochondrial
protein that is important for cellular metabolism
and energy production. FA results in a physically
debilitating, life-shortening condition and is
the most common hereditary ataxia, with an
estimated (cid:23),000 to 10,000 patients in the U.S.
Symptoms of FA include progressive loss of
coordination and muscle strength, which lead to
the full-time use of a wheelchair(cid:29) scoliosis (which
often re(cid:83)uires surgical intervention)(cid:29) diabetes
mellitus(cid:29) hearing and vision impairment(cid:29) serious
heart conditions(cid:29) and premature death. Current
FA therapies are primarily focused on symptom
relief, and there are no FDA-approved drugs to
treat the cause of FA.
FCS: Familial Chylomicronemia Syndrome
(FCS) is an ultra-rare disease caused by impaired
function of the enzyme lipoprotein lipase (LPL)
and characterized by severe hypertriglyceridemia
((cid:32)880mg(cid:17)dL) and a risk of unpredictable and
potentially fatal acute pancreatitis. Because of
limited LPL function, people with FCS cannot
breakdown chylomicrons, lipoprotein particles
that are 90(cid:7) triglycerides. FCS patients are
also at risk of chronic complications due to
permanent organ damage. They can experience
daily symptoms including abdominal pain,
generalized fatigue and impaired cognitions
that affect their ability to work. People with FCS
report ma(cid:76)or emotional and psychosocial effects
including anxiety, social withdrawal, depression
and brain fog. There is no effective therapy for
FCS currently available.
hATTR: hereditary transthyretin (hATTR) amyloi-
dosis is a progressive, systemic and fatal inherited
disease caused by the abnormal formation of
the TTR protein and aggregation of TTR amyloid
deposits in various tissues and organs throughout
the body, including in peripheral nerves, heart,
intestinal tract, eyes, kidneys, central nervous
system, thyroid and bone marrow. The progressive
accumulation of TTR amyloid deposits in these
tissues and organs leads to sensory, motor and
autonomic dysfunction often having debilitating
effects on multiple aspects of a patient(cid:360)s life.
Ultimately, hATTR amyloidosis results in death
within three to 1(cid:23) years of symptom onset. There
are an estimated (cid:23)0,000 patients with hATTR
amyloidosis worldwide. Therapeutic options for
the treatment of patients with hATTR amyloidosis
are limited.
HD: (cid:42)untington(cid:360)s Disease ((cid:42)D) is a rare
genetic disorder that is caused by a CA(cid:41) repeat
expansion in the (cid:42)TT gene. The mutated (cid:42)TT
protein leads to severe neuron degeneration
predominately in the striatum and the cerebral
cortex. Currently, there are no approved
disease-modifying treatments.
IRDs: Inherited retinal disorders are a group
of rare eye disorders caused by an inherited
gene mutation and can result in vision loss or
blindness. Some people with inherited retinal
diseases experience a gradual loss of vision,
eventually leading to complete blindness. Others
may be born with or experience vision loss in
infancy or early childhood.
LMS: Leiomyosarcomas (L(cid:47)S) are malignant
tumors of muscle tissue. They are rare tumors
with approximately (cid:21),000 new cases in the U.S.
There is a high rate of relapse with a median
overall survival of 1(cid:22) months.
MEDS: (cid:47)itochondrial Epilepsy Disorders
((cid:47)EDS) are part of a group of conditions called,
metabolic disorders. The organs with the most
mitochondria in them are the brain, nerves,
muscles and liver and because of this, neuro-
logical disorders, including epilepsy, occur (cid:83)uite
commonly in mitochondrial disorders. (cid:47)ost of
the epilepsy caused by a mitochondrial disorder
starts in childhood and usually in the first two
years of life. (cid:47)ost mitochondrial disorders are
progressive meaning the symptoms and the
seizures will worsen over time. (cid:42)ow (cid:83)uickly
the progression happens will depend on the
particular type of mitochondrial disorder. The
seizures in most mitochondrial disorders are
usually very difficult to control. Unfortunately,
for most mitochondrial disorders there is no
specific treatment, such as diet or surgery, which
can stop the seizures or stop the disorder from
progressing.
Reelin: Reelin is a large protein that helps
regulate processes of neuronal migration and
positioning in the developing brain by controlling
cell-cell interactions. It is important in early brain
development and continues to work in the adult
brain. It is found not only in the brain, but also in
the liver, thyroid gland, adrenal gland, Fallopian
tube, breast and in comparatively lower levels
across different areas of the body. Reelin has
been suggested to be implicated in several brain
diseases.
SMA: Spinal (cid:47)uscular Atrophy (S(cid:47)A) is a genetic
disease caused by mutation or deletion of the
S(cid:47)N1 (survival of motor neuron) gene. It affects
one in approximately 10,000 live births and, in
its most severe forms, is associated with a high
rate of childhood mortality. S(cid:47)A is characterized
by progressive loss of motor neurons, muscle
weakness, and atrophy. The disease affects
mainly proximal muscles including intercostal
muscles (chest muscles), and patients often die
due to respiratory complications.
FORM 10-K UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☑
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended: December 31, 2019
or
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number: 001-35969
Delaware
(State or other jurisdiction of incorporation or organization)
04-3416587
(I.R.S. Employer Identification No.)
100 Corporate Court
South Plainfield, NJ
(Address of principal executive offices)
07080
(Zip Code)
(908) 222-7000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol (s)
Name of each exchange on which registered
Common Stock, $0.001 par value per share
PTCT
Nasdaq Global Select Market
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ☑ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes ☐ No ☑
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to
Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit
such files). Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an
emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in
Rule 12b-2 of the Exchange Act.
Large accelerated filer
Non-accelerated filer
☑
☐
Accelerated filer
Smaller reporting company
Emerging growth company
☐
☐
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new
or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
The aggregate market value of the Common Stock held by non-affiliates of the registrant, based upon the last sale price of the Common Stock reported
on the Nasdaq Global Select Market on June 28, 2019, the last business day of the registrant’s most recently completed second fiscal quarter, was $2,567,003,670.
For purposes of this calculation, shares of Common Stock held by directors and officers have been treated as shares held by affiliates.
As of February 27, 2020, the registrant had 62,632,628 shares of Common Stock, $0.001 par value per share, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Part III of this Annual Report incorporates by reference information from the definitive Proxy Statement for the registrant’s 2020 Annual Meeting of
Shareholders which is expected to be filed with the Securities and Exchange Commission not later than 120 days after the registrant’s fiscal year ended
December 31, 2019.
[This page intentionally left blank.]
TABLE OF CO(cid:1)TE(cid:1)TS
PTC Therapeutics, Inc.
PART I
Item 1. Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Mine Safety Disclosures
PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuers Purchases of Equity
Securities
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accountant Fees and Services
PART IV
Item 15. Exhibits and Financial Statement Schedules
Item 16. Form 10-K Summary
SIG(cid:1)ATURES
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FORWARD-LOOKI(cid:1)G STATEME(cid:1)TS
This Annual Report on Form10-K contains forward-looking statements that involve substantial risks and uncertainties. All
statements, other than statements of historical facts, contained in this Annual Report on Form 10-K, including statements regarding
our strategy, future operations, future financial position, future revenues, projected costs, prospects, plans and objectives of
management, are forward-looking statements. The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “might,”
“plan,” “predict,” “project,” “target,” “potential,” “will,” “would,” “could,” “should,” “continue,” and similar expressions are
intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.
The forward-looking statements in this Annual Report on Form 10-K include, among other things, statements about:
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expectations with respect to our gene therapy platform, including any potential regulatory submissions and potential
approvals, including those related to our gene therapy for the treatment of Aromatic L-Amino Acid Decarboxylase, or
AADC, deficiency, or PTC-AADC, our manufacturing capabilities and the potential financial impact and benefits of
our leased biologics manufacturing facility and the potential achievement of development, regulatory and sales
milestones and contingent payments that we may be obligated to make;
our ability to negotiate, secure and maintain adequate pricing, coverage and reimbursement terms and processes on a
timely basis, or at all, with third-party payors for our products or product candidates that we commercialize or may
commercialize in the future;
our ability to maintain our marketing authorization of Translarna for the treatment of nmDMD in the European Economic
Area, or EEA, which is subject to the specific obligation to conduct and submit the results of Study 041 to the European
Medicines Agency, or EMA, and annual review and renewal by the European Commission following reassessment of
the benefit-risk balance of the authorization by the EMA;
our ability to enroll, fund, and complete Study 041, a multicenter, randomized, double-blind, 18-month, placebo-
controlled clinical trial of Translarna for the treatment of nmDMD followed by an 18-month open label extension,
according to the protocol agreed with the EMA, and by the EMA’s deadline;
the anticipated period of market exclusivity for Emflaza for the treatment of DMD in the United States under the Orphan
Drug Act of 1983, or Orphan Drug Act, the Drug Price Competition and Patent Term Restoration Act of 1984, or the
Hatch-Waxman Act;
our ability to complete any dystrophin study necessary in order to resolve the matters set forth in the FDA's denial of
our appeal to the Complete Response Letter we received from the FDA in connection with our (cid:1)ew Drug Application,
or (cid:1)DA, for Translarna for the treatment of nmDMD, and our ability to perform additional clinical trials, non-clinical
studies or CMC assessments or analyses at significant cost;
the timing and scope of our commercialization of our products and product candidates;
our ability to obtain additional and maintain existing reimbursed named patient and cohort early access programs, or
EAP programs, for our products on adequate terms, or at all;
our expectations with respect to the development, regulatory and commercial status of our product candidates and
program directed against spinal muscular atrophy in collaboration with F. Hoffmann La Roche Ltd and Hoffmann La
Roche Inc., which we refer to collectively as Roche, and the Spinal Muscular Atrophy Foundation, or the SMA
Foundation, and our estimates regarding future revenues from achievement of milestones in that program;
our expectations and the potential financial impact and benefits related to our Collaboration and Licensing Agreement
with Akcea Therapeutics, Inc., or Akcea, including with respect to the timing of regulatory approval of
TegsediTM (inotersen) and WaylivraTM (volanesorsen) in countries in which we are licensed to commercialize them,
the commercialization of Tegsedi and Waylivra, and our expectations with respect to contingent payments to Akcea
based on the potential achievement of certain regulatory milestones and royalty payments by us to Akcea based on our
potential achievement of certain net sales thresholds;
our estimates regarding the potential market opportunity for our products or product candidates, including the size of
eligible patient populations and our ability to identify such patients;
our estimates regarding expenses, future revenues, third-party discounts and rebates, capital requirements and needs
for additional financing, including our ability to maintain the level of our expenses consistent with our internal budgets
and forecasts and to secure additional funds on favorable terms or at all;
1
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the timing and conduct of our ongoing, planned and potential future clinical trials and studies in our gene therapy,
splicing, Bio-e and oncology programs as well as studies in our products for maintaining authorizations, label extensions
and additional indications, including the timing of initiation, enrollment and completion of the trials and the period
during which the results of the trials will become available;
our ability to realize the anticipated benefits of our acquisitions or other strategic transactions, including the possibility
that the expected impact of benefits from the acquisitions or strategic transactions will not be realized or will not be
realized within the expected time period, significant transaction costs, the integration of operations and employees into
our business, our ability to obtain marketing approval of our product candidates we acquired from the acquisitions or
other strategic transactions and unknown liabilities;
the rate and degree of market acceptance and clinical utility of any of our products or product candidates;
the ability and willingness of patients and healthcare professionals to access our product and product candidates through
alternative means if pricing and reimbursement negotiations in the applicable territory do not have a positive outcome;
our ability to complete the United States Food and Drug Administration, or FDA, post-marketing requirements to the
marketing authorization of Emflaza and any other post-marketing requirements for our products;
the timing of, and our ability to obtain additional marketing authorizations for our products and product candidates;
the ability of our products and our product candidates to meet existing or future regulatory standards;
our ability to maintain the current labeling under the marketing authorization in the EEA or expand the approved product
label of Translarna for the treatment of nmDMD;
the potential receipt of revenues from future sales of our products or product candidates;
the potential impact that enrollment, funding and completion of Study 041 may have on our revenue growth;
our sales, marketing and distribution capabilities and strategy, including the ability of our third-party manufacturers to
manufacture and deliver our products and product candidates in clinically and commercially sufficient quantities and
the ability of distributors to process orders in a timely manner and satisfy their other obligations to us;
our ability to establish and maintain arrangements for the manufacture of our products and product candidates that are
sufficient to meet clinical trial and commercial launch requirements;
our ability to establish and grow our manufacturing capabilities for our gene therapy platform;
our expectations with respect to the potential financial impact and benefits of our leased biologics manufacturing facility
and our ability to satisfy our obligations under the terms of the lease agreement for such facility;
our ability to satisfy our obligations under the terms of the credit and security agreement with MidCap Financial Trust,
or MidCap Financial, as administrative agent and MidCap Financial and certain other financial institutions as lenders
thereunder;
our ability to satisfy our obligations under the indenture governing our 3.00% convertible senior notes due August 15,
2022 and under the indenture governing our 1.50% convertible senior notes due September 15, 2026;
our regulatory submissions, including with respect to timing and outcome of regulatory review;
our plans to advance our earlier stage programs and pursue research and development of other product candidates,
including our splicing, gene therapy, Bio-e and oncology programs;
• whether we may pursue business development opportunities, including potential collaborations, alliances, and
acquisition or licensing of assets and our ability to successfully develop or commercialize any assets to which we may
gain rights pursuant to such business development opportunities;
•
•
•
•
the potential advantages of our products and any product candidate;
our intellectual property position;
the impact of government laws and regulations;
the impact of litigation that has been or may be brought against us or of litigation that we are pursuing against others;
and
2
•
our competitive position;
We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you
should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans,
intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the
cautionary statements included in this Annual Report on Form 10-K, particularly in Part I, Item 1A. Risk Factors that we believe
could cause actual results or events to differ materially from the forward-looking statements that we make.
Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint
ventures or investments we may make.
You should read this Annual Report on Form 10-K and the documents that we have filed as exhibits to this Annual Report
on Form 10-K completely and with the understanding that our actual future results may be materially different from what we
expect. We do not assume any obligation to update any forward-looking statements whether as a result of new information, future
events or otherwise, except as required by applicable law.
In this Annual Report on Form 10-K, unless otherwise stated or the context otherwise requires, references to “PTC,” “PTC
Therapeutics,” “we,” “us,” “our,” “the Company,” and similar references refer to PTC Therapeutics, Inc. and, where appropriate,
its subsidiaries. The trademarks, trade names and service marks appearing in this Annual Report on Form 10-K are the property
of their respective owners.
All website addresses given in this Annual Report on Form 10-K are for information only and are not intended to be an
active link or to incorporate any website information into this document.
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Item 1. Business
Overview
PART I
We are a science-driven global biopharmaceutical company focused on the discovery, development and commercialization of
clinically-differentiated medicines that provide benefits to patients with rare disorders. Our ability to globally commercialize
products is the foundation that drives our continued investment in a robust diversified pipeline of transformative medicines and
our mission to provide access to best-in-class treatments for patients who have an unmet medical need. The Company’s strategy
is to bring best-in-class therapies with differentiated clinical benefit to patients affected by rare disorders and to leverage its global
commercial infrastructure to maximize value for its patients and other stakeholders.
Our Pipeline
We have a portfolio pipeline that includes commercial products as well as product candidates in various stages of development,
including clinical, pre-clinical and research and discovery stages, focused on the development of new treatments for multiple
therapeutic areas, including rare diseases and oncology. Below is a summary of our more advanced programs as of the date of this
report, including those with our strategic partners:
• Global Commercial Footprint
Global DMD Franchise - We have two products, Translarna™ (ataluren) and Emflaza™ (deflazacort), for the
treatment of Duchenne muscular dystrophy, or DMD, a rare, life threatening disorder. Translarna has marketing
authorization in the European Economic Area, or EEA, for the treatment of nonsense mutation Duchenne
muscular dystrophy, or nmDMD, in ambulatory patients aged two years and older and in Brazil for the treatment
of nmDMD in ambulatory patients aged five years and older. Emflaza is approved in the United States for the
treatment of DMD in patients two years and older.
LATAM Commercialization - We hold the rights for the commercialization of Tegsedi™ (inotersen) and
Waylivra™ (volanesorsen) for the treatment of rare diseases in countries in Latin America and the Caribbean
pursuant to our Collaboration and License Agreement with Akcea Therapeutics, Inc., or Akcea. Tegsedi has
received marketing authorization in the United States, European Union, or the EU, and Brazil for the treatment
of stage 1 or stage 2 polyneuropathy in adult patients with hereditary transthyretin amyloidosis, or hATTR
amyloidosis. Waylivra has received marketing authorization in the EU, for the treatment of familial
chylomicronemia syndrome, or FCS. We anticipate filing for marketing authorization for Waylivra with
A(cid:1)VISA, the Brazilian health regulatory authority, in the second half of 2020.
• Diversified Development Pipeline
Gene Therapy Platform - We have a pipeline of gene therapy product candidates for rare monogenic diseases
that affect the central nervous system, or C(cid:1)S, including PTC-AADC for the treatment of Aromatic L-Amino
Acid Decarboxylase, or AADC, deficiency, a rare C(cid:1)S disorder arising from reductions in the enzyme AADC
that result from mutations in the dopa decarboxylase gene. We are preparing a biologics license application, or
BLA, for PTC-AADC for the treatment of AADC deficiency in the United States, which we anticipate submitting
to the U.S. Food and Drug Administration, or FDA, in the second quarter of 2020. In January 2020, we submitted
a marketing authorization application, or MAA, for PTC-AADC for the treatment of AADC deficiency in the
EEA to the European Medicines Agency, or EMA, and we expect an opinion from the Committee for Medicinal
Products for Human Use, or CHMP, by the end of 2020.
Splicing Platform - We have a spinal muscular atrophy, or SMA, collaboration with F. Hoffman-La Roche Ltd.
and Hoffman-La Roche Inc., which we refer to collectively as Roche, and the Spinal Muscular Atrophy
Foundation, or SMA Foundation. The lead compound in the SMA program is risdiplam (RG7916, RO7034067).
Roche submitted an (cid:1)DA for risdiplam to the FDA in the fourth quarter of 2019 and the Prescription Drug User
Fee Act, or PDUFA, date for a decision by the FDA is May 24, 2020. Risdiplam is expected to be indicated in
the United States for SMA type 1, 2 and 3 patients, if approved. Roche anticipates submitting an MAA for
risdiplam for the treatment of SMA in the EEA in mid-year 2020.
Bio-e Platform - In 2019, we acquired substantially all of the assets of BioElectron Technology Corporation,
or BioElectron, including certain compounds that we have begun to develop as part of our Bio-e platform. In
2020, we plan to initiate three trials in this platform with two different compounds that regulate inflammation
and oxidative stress.
Oncology Program - We have two oncology agents in Phase 1 clinical development, PTC299 and PTC596.
• Multi-platform Discovery
We continue to invest in our pre-clinical product pipeline across all of our platforms by committing significant
resources to research and development programs and business development opportunities within our areas of
scientific expertise, including potential collaborations, alliances, and acquisitions or licensing of assets that
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complement our strategic mission to provide access to best-in-class treatments for patients who have an unmet
medical need.
Global Commercial Footprint
Global DMD Franchise
Duchenne muscular dystrophy (DMD)
Muscular dystrophies are genetic disorders involving progressive muscle wasting and weakness. DMD is the most common and
one of the most severe types of muscular dystrophy. DMD occurs when a mutation in the dystrophin gene prevents the cell from
making a functional dystrophin protein. Dystrophin is a muscle membrane associated protein and is critical to the structural and
membrane stability of muscle fibers in skeletal, diaphragm and heart muscle. The absence of normally functioning dystrophin
results in muscle fragility, such that muscle injury occurs when muscles contract or stretch during normal use. As muscle damage
progresses, connective tissue and fat replace muscle fibers, resulting in inexorable muscle weakness.
Because the dystrophin gene is located on the X chromosome, DMD occurs primarily in young boys, although approximately
10% of female carriers show some disease symptoms. DMD is rare, and estimates of occurrence include approximately 1 in every
3,500 live male births, according to Parent Project Muscular Dystrophy and approximately 1 in every 5,000 live male births
according to Ryder (2017) in the European Journal of Human Genetics. We estimate that there are between approximately 10,000
and 15,000 DMD patients in the United States. Several different types of mutation in the dystrophin gene can result in DMD,
including deletion, duplication and nonsense mutations. A test known as multiplex ligation-dependent probe amplification (MLPA)
can detect large deletions and duplications, which account for approximately 75% of all mutations. However, gene sequencing is
required to identify small mutations such as nonsense mutations. We estimate that nonsense mutations account for approximately
13% of cases of DMD. Without treatment, patients with DMD typically lose walking ability by their early teens, require ventilation
support in their late teens, and eventually experience premature death due to heart and lung failure. Even with medical care, most
people with DMD die from cardiac or respiratory failure before or during their 30s.
Marketing authorization matters
Translarna for the treatment of nonsense mutation Duchenne muscular dystrophy
European Economic Area
We received marketing authorization from the European Commission in August 2014 for Translarna for the treatment of nmDMD
in ambulatory patients aged five years and older in the 31 member states of the EEA, subject to annual renewal and other conditions.
In July 2018, the European Commission approved a label-extension request to our marketing authorization for Translarna in the
EEA to include patients from two to up to five years of age. In September 2018, we submitted to the EMA a label-extension request
to our marketing authorization in the EEA to include patients who are non-ambulatory but the request received a negative opinion
and the indication was not added.
The marketing authorization is subject to annual review and renewal by the European Commission following reassessment by the
EMA of the benefit-risk balance of continued authorization, which we refer to as the annual EMA reassessment. In July 2019, the
European Commission renewed our marketing authorization, making it effective, unless extended, through August 5, 2020. In
February 2020, we submitted a marketing authorization renewal request to the EMA.
This marketing authorization is further subject to a specific obligation to conduct and submit the results of an 18-month, placebo-
controlled trial, followed by an 18-month open-label extension, which we refer to together as Study 041. The final report on the
trial and open-label extension is to be submitted by us to the EMA by the end of the third quarter of 2022.
Marketing authorization is required in order for us to engage in any commercialization of Translarna in the EEA, including through
participation in the market access process and related pricing and reimbursement negotiations, on a country-by-country basis with
each country in the EEA, and is also required to make Translarna available under early access programs, or EAP programs. There
is substantial risk that if we are unable to renew our EEA marketing authorization during any annual renewal cycle, if our product
label is materially restricted, or if Study 041 does not provide the data necessary to maintain our marketing authorization, we
would lose all, or a significant portion of, our ability to generate revenue from sales of Translarna in the EEA and other territories.
See “Item 1. Business-Commercial Matters-Market Access Considerations” and “Item 1A. Risk Factors-Risks Related to the
Development and Commercialization of our Product and our Product Candidates” and “-Risks Related to Regulatory Approval
of our Product and our Product Candidates” for further information regarding the marketing authorization in the EEA, the market
access process and related risks.
As the marketing authorization holder, we are obligated to monitor the use of Translarna for nmDMD to detect, assess and take
required action with respect to information that could impact the safety profile of Translarna and to report this information, through
pharmacovigilance submissions, to the EMA. Following its assessment of these submissions, the EMA can recommend to the
European Commission actions ranging from the continued maintenance of the marketing authorization to its withdrawal.
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United States
Translarna is an investigational new drug in the U.S. During the first quarter of 2017, we filed a (cid:1)ew Drug Application, or (cid:1)DA,
for Translarna for the treatment of nmDMD over protest with the FDA. In October 2017, the Office of Drug Evaluation I of the
FDA issued a Complete Response Letter for the (cid:1)DA, stating that it was unable to approve the application in its current form. In
response, we filed a formal dispute resolution request with the Office of (cid:1)ew Drugs of the FDA. In February 2018, the Office of
(cid:1)ew Drugs of the FDA denied our appeal of the Complete Response Letter. In its response, the Office of (cid:1)ew Drugs recommended
a possible path forward for our ataluren (cid:1)DA submission based on the accelerated approval pathway. This would involve a re-
submission of an (cid:1)DA containing the current data on effectiveness and safety of ataluren with new data to be generated on
dystrophin production in nmDMD patients’ muscles. We intend to follow the FDA’s recommendation and will collect, using newer
technologies via procedures and methods that we designed, such dystrophin data in a new study, Study 045, which we initiated in
the fourth quarter of 2018. We plan to re-submit the (cid:1)DA with the data from Study 045 in mid-year 2020. Additionally, should a
re-submission of an (cid:1)DA receive accelerated approval, the Office of (cid:1)ew Drugs stated that Study 041, which is currently enrolling,
could serve as the confirmatory post-approval trial required in connection with the accelerated approval pathway.
There is substantial risk that Study 045, or any other studies we may use to collect the dystrophin data, will not provide the necessary
data to support a marketing approval for Translarna for the treatment of nmDMD in the U.S.
See “Item 1. Business-Government Regulation-The new drug and biologic approval process” below for further discussion with
respect to the (cid:1)DA process. See “Item 1. Business-Translarna™ (ataluren)” and “Item 1A. Risk Factors-Risks Related to the
Development and Commercialization of our Product and our Product Candidates” and “-Risks Related to Regulatory Approval
of our Product and our Product Candidates” for further detail regarding the results of our completed trials and studies of Translarna
for the treatment of nmDMD, our regulatory strategy in the United States, our history with submissions to the FDA and the related
risks to our business.
Other Territories
Translarna received marketing authorization for the treatment of nmDMD in Israel and South Korea in 2015, Chile in 2018 and
Brazil in 2019 and these licenses are currently active. Many territories outside of the EEA, including Israel, South Korea and Chile,
reference and depend on the determinations by the EMA when considering the grant of a marketing authorization. It is unlikely
that we would be able to maintain our marketing authorizations in these regions in the event the EMA determines not to renew or
otherwise modifies or withdraws our marketing authorization in the EEA. In addition, the marketing authorization for Translarna
in Brazil is subject to renewal every five years. We have been pursuing and expect to continue to pursue marketing authorizations
for Translarna for the treatment of nmDMD in other regions.
Emflaza for the treatment of Duchenne muscular dystrophy in the United States
Emflaza, both in tablet and suspension form, received approval from the FDA in February 2017 as a treatment for DMD in patients
five years of age and older in the United States. In June 2019, the FDA approved our label expansion request for Emflaza for
patients two to five years of age. We estimate that there are between approximately 10,000 and 15,000 DMD patients in the United
States. We are obligated to complete certain post-marketing requirements in connection with the FDA's approval, including pre-
clinical and clinical safety studies.
Emflaza has a seven-year exclusive marketing period in the United States for the approved indication, commencing on the date
of FDA approval, under the provisions of the Orphan Drug Act of 1983, or the Orphan Drug Act, as well as a concurrent five-year
exclusive marketing period in the United States for the active moiety in Emflaza under the provisions of the Drug Price Competition
and Patent Term Restoration Act of 1984, or the Hatch-Waxman Act. See “Item 1. Business-Government Regulation-The new
drug and biologic approval process-Hatch-Waxman Act for Drugs” below for further discussion with respect to marketing protection
we rely on.
LATAM Commercialization
In August 2018 we entered into a Collaboration and License Agreement with Akcea for the commercialization by us of
TegsediTM (inotersen), WaylivraTM (volanesorsen) and products containing those compounds in countries in Latin America and the
Caribbean, or the PTC Territory. See “Item 1. Business-Our Collaborations, License Agreements and Funding Arrangements-
Akcea” below for further discussion with respect to our Collaboration and License Agreement with Akcea.
Tegsedi
Tegsedi, a product of Ionis Pharmaceuticals, Inc.’s, or Ionis, an affiliate of Akcea, proprietary antisense technology, is an antisense
oligonucleotide, or ASO, inhibitor of human transthyretin, or TTR, production. Tegsedi is the world’s first R(cid:1)A-targeted therapeutic
to treat patients with hereditary transthyretin amyloidosis, or hATTR amyloidosis. In October 2019, it received marketing
authorization from A(cid:1)VISA for the treatment of stage 1 or stage 2 polyneuropathy in adult patients with hATTR amyloidosis in
Brazil. Our marketing authorization for Tegsedi in Brazil is subject to renewal every five years. It has also received marketing
authorization in the United States and EU for the same indication. Our commercial launch of Tegsedi in Brazil is ongoing and we
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continue to make Tegsedi available in certain countries within the PTC Territory for the treatment of hATTR amyloidosis through
EAP Programs.
hATTR amyloidosis is a progressive, systemic and fatal inherited disease caused by the abnormal formation of the TTR protein
and aggregation of TTR amyloid deposits in various tissues and organs throughout the body, including in peripheral nerves, heart,
intestinal tract, eyes, kidneys, central nervous system, thyroid and bone marrow. The progressive accumulation of TTR amyloid
deposits in these tissues and organs leads to sensory, motor and autonomic dysfunction often having debilitating effects on multiple
aspects of a patient's life. Patients with hATTR amyloidosis often present with a mixed phenotype and experience overlapping
symptoms of polyneuropathy and cardiomyopathy.
Ultimately, hATTR amyloidosis generally results in death within three to fifteen years of symptom onset. Therapeutic options for
the treatment of patients with hATTR amyloidosis are limited and there are currently no disease-modifying drugs approved for
the disease. There are an estimated 50,000 patients with hATTR amyloidosis worldwide, including approximately 6,000 patients
with polyneuropathic hATTR amyloidosis in Latin America.
Waylivra
Waylivra is an ASO that has received marketing authorization in the EU for the treatment of FCS, subject to certain conditions.
The United States and EU regulatory agencies have granted orphan drug designation to Waylivra for the treatment of FCS. In
connection with the marketing approval for Waylivra in the EU, the European Commission is requiring Akcea to provide results
of a study based on a registry of patients to investigate how blood checks and adjustments to frequency of injections are carried
out in practice and how well they work to prevent thrombocytopenia and bleeding in FCS patients taking Waylivra. While Waylivra
is not currently approved for marketing in the PTC Territory, we have made Waylivra available in certain countries within the PTC
Territory for the treatment of FCS through EAP Programs. We anticipate filing for marketing authorization with A(cid:1)VISA in the
second half of 2020.
FCS is an ultra-rare disease caused by impaired function of the enzyme lipoprotein lipase, or LPL, and characterized by severe
hypertriglyceridemia (>880mg/dL) and a risk of unpredictable and potentially fatal acute pancreatitis. Because of limited LPL
function, people with FCS cannot break down chylomicrons, lipoprotein particles that are 90% triglycerides. In addition to
pancreatitis, FCS patients are at risk of chronic complications due to permanent organ damage. They can experience daily symptoms
including abdominal pain, generalized fatigue and impaired cognitions that affect their ability to work. People with FCS also report
major emotional and psychosocial effects including anxiety, social withdrawal, depression and brain fog. There is no effective
therapy for FCS currently available.
Additionally, Waylivra is currently in Phase 3 clinical development for the treatment of people with familial partial lipodystrophy,
or FPL. The EMA has granted orphan drug designation to Waylivra for the treatment of patients with FPL.
Diversified Development Pipeline
Our pipeline has a number of development programs in the clinical stages. These include our gene therapy, splicing, Bio-e and
oncology programs as well additional studies of our current commercial products to both expand marketing labels and find benefits
that these treatments may have in additional indications.
Gene Therapy Platform
Our gene therapy platform focuses on the development of innovative therapies for rare, debilitating diseases of the C(cid:1)S. Our lead
gene therapy product candidate is PTC-AADC for the treatment of AADC deficiency. AADC deficiency is a rare C(cid:1)S disorder
arising from reductions in the enzyme AADC that result from mutations in the DOPA decarboxylase gene. AADC is the enzyme
responsible for the conversion of L-dopa to dopamine. Dopamine is a key neurotransmitter that acts within the striatum (caudate
and putamen), a component of the brain’s deep grey matter, to modulate output of neurons that project to the motor and premotor
cortices of the brain that plan and execute normal motor function. Dopamine is required in the brain for humans to develop and
maintain proper motor function.
AADC deficiency is a monogenic disorder of neurotransmitter synthesis that manifests in young children and most commonly
results in profound developmental delay, often seen as complete arrest of motor development. AADC deficiency generally causes
the inability to develop motor control, resulting in breathing, feeding, and swallowing problems, frequent hospitalizations, and
the need for life-long care. On average, patients with AADC deficiency die in the first decade of life due to profound motor
dysfunction and secondary complications such as choking, hypoxia, and pneumonia. Currently, no treatment options are available
for the underlying cause of the disorder, and care is limited to palliative options with significant burden on caregivers.
The prevalence of AADC deficiency has been estimated to be approximately 5,000 patients worldwide, with a live-birth incidence
of up to 1 in 40,000 worldwide. While several diagnostic tests for AADC deficiency are available, we believe the condition remains
largely undiagnosed or misdiagnosed and may be confused with cerebral palsy.
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PTC-AADC is an adeno-associated virus, or AAV, gene therapy, which has been assessed in two completed clinical trials, and one
ongoing trial. The two completed trials include a total of 18 children with severe AADC deficiency who were treated with a one-
time total dose of 1.8 x 1011 vg of PTC-AADC during a single procedure in which the gene therapy was administered directly to
the region of the brain, called the putamen, where dopamine is made and released. The targeted micro-dosing approach administering
small amounts of gene therapy directly to focal regions of affected cells in the putamen has the benefit of keeping the supply
requirements for materials low, improving access of the therapeutic gene to key cells, potentially limiting immune and complement-
mediated responses and reducing the risk of off-target uptake and excretion of the gene therapy by the liver and kidneys. To date,
results from these trials suggest that patients may have a gain of motor functions and improvement in cognitive scales following
gene therapy administration and have shown significant increases in motor function, which contrasts with the published natural
history.
The two completed clinical trials, AADC-1601, a trial in which patients were enrolled under individual compassionate use consents,
and AADC-010, were both single-arm, open-label, interventional trials that enrolled a total of 18 patients. The primary and
secondary objectives of these trials were to assess the safety and efficacy of PTC-AADC administered via bilateral
putaminal infusions in patients with severe AADC deficiency at a total one-time dose of 1.8 x 1011 vg. Study enrollment required
a diagnosis of AADC deficiency, defined as decreased homovanilic acid, or HVA, and 5-hydroxyindoleacetic acid, or 5 HIAA,
and elevated levels of L-DOPA in the cerebrospinal fluid, or CSF, the presence of more than one DDC gene mutation, and the
presence of clinical symptoms of AADC deficiency (including developmental delay, hypotonia, dystonia, and oculogyric crisis),
and a patient age of older than 2 years.
Patients were evaluated monthly for safety assessments and every three months for efficacy assessments that included tests of
motor developmental testing (Peabody Developmental Motor Scale, Second Edition, or PDMS-2, and Alberta Infant Motor Scale,
or AIMS) through the first year after treatment with PTC-AADC and at periodic intervals thereafter through five years following
treatment. The PDMS-2 and AIMS are validated scales used to assess motor skills in young children. Pharmacodynamic testing
of C(cid:1)S AADC activity over time included analyses of CSF neurotransmitter metabolites and F-DOPA PET imaging intervals,
also through five years.
8 patients were enrolled in the AADC-1601 study. 10 patients were enrolled in the AADC-010 study. In both studies, the average
age of patients was less than 5 years of age.
At baseline, patients had no functional movement and failed to achieve any motor milestones, including head control, sitting or
standing capabilities, consistent with the published natural history of severe AADC deficiency. Compared to baseline, at one-year
and at five-years after PTC-AADC administration, patients had objective evidence of de novo dopamine production as visualized
by F-DOPA PET imaging of the brain, consistent with successful and stable gene expression and enzyme activity over time.
Based on preliminary analysis, following administration of PTC-AADC, the combined group of patients showed significant
improvements from baseline capabilities at one-year post-treatment in functional motor skills assessed with the PDMS-2 total
score, as well as on the locomotion, grasping, visual-motor integration and stationary subscales. Significant improvements from
baseline at one-year post-treatment were also observed for the combined group of patients on the AIMS total score and on the
prone, supine, sit and stand subscales.
Compared to published natural history data, patients in these trials showed statistically significant improvements at both two- and
five-year post-treatment in achievement of motor milestones of full head control (at 2 and 5 years), sitting unassisted (at 2 and 5
years) and standing with support (at 5 years), reinforcing the clinical benefit and sustainability of functional motor improvements.
Surgical injection of PTC-AADC in both completed trials was well tolerated, with no adverse events occurring during the surgical
procedure. Adverse events were generally associated with the disease state. The most frequent adverse event associated with PTC-
AADC was dyskinesia and these events completely resolved over time. (cid:1)o serious adverse events have been attributed to PTC-
AADC.
The ongoing clinical trial, AADC-011, is a single-center, open-label trial to assess the efficacy and safety of PTC-AADC in patients
with AADC deficiency. The primary outcomes for this trial include assessing a change in the PDMS-2 score and measuring the
change in the neurotransmitter metabolite HVA or 5-HIAA in the cerebrospinal fluid. 10 patients have been enrolled and treated
to date. With these 10 patients, we now have 28 patients from our three trials being evaluated in safety and efficacy studies.
An end-of-phase 2 meeting was held with the FDA in July 2017, and the clinical, non-clinical and chemistry, manufacturing and
control, or CMC, data available to date from the two completed clinical trials were reviewed. The FDA provided feedback indicating
that the clinical and non-clinical data available to date were sufficient to support the submission of a BLA without undertaking
additional trials or studies at this time. In a late 2019 interaction with the FDA, the agency requested additional information
concerning the use of the commercial delivery system for PTC-AADC in young patients. Based on the FDA input, including with
respect to the request for additional information, we are preparing a BLA for PTC-AADC for the treatment of AADC deficiency
in the United States, which we anticipate submitting to the FDA in the second quarter of 2020.
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In January 2020, we submitted an MAA to the EMA for the treatment of AADC deficiency with PTC-AADC in the EEA. We
expect to receive an opinion from the Committee for Medicinal Product for Human Use, or CHMP, of the EMA regarding our
MAA submission by the end of 2020.
PTC-AADC for the treatment of AADC deficiency has orphan drug designation in the United States and EU, and rare pediatric
disease designation in the United States, and upon BLA approval the FDA may grant us a priority review voucher.
If PTC-AADC for the treatment of AADC deficiency receives FDA approval, we expect that PTC-AADC would have a twelve-
year exclusive marketing period in the United States for the approved indication, commencing on the date of FDA approval, under
the provisions of the Biologics Price Competition and Innovation Act of 2009, or BPCIA, as well as a concurrent seven-year
exclusive marketing period, which would commence on the date of FDA approval, under the provisions of the Orphan Drug Act.
We are pursuing patent protection for PTC-AADC, and, in the meantime, we expect to rely on the twelve-year BPCIA regulatory
exclusivity and concurrent seven-year Orphan Drug Act exclusivity to commercialize PTC-AADC in the United States, if it is
approved. Due to its orphan designation in the EMA, we anticipate that PTC-AADC would have similar market exclusivities in
the EU, if it is approved.
See “Item 1. Business-Government Regulation-The new drug and biologic approval process” below for further discussion with
respect to the BLA and MAA process. See “Item 1A. Risk Factors-Risks Related to our Gene Therapy Platform” and “-Risks
Related to Regulatory Approval of our Product and our Product Candidates” for further detail regarding the related risks to the
development, regulatory process and commercialization of gene therapy products.
Splicing Platform
Our splicing platform focuses on the development of innovative therapies for diseases, such as spinal muscular atrophy, or SMA,
that involve regulation of messenger R(cid:1)A, or mR(cid:1)A, splicing in the cell. SMA is a genetic neuromuscular disease characterized
by muscle wasting and weakness. The disease generally manifests early in life. SMA is caused by mutation or deletion of the
Survival of Motor (cid:1)euron 1, or SM(cid:1)1, gene that encodes the survival of motor neuron, or SM(cid:1), protein. The SM(cid:1) protein is
critical to the health and survival of the nerve cells in the spinal cord responsible for muscle contraction. A second gene, Survival
of Motor (cid:1)euron 2, or SM(cid:1)2, is very similar to SM(cid:1)1, contains a T nucleotide at position 6 in exon 7 and produces low, insufficient
levels of functional SM(cid:1) protein due to alternative splicing of exon 7.
According to the SMA Foundation, SMA is the leading genetic cause of death in infants and toddlers. Approximately 1 in 11,000
children is born with the disease. We estimate that there are between 20,000 to 30,000 children and adults living with SMA in the
United States, Europe and Japan.
Using our splicing technology and in collaboration with the SMA Foundation and Roche (from 2011), we identified highly potent
small molecule splicing modifiers that, in non-clinical studies in cultured cells derived from patients with SMA, increased both
the inclusion of exon 7 in the SM(cid:1)2 mR(cid:1)A transcript and the levels of SM(cid:1) protein produced by the SM(cid:1)2 gene. Importantly,
in studies in transgenic mice carrying only the SM(cid:1)2 gene, these orally bioavailable compounds penetrated the blood-brain barrier
and increased the levels of full-length SM(cid:1)2 mR(cid:1)A and protein in brain, spinal cord, muscle and other tissues. In these same
mouse studies, treatment with these compounds resulted in increased survival, restoration of body weight, prevention of motor
neuron loss and improved motor function.
In (cid:1)ovember 2011, we entered into a collaboration and licensing agreement with Roche which included a $30 million upfront
payment, the potential for up to $460 million in milestone payments, and royalties on net sales. Roche is financially responsible
for pursuing clinical development of compounds from the research program under the collaboration and then commercializing
any resulting products. We have received $62.5 million in milestone payments from Roche, including a $15 million milestone
payment upon the FDA’s acceptance of the (cid:1)DA filing for risdiplam for the treatment of SMA in the the fourth quarter of 2019.
We also previously received $13.3 million in sponsored research funding for this program from the Spinal Muscular Atrophy
Foundation.
One of the compounds in the SMA collaboration that is currently being advanced in development is risdiplam. The risdiplam
clinical development program is comprised of several studies, evaluating risdiplam in a broad SMA patient population covering
the ages from newborns to 60 years old. The four ongoing studies are Firefish (infantile onset SMA; age at enrollment of one to
seven months) , Sunfish (later onset SMA; age at enrollment of two to 25 years), Jewelfish (patients who previously received other
SMA therapies; age at enrollment of six months to 60 years), and Rainbowfish (presymptomatic patients; age at enrollment of
newborns to 6 weeks).
The Sunfish study was initiated in October 2016. Sunfish is a two-part clinical study, initiated in pediatric and adult type 2 and
type 3 SMA patients to investigate the safety, tolerability, and efficacy of risdiplam. Based on the results from part one of Sunfish,
dosing for the second part of the study was selected and the pivotal part two of Sunfish initiated in October 2017, which triggered
a $20.0 million milestone payment to us from Roche. Part two of Sunfish completed recruitment in October 2018 with 180 type
2 and type 3 SMA patients enrolled. The patients were randomized 2:1 risdiplam vs. placebo for 12 months followed by 12 months
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of all study participants receiving risdiplam. Patients that were enrolled in part 2 of Sunfish had a broad age range (2-25 years;
median age 9 years) and broad functional characteristics. The majority of the patients in the study were older, had more progressed
disease, and had lower baseline scores on motor function scales relative to other clinical studies in this population. The study
showed statistically significant results in primary and key secondary endpoints. The primary endpoint of part 2 was change from
baseline in the total Motor Function Measure 32, or MFM-32, score at Month 12. Data from part 2 of the Sunfish trial were
presented in February 2020 at the 2nd International Scientific Congress on Spinal Muscular Atrophy. Both part one and part two
of the study are being followed by an ongoing open-label extension.
In December 2016, a two-part clinical study, called Firefish, initiated in infants with type 1 SMA to investigate safety, tolerability,
and efficacy of risdiplam. Both parts of Firefish are open-label studies. Part one of Firefish was a dose-finding study in 21 infants.
The primary objective of part one was to assess the safety profile of risdiplam in infants and determine the dose for part two. A
low dose cohort and a high dose cohort were evaluated in part one. Interim clinical data from the Firefish part 1 trial were presented
in October 2019 at the World Muscle conference. The median age of first dose was 6.7 months and babies have received risdiplam
for a duration of up to 30.1 months. After 16 months of treatment, over 82% (14/17) of the high dose babies achieved a greater
than or equal to 4-point increase in CHOP-I(cid:1)TE(cid:1)D score compared to baseline, a rating to evaluate the motor skills of patients
with type 1 SMA developed by the Children’s Hospital of Philadelphia. Moreover, 86% (18/21) infants were event-free after
receiving risdiplam for 16 months. Data capturing babies displaying improved motor function and sitting were shown at the
CureSMA Conference in June 2018. More recently, video footage was presented by a principal investigator in the trial at the 2019
World Muscle conference, who showed a video of an additional type 1 SMA baby sitting unassisted, bringing the total to 4 babies
sitting unassisted as shown in patient videos to date. (cid:1)atural history indicates that type 1 SMA babies never achieve this milestone.
Video footage has also showed type 1 SMA babies from the Firefish trial demonstrating head control and rolling. Furthermore,
no babies in Firefish part 1 have required a tracheostomy or permanent ventilation since study initiation and no baby has lost the
ability to swallow. Previously published natural history data indicate that in comparable historic cohorts the median age of event-
free survival for type 1 SMA infants is between 8 and 10.5 months. In addition, SM(cid:1) protein level increases of up to 6.5-fold were
observed after 28 days of dosing and the increase was sustained.
Based on the results from part one of Firefish, part two of Firefish was initiated in March 2018 and completed recruitment in
(cid:1)ovember 2018 with 41 type 1 SMA infants enrolled. The study met its primary endpoint of proportion of infants who are sitting
without support after 12 months of treatment, as assessed in the Gross Motor Scale of the Bayley Scales of Infant and Toddler
development - Third Edition (BSID-III) (defined as sitting without support for 5 seconds). At least 6 out of 41 babies were required
to demonstrate sitting without support in order to meet the primary endpoint in part two. Risdiplam has been well-tolerated and
no treatment-related safety findings leading to withdrawal have been observed. We expect to share data from part 2 of the FIREFISH
study with health authorities globally and will be presented at an upcoming medical congress.
Based on feedback from the FDA and national health authorities in Europe that Part 1 of FIREFISH and SU(cid:1)FISH may be sufficient
to file an (cid:1)DA and an MAA, Roche submitted an (cid:1)DA to the FDA for risdiplam for the treatment of SMA in the United States
which was accepted for filing by FDA in the fourth quarter 2019. This event triggered a $15.0 million milestone payment to us
from Roche. Roche is preparing an MAA for risdiplam for the treatment of SMA in the EEA, which Roche anticipates submitting
to the EMA in mid-year 2020. The risdiplam Prescription Drug User Free Act, or PDUFA, date for a decision by the FDA is May
24, 2020. Risdiplam is expected to be indicated for SMA type 1, 2 and 3 patients, if approved.
Jewelfish, an open-label study investigating the safety, tolerability, PK, and PK/pharmacodynamic relationship of risdiplam in
patients aged from 6 months to 60 years with SMA previously treated with one of several experimental SMA therapies, initiated
in the first quarter of 2017. Preliminary PD data from twelve Jewelfish patients presented in October 2018 at the World Muscle
conference demonstrated sustained >2-fold increase in median SM(cid:1) protein levels versus baseline over 12 months of treatment.
Also, risdiplam was well tolerated, with no drug-related adverse events leading to withdrawal from the study.
Rainbowfish is an open-label, single-arm, multicenter study, investigating the efficacy, safety, pharmacokinetics and
pharmacodynamics of risdiplam in babies, from birth to six weeks of age (at first dose) with genetically diagnosed SMA who are
not yet presenting with symptoms. The study is currently recruiting.
Over 400 patients have been treated with risdiplam across all studies to date. (cid:1)o treatment-related safety findings have led to
patient withdrawal in any study.
Bio-e Platform
On October 25, 2019, we completed the acquisition of substantially all of the assets of BioElectron, including certain compounds
that we have begun to develop as part of our Bio-e platform. Oxidation-reduction, or redox, reactions are an essential component
of the generation and regulation of energy in living systems. These reactions are regulated through a set of enzymes known as
oxidoreductase enzymes that uniquely require the transfer of an electron, or a redox chemical reaction, to affect their biological
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activity. Our Bio-e platform consists of small molecule compounds that target oxidoreductase enzymes that regulate oxidative
stress and inflammatory pathways central to the pathology of a number of C(cid:1)S diseases.
Our most advanced molecule in the Bio-e platform is PTC743. PTC743 is a small molecule orally bioavailable compound that
has been in development for inherited mitochondrial diseases and related genetic disorders of oxidative stress. PTC743 targets
15-lipoxygenase, or 15-LO, a key regulator of oxidative stress, lipid-based neuro-inflammation, alpha-synuclein oxidation and
aggregation and cell death. In the second quarter of 2020, we expect to initiate a potential registrational Phase 2 placebo-controlled
trial of PTC743 in approximately 60 children with mitochondrial disease and associated refractory epilepsy. All subjects will be
followed for one month to ensure a baseline seizure frequency, and then will be randomized to receive PTC743 or placebo for six
months. Refractory epilepsy is a highly morbid symptom common to a number of mitochondrial disease subtypes. We believe that
there are 5,000 to 6,000 addressable mitochondrial epilepsy patients in the United States and EU combined. The clinical rationale
for the Phase 2 trial is based on reports of decreased seizure frequency, disruption of status epilepticus and reduced mortality risk
and disease-associated morbidity recorded through compassionate use studies of PTC743 in mitochondrial disease patients
conducted in the United States and EU.
Additionally, we expect to initiate a potential registrational Phase 3 trial of PTC743 in approximately 100 patients with Friedrich
ataxia in the third quarter of 2020, focusing on the younger cohort and run for one year in a 1:1 randomization scheme with placebo.
Friedreich ataxia is a rare and life-shortening neurodegenerative disease caused by a single defect in the FX(cid:1) gene which causes
reduced production of the frataxin protein. We believe that there are 25,000 addressable Friedrich ataxia patients globally. PTC743
has previously been studied in Friedriech ataxia patients in a Phase 2 trial that included a six-month placebo-controlled phase
followed by an 18-month open label extension. This trial demonstrated that long-term PTC743 treatment (18-24 months) was
associated with an improvement in overall disease severity and neurological function relative to natural history. PTC743 has been
dosed in hundreds of patients and has been generally well-tolerated in the clinic.
Translarna™ (ataluren)
Mechanism of action
We discovered Translarna by applying our technologies to identify molecules that promote or enhance the suppression of nonsense
mutations. (cid:1)onsense mutations are implicated in a variety of genetic disorders. (cid:1)onsense mutations create a premature stop signal
in the translation of the genetic code contained in mR(cid:1)A and prevent the production of full-length, functional proteins. Based on
our research, we believe that Translarna interacts with the ribosome, which is the component of the cell that decodes the mR(cid:1)A
molecule and manufactures proteins, to enable the ribosome to read through premature nonsense stop signals on mR(cid:1)A and allow
the cell to produce a full-length, functional protein. As a result, we believe that Translarna has the potential to be an important
therapy for genetic disorders which are the result of a nonsense mutation. Genetic tests are available for many genetic disorders,
including those noted above, to determine if the underlying cause is a nonsense mutation. Translarna has been generally well-
tolerated in all of our clinical trials to date, which have enrolled over 1,000 individuals to date.
Planned and ongoing clinical development of Translarna in nonsense mutation Duchenne muscular dystrophy
Study 041
Overview. As a specific obligation to our marketing authorization in the EEA, we are required to conduct and submit to the EMA
the results of a three-year clinical trial to confirm the efficacy and safety of Translarna in the treatment of ambulatory patients with
nmDMD aged five years or older. The trial is comprised of two stages: an 18-month randomized, double-blind, placebo controlled
clinical trial followed by an 18-month open label extension period. We refer to the 18-month clinical trial portion as “Stage 1” and
the 18-month extension period as “Stage 2”. We refer to Stage 1 and Stage 2 together as Study 041. As a condition to our marketing
authorization, we are required to submit the results of Study 041 to the EMA by the end of the third quarter of 2022. The protocol
for Study 041 has been approved by the CHMP.
For a discussion of the risks related to conducting clinical trials, in general, and Study 041, in particular, please see “Item 1A. Risk
Factors-Risks Related to the Development and Commercialization of our Product and our Product Candidates” ands “-Risks
Related to Regulatory Approval of our Product and our Product Candidates”.
Enrollment. According to the study protocol, Study 041 will enroll nmDMD patients aged five years and above who achieve a 6-
minute walk distance, or 6MWD, equal to or greater than 150 meters at three pre-treatment evaluation times (screening, baseline
day one and baseline day two), tested as set forth in the protocol. Qualified participants will also need to perform timed function
tests of running/walking 10 meters, climbing/descending four stairs and standing from supine within 30 seconds at both screening
and baseline, and meet the other criteria set forth in the protocol.
Of the approximately 250 patients planned to be enrolled in Study 041, approximately 160 patients are expected to meet the criteria
for inclusion in the primary analysis population, which we refer to as the modified intention-to-treat population, or mITT. Patients
11
included in the mITT must be at least 7, but less than 16, years old, with a 6MWD of equal to or greater than 300 meters and a
stand from supine time of five seconds or more, each as tested at screening and baseline.
Objectives and endpoints. The primary objective of Study 041 is to evaluate the effect of Translarna on ambulation and endurance
as assessed by the 6-minute walk test, or 6MWT. Based on the study protocol, the primary analysis of Stage 1 will evaluate the
difference in slope of change in 6MWD from baseline to week 72 between Translarna and placebo in the mITT population. Data
from participants who do not qualify for inclusion in the mITT will be used for summary and analysis of efficacy endpoints.
Slope of change in 6MWD over 144 weeks will also be assessed as a secondary endpoint at the conclusion of Stage 2, and the
consistency of the results at 144 weeks against week 72 will be assessed. Changes in 6MWD from baseline to week 72 and week
144 respectively will also be assessed as secondary endpoints.
A secondary objective of Study 041 is to determine the effects of Translarna on ambulation and burst activity as assessed by timed
function tests (10-meter run/walk, 4-stair stair-climb, and 4-stair stair descend). Each timed function test will be analyzed as a
secondary endpoint for both the mITT and ITT populations, at the end of Stage 1 and Stage 2. A separate analysis will evaluate
10-meter run/walk results in participants with a baseline 6MWD below 300 meters. An additional analysis will evaluate a composite
endpoint of average change in times to run/walk 10 meters, climb 4 stairs, and descend 4 stairs. We will also assess each of time
to loss of ambulation, stair-climbing and stair-descending over 72 weeks and over 144 weeks.
Determination of the effects of Translarna on lower-limb muscle function as assessed by the (cid:1)orth Star Ambulatory Assessment,
or (cid:1)SAA, a functional scale designed for boys affected by DMD, will serve as an additional secondary objective. (cid:1)SAA scores
will be analyzed as secondary endpoints for both the mITT and ITT populations, at the end of Stage 1 and Stage 2. A separate
analysis for Stage 2 will evaluate changes in total score in participants with a baseline 6MWD of equal to or greater than 400
meters and under 7 years of age. We will also assess the risk of loss of (cid:1)SAA items over 72 weeks and 144 weeks.
The safety profile of Translarna also will be evaluated throughout Stage 1 and Stage 2 as a secondary objective.
Certain exploratory endpoints will also be assessed in Study 041. In patients aged 7 years and above, change from baseline in
upper limb function will be assessed using both functional testing and parent/caregiver-reported questionnaires. In patients under
7 years of age, muscle strength will be assessed by change from baseline in myometry parameters. At pre-qualified sites only,
magnetic resonance imaging will be used to assess change from baseline in muscle fat fraction. The effects of Translarna on
pulmonary function will be assessed by change from baseline in forced vital capacity. In addition, subject- and parent/caregiver-
reported questionnaires and at-home diaries will be assessed to evaluate the effect of Translarna on health-related quality of life
(HRQL) changes from baseline.
Stratification. In Stage 1, participants will be randomized 1:1 to placebo or Translarna (10, 10, 20 mg/kg). The randomization will
be stratified based on type of concomitant corticosteroid used at baseline (deflazacort versus prednisone/prednisolone), maximum
of the two valid 6-minute walk tests performed at baseline day 1 and day 2 (<300 meters versus 300 to <350 meters, versus 350
to <400 meters, versus 400 meters), and time to stand from supine at baseline (<5 seconds versus 5 seconds).
Study 045
Following the FDA’s recommendation to collect dystrophin data using validated quantification methods, we initiated Study 045
to evaluate the ability of ataluren to increase dystrophin protein levels in boys with nmDMD. The study, a Phase 2 open label
clinical study of 20 boys with nmDMD from ages two to seven, was initiated in the fourth quarter of 2018, and will have a 40-
week study period. We expect the study to be completed in the second quarter of 2020.
Observational study, data collection, and open label, extension trials of Translarna for treatment of nmDMD
We are undertaking a multi-center, observational post-approval study of patients receiving Translarna on a commercial basis, or
Study 025o, as required by the Pharmacovigilance Risk Assessment Committee of the EMA and in collaboration with TREAT-
(cid:1)MD and the Cooperative International (cid:1)euromuscular Research Group. During the study we will gather data on the safety,
effectiveness, and prescription patterns of Translarna in routine clinical practice. We have successfully enrolled more than 200
patients in Study 025o and we expect to follow their progress over five years.
Pursuant to the five-year managed access agreement entered into in July 2016 between us, the UK (cid:1)ational Institute for Health
and Care Excellence, or (cid:1)ICE, (cid:1)ational Health Services England, or (cid:1)HS England, and other interested parties, the (cid:1)orthStar
(cid:1)etwork is collecting data on the efficacy of Translarna for the treatment of nmDMD as measured by the (cid:1)orthStar Ambulatory
Assessment test. Patients receiving Translarna will be compared to an historical natural history population as well as a matched
control group in order to assess response to treatment over the period specified in the managed access agreement.
An open label, extension trial involving patients who participated in ACT DMD is also ongoing, across multiple sites in the United
States, Europe and other territories. Two open label extension trials involving patients from the United States, Europe, Israel,
Australia, and Canada who had participated in our prior trials for nmDMD are also ongoing. In certain limited territories where
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Translarna is available via a commercial or EAP program, we have begun to wind down the studies and are investigating the
potential impact that additional site closures may have on our research and development expense.
Completed clinical trials of Translarna in nonsense mutation Duchenne muscular dystrophy
Phase 2 pediatric study
As part of our pediatric development commitments under our marketing authorization in the EEA and to support the potential
expansion of the Translarna label to younger patients with nmDMD, we initiated a Phase 2 pediatric clinical study to evaluate the
safety and pharmacokinetics of Translarna in patients two to five years of age. The study, initiated in June 2016, included a four-
week screening period, a four-week study period, and a 48-week extension period for patients who complete the four-week study
period (52 weeks total treatment). In July 2018, the EMA approved a label-extension request to our marketing authorization for
Translarna in the EEA to include patients from two to up to five years of age, based on data from this study.
Phase 3 clinical trial of Translarna for nmDMD (ACT DMD)
In October 2015, we announced results from ACT DMD, also referred to as Study 020, our Phase 3, double-blind, placebo-
controlled, 48-week clinical trial to evaluate the safety and efficacy of Translarna in patients with nmDMD. ACT DMD involved
228 patients at 53 sites across 18 countries.
In the overall intent-to-treat, or ITT, study population, the primary endpoint of change from baseline at week 48 in the 6MWT,
showed a 15 meter benefit in favor of Translarna, which did not meet statistical significance.
A summary of the safety and efficacy results from ACT DMD is outlined below.
Safety and tolerability. The results of ACT DMD confirmed the favorable safety profile of Translarna seen in our 48-week, 174-
patient Phase 2b double-blind, placebo controlled clinical trial evaluating the long-term safety and efficacy of Translarna in patients
with nmDMD completed in 2009, or the Phase 2b trial.
Translarna was generally well tolerated at both dose levels in our Phase 2b clinical trial. There were no study discontinuations due
to adverse events. Most treatment-emergent adverse events were mild or moderate in severity. Investigators’ attributions of drug-
related adverse effects were generally similar across the placebo and Translarna arms. The most common adverse events in this
trial were vomiting (46.6% overall), headache (29.3%), diarrhea (24.1%), nasopharyngitis (20.7%), fever (19.0%), cough (19.0%)
and upper abdominal pain (17.8%). These events were generally balanced across treatment arms and are typical of pediatric
illnesses. Adverse events with at least a 10% incidence in any treatment arm that were seen with increased frequency from the
placebo group to the Translarna 40 mg dose group to the Translarna 80 mg dose group were nausea (12.3% for placebo, 14.0%
for the Translarna 40 mg group and 16.7% for the Translarna 80 mg group), abdominal pain (7.0% for placebo, 12.3% for the
Translarna 40 mg group and 16.7% for the Translarna 80 mg group), pain in extremity (10.5% for placebo, 12.3% for the Translarna
40 mg group and 13.3% for the Translarna 80 mg group), flatulence (7.0% for placebo, 8.8% for the Translarna 40 mg group and
11.7% for the Translarna 80 mg group) and nasal congestion (7.0% for placebo, 8.8% for the Translarna 40 mg group and 10.0%
for the Translarna 80 mg group). There were no serious adverse events observed during the trial that were considered possibly or
probably related to Translarna. Determination of relatedness of the serious adverse event to Translarna was made by the trial
investigator, based on his or her judgment.
Translarna was generally well tolerated in ACT DMD. There were two study discontinuations due to adverse events, including
one in the Translarna arm (constipation) and one in the placebo arm (disease progression). Most treatment-emergent adverse events
were mild or moderate in severity. The most common adverse events in this trial were vomiting (20.4% overall), nasopharyngitis
(20.0%), headache (18.3%), and fall (17.8%). These events were generally balanced across treatment arms and are typical of
pediatric illnesses and/or patients with DMD. Adverse events with at least a 10% incidence in either treatment arm that were seen
with increased frequency from the placebo group to the Translarna 40 mg dose group were vomiting (18.3% for placebo, 23.6%
for the Translarna 40 mg group), nasopharyngitis (19.1% for placebo, 20.9% for the Translarna 40 mg group), fall (17.4% for
placebo, 18.3% for the Translarna 40 mg group), cough (11.3% for placebo, 16.5% for the Translarna 40 mg group) diarrhea (8.7%
for placebo, 17.4% for the Translarna 40 mg group), and pyrexia (10.4% for placebo, 13.9% for the Translarna 40 mg group). An
overview of adverse events in this trial is shown in the table below.
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Overview of treatment-emergent adverse events in Phase 3 clinical trial (as-treated population)
Parameter
Adverse events by severity
Grade 1 (mild)
Grade 2 (moderate)
Grade 3 (severe)
Grade 4 (life-threatening)
Adverse events by relatedness
Unrelated
Unlikely
Possible
Probable
Discontinuations due to adverse events
Serious adverse events
Deaths
Placebo
(cid:1)=115
Translarna
40 mg group
(cid:1)=115
All
patients
(cid:1)=230
101 (87.8)%
103 (89.6)%
204 (88.7)%
54 (47.0)%
37 (32.2)%
9 (7.8)%
—
47 (40.9)%
30 (26.1)%
18 (15.7)%
6 (5.2)%
1 (0.9)%
4 (3.5)%
—
61 (53.0)%
115 (50.0)%
35 (30.4)%
72 (31.3)%
7 (6.1)%
16 (7.0)%
—
—
44 (38.3)%
20 (17.4)%
27 (23.5)%
12 (10.4)%
1 (0.9)%
4 (3.5)%
—
91 (39.6)%
50 (21.7)%
45 (19.6)%
18 (7.8)%
2 (0.9)%
8 (3.5)%
—
There were no serious adverse events observed during the trial that were considered possibly or probably related to Translarna.
Determination of relatedness of the serious adverse event to Translarna was made by the trial investigator, based on his or her
judgment.
Intent to Treat (ITT) Population. The primary efficacy endpoint in ACT DMD was change in 6MWD from baseline to week 48.
In the ITT population, a 15 meter benefit (p=0.213) was observed in the primary endpoint which did not meet statistical significance.
Secondary endpoints in the trial included the proportion of patients with at least 10% worsening in 6MWD at week 48 of the trial
compared to baseline, or 10% 6MWD worsening, and change in timed function tests of time to run/walk 10 meters, climb four
stairs and descend four stairs. The hazard ratio for Translarna versus placebo was 0.75 (p=0.160) for 10% 6MWD worsening.
Benefits trended in favor of Translarna over placebo in the timed function tests in the ITT population, including observed results
in time to run/walk 10 meters (1.2 seconds; p=0.117), time to climb four stairs (1.8 seconds; p=0.058), and time to descend four
stairs (1.8 seconds; p=0.012).
Additional endpoints included the (cid:1)SAA test and the Pediatric Outcomes Data Collection Instrument, or PODCI, a validated tool
for measuring quality of life in pediatric patients with orthopedic conditions. These additional endpoints favored Translarna in the
ITT population but did not meet statistical significance.
Pre-Specified Analyses. The statistical analysis plan submitted to the FDA for ACT DMD set forth pre-specified analyses of
efficacy to be conducted, including subgroups of patients with baseline 6MWD less than 350 meters and patients with baseline
6MWD of greater than or equal to 300 and less than 400 meters, which we refer to as our key subgroups.
The pre-specification of our key subgroups was scientifically justified based upon knowledge of the biology and natural history
of the disease and the evolving understanding of the of the six minute walk test as used to assess DMD patients. We considered
the pre-specified less than 350 meter baseline 6MWD population as a key subgroup based on the knowledge that 350 meters
represents a transition point for patients towards a more rapid decline in walking ability as supported by analysis from our Phase 2b
trial. Furthermore, we considered the pre-specified 300 to 400 meter baseline 6MWD population as a key subgroup based on an
increasing understanding of the sensitivity limitations of the six minute walk test as an endpoint in 48-week studies. (cid:1)atural history
data suggest that the 6MWT may not be the optimal tool to demonstrate efficacy in patients with either a baseline 6MWD of less
than 300 meters, as these patients have significant muscle loss as monitored by magnetic resonance spectroscopy and are at high
risk for losing ambulation regardless of treatment, or in high walking patients, such as those with a baseline 6MWD at or greater
than 400 meters, as these patients are likely to remain stable over a 48 week testing period.
By defining these key subgroups, we thereby also defined corresponding subgroups of patients with baseline 6MWD greater than
or equal to 350 meters, greater than or equal to 400 meters, and less than 300 meters. We also pre-specified a meta-analysis of the
combined results from ACT DMD and the Phase 2b ambulatory decline phase patients.
Pre-specified sub-group analysis. We saw strong evidence of clinical benefit in the pre-specified subgroup of patients with
baseline 6MWD between 300 and 400 meters. Specifically, we observed a benefit in Translarna-treated patients of 47 meters
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(nominal p=0.007) in the 6MWT in this subgroup. This was consistent with an observed benefit of 49 meters (nominal p=0.026)
in our Phase 2b clinical trial in the 300 to 400 meters baseline 6MWD population. We also saw clinically meaningful benefit for
Translarna over placebo in each of the timed function tests, including observed results in time to run/walk 10 meters (2.1 seconds;
nominal p=0.066), time to climb four stairs (3.6 seconds; nominal p=0.003), and time to descend four stairs (4.3 seconds; nominal
p<0.001). The hazard ratio for Translarna versus placebo was 0.79 (nominal p=0.418) for 10% 6MWD worsening. In addition, a
benefit of 4.5 points over placebo (nominal p=0.041) was observed in the (cid:1)SAA test, which we believe is clinically meaningful.
We believe that the benefits observed in this key pre-specified subgroup support the use of the 6MWT in the patients with a walking
ability in the 300 to 400 meters range and the understanding that the reliability of the 6MWT over a 48 week period was limited
at both the lower and upper ends of our 6MWD enrollment range.
In the pre-specified subgroup of patients with baseline 6MWD less than 350 meters, we observed a benefit of 24 meters (nominal
p=0.210) in favor of Translarna in the 6MWT. An analysis of the results from our Phase 2b clinical trial in the less than 350 meters
baseline 6MWD population, defined post-hoc, demonstrated a 68 meter benefit in the 6MWT (nominal p=0.006). In the timed
function tests for the subgroup of ACT DMD patients with baseline 6MWD less than 350 meters, we observed benefits for Translarna
over placebo in time to run/walk 10 meters (2.3 seconds; nominal p=0.033), time to climb four stairs (4.2 seconds; nominal p=0.019)
and time to descend four stairs (4.0 seconds; nominal p=0.007).
Typically, a trial result is statistically significant if the chance of it occurring when the treatment is like placebo is less than one
in 20, resulting in a p-value of less than 0.05. A nominal p-value is the result of one particular comparison when more than one
comparison is possible, such as when two active treatments are compared to placebo or when two or more subgroups are analyzed.
As described above, we believe the 6MWT lacks sensitivity to detect a clinical effect in patients with baseline less than 300 meters
in a 48-week trial. However, the timed function tests trended in favor of patients treated with Translarna with a baseline 6MWD
below 300 meters, including observed benefit over placebo in time to run/walk 10 meters (2.5 seconds; nominal p=0.066), time
to climb four stairs (2.4 seconds; nominal p=0.790), and time to descend four stairs (2.1 seconds; nominal p=0.595). We believe
the positive trends in this population reflect that short muscle burst activity tests may be a better clinical measure for patients that
are at a more advanced stage of disease progression. Consistent with the natural history of ambulatory DMD patients with 6MWD
greater than 400 meters, which indicates stability in walking ability over a 48 week period, we observed no meaningful difference
in 6MWT between patient groups. Similarly, we observed no meaningful difference in 6MWT between patient groups with baseline
6MWD greater than 350 meters.
Pre-specified meta-analysis. The meta-analysis combined efficacy results from the ACT DMD ITT population and Phase 2b
ambulatory decline phase subgroup. The Phase 2b ambulatory decline phase group includes the patients from our randomized,
double-blind, placebo controlled, Phase 2b clinical trial in patients with nmDMD who would have met the enrollment criteria of
ACT DMD.
Results from the meta-analysis showed a statistically significant 21 meter improvement in 6MWD (p = 0.015) favoring Translarna.
Additionally, the meta-analysis showed statistically significant benefit for Translarna over placebo across each timed function test
including time to run/walk 10 meters (1.4 seconds; p=0.025), time to climb four stairs (1.6 seconds; p =0.018) and time to descend
four stairs (2.0 seconds; p=0.004). The hazard ratio for Translarna versus placebo was 0.66 (p=0.023) for 10% 6MWD worsening.
We believe that we are able to demonstrate a statistically significant outcome in the 6MWD in the meta-analysis, despite the
significant variability in baseline 6MWD among patients in both ACT DMD and the Phase 2b trial’s ambulatory decline phase,
due to the substantially larger patient population available in the pooled analysis.
Retrospective Analysis. We also looked back at the observed results in the meta-analysis for all patients with a baseline 300 to
400 meter 6MWD from ACT DMD and the Phase 2b trial. The meta-analysis of these data demonstrated a 45 meter benefit (nominal
p<0.001) in the 6MWT as well as clinically meaningful benefits across each secondary endpoint timed function test, including
benefit over placebo in time to run/walk 10 meters (2.2 seconds; nominal p=0.008), time to climb four stairs (3.4 seconds; nominal
p<0.001) and time to descend four stairs (4.3 seconds; nominal p<0.001). This meta-analysis of patients with baseline 6MWD of
300 to 400 meters was not pre-specified and is defined post-hoc.
A retrospective analysis performed after unblinding trial results can result in the introduction of bias if the analysis is inappropriately
tailored or influenced by knowledge of the data and actual results. In addition, nominal p-values cannot be compared to the
benchmark p-value of 0.05 to determine statistical significance without being adjusted for the testing of multiple dose groups or
analyses of subgroups. Because of these limitations, regulatory authorities typically give greatest weight to results from pre-
specified analyses and adjusted p-values and less weight to results from post-hoc, retrospective analyses and nominal p-values.
Statistical Considerations. The pre-specified meta-analysis results, which favored Translarna in the 6MWT and each of the timed
function tests, are considered statistically significant. In the pre-specified subgroups of ACT DMD patients with a baseline 6MWD
less than 350 meters and 300 to 400 meters, the p-values for the 6MWT and each of the timed function tests are considered nominal.
For information with respect to the use of nominal p-values and post-hoc analyses, see Item 1A. Risk Factors, “Our conclusions
regarding the activity and potential efficacy of Translarna in nmDMD are primarily based on retrospective, subgroup and meta-
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analyses of the results of our Phase 2b and ACT DMD clinical trials of Translarna for the treatment of nmDMD. Other than with
respect to certain of our meta-analyses, results of our analyses are expressed as nominal p-values, which are generally considered
less reliable indicators of efficacy than adjusted p-values. In addition, retrospective analyses are generally considered less reliable
than pre-specified analyses.”
Participation Criteria and Stratification. Certain key inclusion criteria were specified in the ACT DMD trial protocol for
enrollment: the patient had to be 7 through 16 years of age; at the screening visit the patient had to be able to walk no more than
80% of predicted 6MWD compared to healthy boys matched for age and height, but had to be able to walk at least 150 meters
during the 6MWT; and the patient must have used systemic corticosteroids for a minimum of six months prior to start of treatment.
The ACT DMD trial protocol provided for the exclusion of patients from the trial if, among other things, they recently used systemic
aminoglycoside antibiotics, recently initiated or changed corticosteroid therapy or previously received Translarna treatment.
Patients enrolled in ACT DMD underwent 48 weeks of blinded treatment prior to the final analysis and the randomization was
stratified based on age (<9 years versus 9), baseline 6MWD (<350 versus 350 meters), and duration of prior use of corticosteroids
(<12 months versus 12 months).
TranslarnaTM for additional indications
Over the last seven years, multiple independent investigators have conducted preclinical studies in which Translarna enabled
readthrough of the premature stop codons from a large set of nonsense mutations across a diverse group of experimental models
exhibiting various genetic disorders. The studies evaluated the ability of Translarna to read through premature stop codons in
mR(cid:1)A in cell-free systems, transfected cell lines, mouse models and patient cells. Based on these studies by independent
investigators in addition to our own trials and studies, we expect to continue to pursue additional indications for Translarna,
including aniridia caused by nonsense mutation and, via an investigator initiated study, Dravet syndrome/CDKL5 caused by
nonsense mutation.
(cid:1)onsense mutation aniridia
Aniridia is a genetic disorder due to mutations in the PAX6 gene associated with ocular anatomical defects at birth, progressive
loss of eyesight, and other symptoms. We estimate that approximately one-third of all aniridia cases are due to a nonsense mutation.
In a prior study conducted by an independent investigator, Translarna-treated mice with nonsense mutation aniridia showed a
significant increase in the PAX6 protein in a nonsense mutation PAX6 gene, but not in mice with a PAX6 gene harboring a splice-
site mutation. The investigators in this study found that Translarna not only inhibited disease progression, but also reversed corneal,
lens and retinal defects and restored electrical responses of the retina.
The first patient in our clinical study of Translarna in nonsense mutation aniridia, which we refer to as STAR, was dosed in February
2016. STAR is a Phase 2, randomized, double-blinded, placebo-controlled study of Translarna in patients with aniridia caused by
a nonsense mutation, followed by an open-label extension study. Patients received blinded study drug for 48 weeks followed by
open-label Translarna for another 96 weeks. STAR was completed in February 2020 and did not meet statistical significance,
although a trend was observed in favor of Translarna. We intend to discuss the results with experts and reassess the program.
(cid:1)onsense mutation Dravet syndrome/CDKL5
Dravet syndrome and CDKL5 are two different genetically defined disorders of epilepsy. Dravet syndrome, also called severe
myoclonic epilepsy of infancy, is a debilitating form of epilepsy caused by mutations in the sodium voltage gated channel a1
subunit gene required for the proper function of brain cells. People with Dravet syndrome experience frequent seizures and
developmental delays. CDKL5 is caused by a mutation of the Cyclin-dependent kinase-like 5 (CDKL5) gene leading to a lack of
the protein critical in brain development. CDKL5 is characterized by seizures starting early in life and severe developmental
impairment.
A clinical study assessing Translarna in nonsense mutation Dravet syndrome/CDKL5 was initiated in the first quarter of 2017.
The study is an investigative trial and we do not expect to use it as the basis for a regulatory submission. The study is fully enrolled
and we expect it to be completed in the first half of 2020, at which point we will reassess the program.
Oncology program
We have two oncology agents in Phase 1 clinical development, PTC299 and PTC596. PTC299 is a small molecule dihydrooratate
dehydrogenase (DHODH) inhibitor that inhibits de novo pyrimidine nucleotide synthesis. In the fourth quarter of 2018, we initiated
a Phase 1 dose-escalation trial in patients diagnosed with acute myelogenous leukemia, or AML, who have relapsed or are refractory
to current treatment options and have no other approved treatment options. We are continuing to enroll this trial. In addition to
assessing PTC299 as a monotherapy in our Phase 1 study, we are also assessing PTC299 in a variety of therapeutic combinations
preclinically.
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AML is a rapidly progressing hematologic cancer that causes uncontrolled growth of immature blast cells in the bone marrow
preventing formation of normal blood cells. It may arise as a primary cancer or result from patient exposure to prior cytotoxic
and/or radiation therapy. Approximately 20,000 new patients are diagnosed annually in the United States.
PTC596 is a small molecule inhibitor of tubulin polymerization that is associated with cell cycle arrest. In addition, administration
is associated with a hyperphosphorylation of tumor BMI1 protein that subsequently leads to BMI1 protein degradation and reduction
in BMI1 protein function. We have assessed PTC596 in a Phase 1 multi-center study in patients with advanced solid tumors.
PTC596 is now being assessed in a clinical trial in combination with standard of care in pediatric patients with diffuse intrinsic
pontine glioma, or DIPG, in combination with radiation as first-line therapy, with PTC596 continuing as monotherapy after radiation
is completed. DIPG is a rapidly fatal pediatric cancer with 90% of patients dying within two years of diagnosis. There are
approximately 300 patients diagnosed annually in the United States and Canada. In the fourth quarter of 2018, we initiated a Phase
1 dose-escalation trial in DIPG patients and are continuing to enroll this trial as we dose-escalate.
PTC596 is also being evaluated in leiomyosarcoma, or LMS, in patients who have relapsed or are refractory to current treatments.
LMS is a type of sarcoma that manifests as malignant soft tissue tumors of muscle tissue. Preclinical evaluations suggested that
PTC596 had synergistic effects in combination with dacarbazine. Of about 3,000 sarcoma patients diagnosed annually in the U.S.,
approximately 20% have LMS. We initiated a Phase 1 dose escalation study of PTC596 for LMS in the first quarter of 2019 and
are currently enrolling this trial.
We received grant funding of $5.4 million for our oncology program from the Wellcome Trust. To the extent that we develop and
commercialize program intellectual property on a for-profit basis ourselves or in collaboration with a partner (provided we retain
overall control of worldwide commercialization), we may become obligated to pay to Wellcome Trust development and regulatory
milestone payments. Our first such milestone payment of $0.8 million to Wellcome Trust occurred in the second quarter of 2016.
For additional information, see “Item 1. Business - Our Collaborations and Funding Arrangements”.
Emflaza for Limb-girdle 2I
Limb-girdle muscular dystrophy type 2I, or LGMD2I, is a form of limb-girdle muscular dystrophy, which refers to a group of
conditions that cause weakness and wasting of the muscles in the arms and legs. In 2019, we initiated a clinical study assessing
Emflaza in limb-girdle 2I. As part of our continuous portfolio review, we have decided to deprioritize this assessment for Emflaza
and have discontinued the study.
Multi-platform Discovery
We continue to invest in our pre-clinical product pipeline by committing significant resources to research and development programs
and business development opportunities within our areas of scientific expertise, including potential collaborations, alliances, and
acquisitions or licensing of assets that complement our strategic mission to provide access to best-in-class treatments for patients
who have an unmet medical need.
Our Approach
Our approach to drug discovery and development is to target rare diseases with high-unmet needs using a variety of tools, including
approaches that intervene in R(cid:1)A, D(cid:1)A and energy production pathways.
Splicing
Post-transcriptional control processes are the events that occur in a cell following the transcription of D(cid:1)A into R(cid:1)A. These
processes regulate, for example, how long R(cid:1)A molecules last in the cell, how exons in precursor messenger R(cid:1)A, or pre-mR(cid:1)A,
molecules are spliced, and how efficiently mR(cid:1)A molecules are translated to proteins. In the majority of human protein-encoding
genes, the sequence encoding the mature mR(cid:1)A transcript is not contiguous in the pre-mR(cid:1)A but rather has intervening non-
coding regions called introns that interrupt the coding sequences, called exons. These introns are removed from the final mR(cid:1)A
product by a process called splicing that also joins the exons together such that only the exons are retained in the mature mR(cid:1)A.
We use our splicing technology to identify molecules that modulate splicing of the pre-mR(cid:1)A. Pre-mR(cid:1)A splicing is a series of
highly organized biochemical reactions. Approximately 94% of all human genes encode pre-mR(cid:1)As that undergo splicing. In
addition, through splicing, one gene can often generate several mR(cid:1)A products that include a different set of exons through a
process called alternative splicing which results in mature mR(cid:1)A that encodes different, related proteins. Splicing is altered, and
can be therapeutically targeted, in many human diseases, including SMA, Huntington’s disease, myotonic dystrophy and various
forms of cancer. We have developed several high-throughput drug discovery technology platforms that enable us to identify small
molecule modifiers of pre-mR(cid:1)A splicing. These technologies rely on sensitive quantification of pre-mR(cid:1)A isoforms directly in
human cells or tissue samples. Using this technology, we have successfully identified orally bioavailable small molecules that
correct splicing of SM(cid:1)2 mR(cid:1)A. One of these molecules, risdiplam, is a potential treatment for the genetic disorder SMA. Based
on this experience, we believe that other small molecule drug candidates can be rapidly identified that modify splicing of pre-
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mR(cid:1)A, promote inclusion of specific exons into mR(cid:1)A, including pseudoexons, or force skipping of undesired exons from the
mature mR(cid:1)A. We believe that this technology is potentially widely applicable to a large number of target genes across all
therapeutic areas.
Our splicing platform includes a development candidate in Huntington disease, a neurodegenerative disease caused by a toxic
gain-of-function triplet repeat expansion in the huntingtin gene. We expect to initiate a clinical trial for this program by the end
of 2020.
(cid:1)onsense suppression
An mR(cid:1)A contains multiple regions that have specific functions. Although the protein coding region of mR(cid:1)A contains the
information for the amino acid sequence of the protein product, several regions of mR(cid:1)A do not code for the protein and are
known as untranslated regions, or UTRs. They are unique to specific mR(cid:1)As or groups of mR(cid:1)As and are directly involved in
the post-transcriptional control of protein production. Interactions of cellular factors with the UTRs in the mR(cid:1)A determine when
and how much protein is produced as well as how mR(cid:1)A is degraded and eliminated from the cell. Additionally, certain sequences
in the mR(cid:1)A encode signals to stop protein production from the mR(cid:1)A. These are termed ‘nonsense’ signals.
We use our nonsense suppression technology to identify molecules that promote or enhance readthrough of premature stop codons
in the mR(cid:1)A. The presence of a premature stop codon results in translation termination before a full-length protein can be produced.
Our nonsense suppression technologies identify small molecules that increase readthrough at the premature stop codon by
facilitating the incorporation of a defined set of amino acids at the site of the premature stop codon resulting in the production a
full-length protein. We anticipate that this approach will be applicable to a wide variety of therapeutic areas.
In some instances, the nonsense, or stop, signals are premature. The presence of a premature stop codon can cause the degradation
of the mR(cid:1)A through a process called nonsense-mediated decay. In addition to identifying molecules that increase readthrough,
we are identifying molecules that can enhance the nonsense suppression effect of readthrough agents, such as Translarna, by
preventing the decay of nonsense mutation containing mR(cid:1)As, a process known as nonsense mediated decay. We have developed
a high throughput screen to identify molecules that increase the level of and stabilize premature stop codon-containing mR(cid:1)As.
We can evaluate the effect of these molecules alone and in combination with Translarna in cell-based models of disease, identify
lead compounds and initiate a chemical optimization program. We are currently in the process of evaluating compounds as single
agents and in combination with readthrough compounds in preparation for an optimization program.
Gene therapy
Gene therapy is a technique that uses genes to treat or prevent disease through several approaches including 1) replacing a mutated
gene that causes disease with a healthy copy of the gene, 2) inactivating, or “knocking out,” a mutated gene that is functioning
improperly or 3) introducing a new gene into the body to help fight a disease. Utilizing our C(cid:1)S delivery strategy and technologies,
we are focused on developing gene therapy product candidates that are engineered and optimized to provide durable treatments,
and potentially functional cures, for C(cid:1)S diseases for which there are currently no approved treatments. By directly administering
low doses our therapies using non-pathogenic AAV to deliver therapeutic genes to the target non-dividing neuronal cells in the
C(cid:1)S, which we term targeted micro-dosing, we believe we maximize the probability of achieving a therapeutic benefit and mitigate
systemic antibody, cellular immunity and complement-based reactions, minimize the stimulation of new immune responses, and
reduce off-target effects.
We believe that our gene therapy platform will enable us to treat patients across a range of C(cid:1)S disease indications. Our detailed
knowledge and expertise in rare C(cid:1)S diseases has enabled us to develop a gene therapy platform which we believe has important
competitive advantages, is highly differentiated and provides practical approaches for delivery of gene therapies to the C(cid:1)S in a
range of disease indications. Our platform utilizes advanced, commercially-available delivery devices, instrumentation and software
to optimize targeting to the region of the C(cid:1)S known to be involved in the cause of the disease. Targeted micro-dosing ensures
direct delivery to the C(cid:1)S, thereby avoiding systemic administration, mitigating systemic immune and complement responses,
minimizing the generation of newly mounted immunity to the gene therapy, and bypassing uptake and excretion of the gene therapy
vector by organs such as the liver and kidney which further enhances safety and keeps the dose levels low. Our targeted micro-
dosing strategy has the added benefit of requiring significantly lower gene therapy doses than systemic dosing would require. Our
low dose requirements provide for efficient manufacturing approaches that reduce supply risks, enhance product quality, and lower
production costs. Our direct delivery processes have also resulted in a deep understanding of routes of administration that result
in effective gene therapy delivery to target cells.
Our gene therapy platform includes an asset targeting Friedreich ataxia. We expect to enter the clinic for this program in the third
quarter of 2020. Additionally, the gene therapy platform includes two other programs targeting C(cid:1)S disorders, including Angelman
syndrome, a rare, genetic, neurological disorder characterized by severe developmental delays. We expect to submit an I(cid:1)D to
the FDA for this program in the first half of 2021.
Energy production and oxidative stress
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Energy production in cells is critical to their survival. On the other hand, processes that induce oxidative stress in cells can
negatively impact them. Energy production takes place in a part of the cell called mitochondria. The mitochondria use the transport
of electrons via chemical reactions called redox reactions in their cell membranes to produce adenosine triphosphate, or ATP,
which is the central energy molecule inside cells. This process of moving electrons to produce ATP is termed electron transfer or
transport. The redox reactions, however, can also cause oxidative stress. We use our expertise in energy production via electron
transfer chemical reactions and in oxidative stress to develop first-in-class therapeutics for unmet medical needs. One area of our
focus is on inherited mitochondrial diseases. Mitochondrial diseases often derive from defects in energy production and oxidative
stress pathway. These diseases commonly result in severe neurological impairment and death at an early age. Through our screening
processes, we have identified multiple drug targets which we are assessing in nonclinical studies with the aim of identifying
additional product candidates to take into clinical development. Similar strategies potentially can be used for broader sets of
diseases. We believe such approaches to these types of intractable diseases have the potential to lead to novel therapies to address
areas of high unmet medical need.
One of the molecules in our Bio-e platform is PTC857, a small molecule orally bioavailable compound that targets 15-LO and is
in development for the potential treatment of adult C(cid:1)S patients. In the third quarter of 2020, we intend to initiate a Phase 1 trial
in healthy volunteers to evaluate the safety and pharmacology of PTC857 and we are targeting glucocerebrosidase, or GBA,
Parkinson’s disease as the first indication. An estimated 5-10% of patients with Parkinson’s disease have a mutation in the GBA
gene and these patients tend to have accelerated onset and progression of a number of disease symptoms.
Our Collaborations, License Agreements and Funding Arrangements
We currently have ongoing collaborations with Roche and the SMA Foundation for SMA, collaboration and license agreements
with (cid:1)ational Taiwan University, or (cid:1)TU, for PTC-AADC, and a collaboration and license agreement with Akcea for Tegsedi and
Waylivra. We also have received grant funding from Wellcome Trust pursuant to funding agreements under which we have
continuing obligations. In addition to these collaboration, license and funding agreements, which are described in more detail
below, during 2015 we announced our research collaboration with Massachusetts General Hospital, or MGH, a Partners Healthcare
hospital, for the treatment of rare genetic disorders resulting from pre-mR(cid:1)A splicing defects pursuant to which we have certain
licensing, development and commercialization obligations to MGH.
Roche and the SMA Foundation
Overview. In (cid:1)ovember 2011, we entered into a license and collaboration agreement with Roche and the SMA Foundation to
further develop and commercialize compounds identified under our SMA sponsored research program with the SMA Foundation
and to research other small molecule compounds with potential for therapeutic use in patients with SMA. The research term of
this agreement was terminated effective December 31, 2014. The ongoing collaboration is governed by a joint steering committee
consisting of an equal number of representatives of us, the SMA Foundation and Roche. We, the SMA Foundation and Roche have
agreed to endeavor to make decisions by consensus, but if the joint steering committee cannot reach agreement after following a
specified decision resolution procedure, Roche’s decision will control. However, Roche may not exercise its final decision-making
authority with respect to certain specified matters, including any decision that would increase our or the SMA Foundation’s
obligations, reduce our or the SMA Foundation’s rights, expand Roche’s rights, or reduce Roche’s obligations under the license
and collaboration agreement.
Commercialization. We have granted Roche worldwide exclusive licenses, with the right to grant sublicenses, to our patent rights
and know-how with respect to such compounds and products. Roche is responsible for pursuing worldwide clinical development
of compounds from the research program and has the exclusive right to develop and commercialize compounds from the
collaboration.
Payments and Contingent Payments. Pursuant to the license and collaboration agreement, Roche paid us an upfront non-
refundable payment of $30.0 million. During the research term, which was terminated effective December 31, 2014, Roche
provided us with funding, based on an agreed- upon full-time equivalent rate, for an agreed-upon number of full- time equivalent
employees that we contributed to the research program. We are eligible to receive up to an aggregate of $135.0 million in payments
if specified development and regulatory milestones are achieved and up to an aggregate of $325.0 million in payments if specified
sales milestones are achieved. As of December 31, 2019, we have earned $62.5 million of these development and regulatory
milestone payments based on the progression of the collaboration from the pre-clinical stage to Phase 2 clinical study in SMA
patients. We are also entitled to tiered royalties ranging from 8% to 16% on worldwide net product sales of products developed
pursuant to the collaboration. Roche’s obligation to pay us royalties will expire generally on a country-by- country basis at the
latest of the expiration of the last-to-expire patent covering a product in the given country, the expiration of regulatory exclusivity
for that product in such country or 10 years from the first commercial sale of that product in such country. However, the royalties
payable to us may be decreased in certain circumstances. For example, the royalty rate in a particular country is reduced if the
product is not protected by patents in that country and no longer entitled to regulatory exclusivity in that country. We remain
responsible for making any payments to the SMA Foundation that may become due under our pre-existing sponsored research
agreement with the SMA Foundation.
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Termination. Unless terminated earlier, the license and collaboration agreement will expire on the date when no royalty or other
payment obligations are or will become due under the agreement. Roche’s termination rights under the license and collaboration
agreement include the right to terminate the agreement at any time after (cid:1)ovember 22, 2013 on a product-by-product and country-
by-country basis upon three months’ notice before the launch of the applicable product or upon nine months’ notice thereafter;
and the right to terminate the agreement in specified circumstances following a change of control of us. The license and collaboration
agreement provides that we or Roche may terminate the agreement in the event of an uncured breach by the other party of a material
provision of the agreement, or in the event of the other party’s bankruptcy or insolvency. Upon termination of the collaboration
agreement by Roche for convenience or termination by us as a result of Roche’s breach, bankruptcy, change of control or patent
challenge, we have the right to assume the development and commercialization of product candidates arising from the license and
collaboration agreement. In that event, we may become obligated to pay royalties to Roche on sales of any such product.
SMA Foundation
Overview. In June 2006, we entered into a sponsored research agreement with the SMA Foundation under which we and the
SMA Foundation have collaborated in the research and preclinical development of small molecule therapeutics for SMA. As
discussed above, we are also collaborating with the SMA Foundation and Roche to further develop these compounds. Pursuant to
the sponsored research agreement, as amended, the SMA Foundation provided us with $13.3 million in funding. The SMA
Foundation is not obligated to provide any further funding under this agreement.
Continuing financial obligations. We may become obligated to pay the SMA Foundation single-digit royalties on worldwide net
product sales of any collaboration product that we successfully develop and subsequently commercialize or, if we outlicense rights
to a collaboration product, a specified percentage of certain payments we receive from our licensee. As discussed above, we have
outlicensed rights to Roche pursuant to a license and collaboration agreement. We are not obligated to make such payments unless
and until annual sales of a collaboration product exceed a designated threshold. Our obligation to make such payments would end
upon our payment to the SMA Foundation of a specified amount, which we refer to as the repayment amount.
Reversion rights. In specified circumstances, including those involving our decision to discontinue development or
commercialization of a collaboration product, our uncured failure to meet agreed timelines or those that might arise following our
change of control, we may be obligated to grant the SMA Foundation exclusive or non-exclusive sublicensable rights under our
intellectual property, in certain collaboration products, among other rights, to assume the development and commercialization of
such collaboration products and to provide the SMA Foundation with other transitional assistance, which we refer to as a reversion.
In some such cases, we may be entitled to receive licensing fee payments from the SMA Foundation and single-digit royalties on
sales of the applicable collaboration product, which amounts we collectively refer to as reversion payments. In other cases, the
SMA Foundation is not required to make any payments to us in connection with the licenses it receives from us.
Termination. Unless terminated earlier, the sponsored research agreement will continue until the earliest of the SMA Foundation’s
receipt of the repayment amount or, if there was a reversion, either our receipt of all reversion payments that the SMA Foundation
may be obligated to make to us or, if the SMA Foundation is not obligated to make reversion payments, the expiration of the last-
to-expire patent we licensed to the SMA Foundation in connection with such reversion. The sponsored research agreement provides
that either party may terminate the agreement in the event of an uncured material breach by the other party or in the event of the
other party’s bankruptcy or insolvency.
(cid:1)ational Taiwan University
We have two agreements with (cid:1)TU relating to PTC-AADC: a collaborative research agreement, originally entered into between
Agilis Biotherapeutics, Inc., or Agilis, and (cid:1)TU, in September 2015, as amended, or the (cid:1)TU Collaboration Agreement; and a
license and technology transfer agreement, originally entered into between Agilis, (cid:1)TU and Professor Wuh-Liang (Paul) Hwu, in
December 2015, or the (cid:1)TU Licensing Agreement.
(cid:1)TU Collaboration Agreement
Overview. The (cid:1)TU Collaboration Agreement governs the collaboration between us and (cid:1)TU with respect to the research and
clinical trials for AADC deficiency gene therapy, or the “Research.” Pursuant to the (cid:1)TU Collaboration Agreement, (cid:1)TU is
responsible for performing the research and clinical trials and we are responsible for providing related funding. In accordance with
such obligations, (cid:1)TU completed a Phase 1/2 trial, AADC-010, in Taiwan of GT-AADC for the treatment of AADC deficiency
and is conducting an ongoing Phase 2b trial, AADC-011, in Taiwan of PTC-AADC for the treatment of AADC deficiency and is
collaborating on certain other ongoing activities with third parties. We are responsible for any regulatory submissions for PTC-
AADC for the treatment of AADC deficiency.
Funding obligations. Our funding obligations consist of funding payments for (cid:1)TU’s research paid upon the achievement of
certain milestones. As of December 31, 2019, an aggregate amount of $759,609 in funding payments has been paid to (cid:1)TU. Since
December 31, 2019, an additional $839,896 has been paid to (cid:1)TU in connection with the EMA’s acceptance of the MAA for PTC-
AADC and other funding payments. An additional $1,200,000 would become due and payable to (cid:1)TU upon a potential approval
by the EMA of the MAA for PTC-AADC.
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Intellectual property. All intellectual property developed or obtained by (cid:1)TU relating to the Research shall be owned by (cid:1)TU.
The (cid:1)TU Collaboration Agreement provided us a right of first refusal for an exclusive, worldwide, royalty bearing license for the
results of the Research, which Agilis exercised in 2015 in connection with entering into the Licensing Agreement.
Termination. The (cid:1)TU Collaboration Agreement expires on September 30, 2020, with automatic annual extensions subject to our
written approval. The (cid:1)TU Collaboration Agreement can be terminated for certain specified breaches by either party upon 30 or
60 days’ notice, depending on the breach and following a specified cure period. Upon termination at our election, (cid:1)TU is obligated
to return to us any unused funding payments made to (cid:1)TU that have not yet been utilized, and we are obligated to pay any non-
cancellable expenses incurred by (cid:1)TU, as of the date of termination.
(cid:1)TU Licensing Agreement
Overview. Pursuant to the (cid:1)TU Licensing Agreement, (cid:1)TU granted to us an exclusive, perpetual license, with the right to grant
sublicenses through all tiers, to research and use the intellectual property, data, chemistry, manufacturing and controls, or CMC,
records, documents, confidential information, materials and know-how pertaining to the Research, including PTC-AADC for the
treatment of AADC deficiency, under the (cid:1)TU Collaboration Agreement, or the Technology, and to develop, make, manufacture,
use, sell, import and market the Technology and any other products made, invented, developed or incorporated by or with the
Technology, or the Licensed Products. Subject to any regulatory delays or issues, we are obligated to research, use and develop
the Technology to manufacture Licensed Products by December 23, 2025. Additionally, we are obligated to obtain marketing
approval of PTC-AADC for the treatment of AADC deficiency, either by the FDA or by the EMA, by December 31, 2024.
Funding Obligations. (cid:1)TU received a lump sum of $100,000 upon execution of the (cid:1)TU Licensing Agreement. Additionally,
(cid:1)TU will be entitled to receive contingent payments from us based on (i) the achievement of certain clinical and regulatory
milestones up to an aggregate maximum amount of $2.0 million, (ii) annual license maintenance fees, (iii) a low double-digit
percentage royalty of annual net sales of Licensed Products, and (iv) a percentage of sublicense revenue, ranging from low-twenties
to mid-twenties. The annual license maintenance fees are non-refundable, but creditable against annual net sales payments.
Intellectual Property. All intellectual property relating to the manufacture, production, assembly, use or sale of Technology and
any Licensed Products derived thereof are owned by (cid:1)TU.
Termination. The (cid:1)TU Licensing Agreement expires on December 23, 2035. Upon expiration, we will have a fully paid-up,
perpetual, royalty-free exclusive license to the Technology. We may terminate the (cid:1)TU Licensing Agreement upon 60 days’ written
notice to (cid:1)TU in the event of (a) the failure of a pivotal clinical study, or serious adverse event in a clinical study, with respect to
PTC-AADC for the treatment of AADC deficiency, that prevents continuing such clinical study under reasonable circumstances
or (b) the rejection of a BLA with the FDA or an MAA with the EMA, or equivalent biologics approval application in another
territory with respect to PTC-AADC for the treatment of AADC. In such termination event, we must pay $100,000 to (cid:1)TU within
30 days of termination and (cid:1)TU would retain all rights to the Technology. We may terminate the (cid:1)TU Licensing Agreement for
material breach by another party following a 30-day cure period. (cid:1)TU may terminate the (cid:1)TU Licensing Agreement for our failure
to pay any undisputed license fees or net sales or sublicensing royalty fees within the applicable deadline following a 30-day cure
period.
Akcea
Overview. In August 2018, PTC Therapeutics International Limited, our subsidiary, entered into a Collaboration and License
Agreement, or the Akcea Agreement, with Akcea, for the commercialization by us of Tegsedi, Waylivra and products containing
those compounds, which we refer to collectively as the Products, in countries in Latin America and the Caribbean, or the PTC
Territory. In addition, Akcea has granted to us a right of first negotiation, or ROF(cid:1), to commercialize AKCEA-TTR-Lrx, a follow-
on product candidate to inotersen, on an exclusive basis in the PTC Territory. We are responsible for all meetings, communications
and other interactions with regulatory authorities in the PTC Territory. The activities of the parties pursuant to the Akcea Agreement
is overseen by a Joint Steering Committee, composed of an equal number of representatives appointed by each of us and Akcea.
Commercialization. Under the terms of the Akcea Agreement, Akcea has granted to us an exclusive right and license, with the
right to grant certain sublicenses, under Akcea’s product-specific intellectual property to develop, manufacture and commercialize
the Products in the PTC Territory. In addition, Akcea has granted to us a non-exclusive right and license, with the right to grant
certain sublicenses, under Akcea’s core intellectual property and manufacturing intellectual property to develop, manufacture and
commercialize the Products in the PTC Territory and to manufacture the Products worldwide in accordance with a supply agreement
with Akcea. Akcea has in-licensed certain of the Akcea intellectual property from its affiliate, Ionis. Each party has agreed not to,
independently or with any third party, commercialize any competing oligonucleotide product in the PTC Territory for the same
gene target as inotersen.
Payments and Contingent Payments. We paid to Akcea an upfront licensing fee of $18.0 million, consisting of an initial payment
of $12.0 million paid in connection with entering into the Akcea Agreement in August 2018, and a second payment of $6.0 million
that was paid after Waylivra received regulatory approval from the EMA in May 2019. In addition, Akcea is eligible to receive
milestone payments, on a Product-by-Product basis, of $4.0 million upon receipt of regulatory approval for a Product from A(cid:1)VISA,
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subject to a maximum aggregate amount of $8.0 million for all such Products. We paid Akcea $4.0 million upon our receipt of
marketing authorization from A(cid:1)VISA in October 2019 for the treatment of stage 1 or stage 2 polyneuropathy in adult patients
with hATTR amyloidosis in Brazil with Tegsedi. Akcea is also entitled to receive royalty payments in the mid-twenty percent
range of net sales on a country-by-country and Product-by-Product basis, commencing on the earlier to occur of (1) 12 months
after the first commercial sale of such Product in Brazil or (2) the date when we, our affiliates or sublicensees have recognized
revenue of $10.0 million or more in cumulative net sales for such Product in the PTC Territory. The royalty payments are subject
to reduction in certain circumstances as set forth in the Akcea Agreement.
Right of first negotiation. Akcea has granted to us a ROF(cid:1) to commercialize AKCEA-TTR-Lrx in the PTC Territory, subject to
negotiation of the terms of a definitive agreement and certain other terms and conditions. Such a definitive agreement would
provide for a royalty rate to be paid by us for AKCEA-TTR-Lrx equal to the royalty rate we have agreed to pay for Tegsedi under
the Akcea Agreement, or in the mid-twenty percent range of net sales, and the term of such royalty payments would be the same
as the term of the Tegsedi royalty payments. During a specified period in the Agreement, neither Akcea nor Ionis may enter into
an agreement or grant any license to AKCEA-TTR-Lrx that is inconsistent with PTC’s ROF(cid:1).
Termination. The Akcea Agreement will continue until the expiration of the last to expire royalty term with respect to all Products
in all countries in the PTC Territory. Either party may terminate the Akcea Agreement on written notice to the other party if such
other party is in material breach of its obligations thereunder and has not cured such breach within 30 days after notice in the case
of a payment breach or 60 days after notice in the case of any other breach.
Wellcome Trust
We have two separate funding agreements with Wellcome Trust for the research and development of small molecule compounds
in connection with our oncology and antibacterial programs. Pursuant to the agreement relating to the antibacterial program,
Wellcome Trust awarded us a $5.0 million grant of which we received $4.8 million between 2011 and 2015. We are no longer
actively pursuing an antibacterial program and do not expect to receive additional funding under this agreement. The materials
terms of these funding agreements are similar in substance, except as described below.
The other agreement, entered into in May 2010, relates to the research and development of small molecule compounds, which we
refer to as our oncology program. Pursuant to this agreement, Wellcome Trust awarded us a $5.4 million grant, of which
approximately $0.9 million was paid in connection with execution of the agreement and the balance of which was paid to us in
2010 and 2012 based on our achievement of specified milestones.
Development and commercialization. We own all intellectual property that arises from the conduct of the research programs
under these funding agreements, which we refer to as program intellectual property, and are responsible for developing and
commercializing the program intellectual property, including PTC596 (for our oncology program), and other compounds. However,
we will require Wellcome Trust’s written consent prior to any such development or commercialization. If Wellcome Trust withholds
such consent and we and Wellcome Trust are not able to resolve Wellcome Trust’s concerns, the parties have agreed to follow a
specified dispute resolution procedure that gives neither party final decision-making authority.
Reversion rights. Under both funding agreements, if we fail to take reasonable steps to develop or commercialize program
intellectual property during specified timeframes, we may be obligated to grant exclusive rights to Wellcome Trust or its nominee
under the program intellectual property, along with non-exclusive rights under our background intellectual property, so that
Wellcome Trust or its nominee can assume such development and commercialization. If we grant such a license, we would be
entitled to a share of any consideration received by Wellcome Trust in connection with any subsequent development or
commercialization of program intellectual property on a for-profit basis, which share would be proportionate to our contribution
to the development and commercialization.
Continuing financial obligations-oncology program. To the extent that we develop and commercialize program intellectual
property on a for-profit basis ourselves or in collaboration with a partner (provided we retain overall control of worldwide
commercialization), we may become obligated to pay to Wellcome Trust development and regulatory milestone payments and
single-digit royalties on sales of any research program product under our oncology program. We made the first development
milestone payment of $0.8 million to Wellcome Trust under this agreement during the second quarter of 2016. Additional
development and regulatory milestone payments up to an aggregate of $22.4 million may become payable by us under the
agreement. For example, in the event a Phase 2 clinical study of a research program candidate, such as PTC596, is commenced,
a milestone payment of $2.5 million would become payable by us to Wellcome Trust upon the earlier to occur of the first dose
administered to the last patient enrolled in the study or the termination of dosing of all patients in the study.
Additional continuing financial obligations. Our obligation to pay the royalties described above would continue on a country-
by-country basis until the longer of the expiration of the last patent in the program intellectual property in such country covering
the research program product and the expiration of market exclusivity of such product in such country. To the extent that we
develop and commercialize program intellectual property on a for-profit basis through outlicensing, we will be obligated to pay
to Wellcome Trust a specified share of any consideration we receive from our licensee, provided that Wellcome Trust would be
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entitled to receive a minimum amount equal to its original contribution. We would incur no payment obligations to Wellcome
Trust to the extent that we elect to develop and commercialize program intellectual property on a non-profit basis.
Termination. Unless terminated earlier, each funding agreement will continue until we have received the full amount of the grant,
the research program has ended, the last-to-expire of the patents in the program intellectual property has expired, any agreement
entered into for the exploitation of the program intellectual property or our background intellectual property has expired, and there
are no remaining payment obligations relating to the exploitation of the program intellectual property or our background intellectual
property. Each funding agreement provides that either party may terminate the agreement in the event of an uncured material
breach by the other party or in the event of the other party’s bankruptcy or insolvency and that Wellcome Trust may terminate the
agreement under specified circumstances, including, among others, in specified circumstances following a change in control of
us or if Wellcome Trust believes that an uncorrected serious failure exists in the progress, management or conduct of the research
program or that an act or omission by us is incompatible with or has an adverse effect on Wellcome Trust’s charitable objectives
or reputation.
If Wellcome Trust terminates either or both funding agreements in specified circumstances, including as a result of our material
breach, bankruptcy or insolvency, or following our change of control, we may be obligated to assign to Wellcome Trust ownership
of the applicable program intellectual property, grant to Wellcome Trust royalty-free non-exclusive rights under the applicable
background intellectual property for the continuation of the research program (if applicable) and the development and
commercialization of the applicable program intellectual property, and provide Wellcome Trust with other specified transitional
assistance.
Certain specified rights and obligations of the parties will generally survive termination of the funding agreements, including
Wellcome Trust’s right to receive payments from us with respect to development and commercialization of program intellectual
property on a for-profit basis.
If a funding agreement terminates prior to the end of a research program, we are obligated to return all funding we received from
Wellcome Trust that is unspent at the date of termination (after deduction of costs and non-cancellable commitments incurred prior
to such date).
Our Ongoing Acquisition-Related Obligations
From time to time, we have engaged in strategic transactions to expand and diversify our product pipeline, including through the
acquisition of assets or businesses. In connection with these acquisitions, we have entered into agreements through which we
have ongoing obligations, including obligations to make contingent payments upon the achievement of certain development,
regulatory and net sales milestones or upon a percentage of net sales of certain products.
Complete Pharma Holdings, LLC
On April 20, 2017, we completed our acquisition of all rights to Emflaza, or the Emflaza Transaction. The Emflaza Transaction
was completed pursuant to an asset purchase agreement, dated March 15, 2017, as amended on April 20, 2017, or the Asset Purchase
Agreement, by and between us and Marathon Pharmaceuticals, LLC (now known as Complete Pharma Holdings, LLC), or
Marathon. The assets acquired by us in the Emflaza Transaction include intellectual property rights related to Emflaza, inventories
of Emflaza, and certain contractual rights related to Emflaza. We assumed certain liabilities and obligations in the Emflaza
Transaction arising out of, or relating to, the assets acquired in the Emflaza Transaction.
Upon the closing of the Emflaza Transaction, we paid to Marathon total upfront consideration comprised of $75.0 million in cash,
funded through cash on hand, and 6,683,598 shares of our common stock. The number of shares of common stock issued at closing
was determined by dividing $65.0 million by the volume weighted average price per share of the Company’s common stock on
the (cid:1)asdaq Global Select Market, or (cid:1)asdaq, for the 15 trading-day period ending on the third trading day immediately preceding
the closing. Marathon will be entitled to receive contingent payments from us based on annual net sales of Emflaza beginning in
2018, up to a specified aggregate maximum amount over the expected commercial life of the asset, and a single $50.0 million
sales-based milestone, in each case subject to the terms and conditions of the Asset Purchase Agreement.
Agilis Biotherapeutics, Inc.
On August 23, 2018, we completed our acquisition of Agilis Biotherapeutics, Inc., or Agilis, pursuant to an Agreement and Plan
of Merger, dated as of July 19, 2018, or the Merger Agreement, by and among us, Agility Merger Sub, Inc., a Delaware corporation
and our wholly owned, indirect subsidiary, Agilis and, solely in its capacity as the representative, agent and attorney-in-fact of the
equityholders of Agilis, Shareholder Representative Services LLC, or the Merger.
Upon the closing of the Merger, we paid to Agilis equityholders total upfront consideration comprised of $49.2 million in cash
and 3,500,907 shares of our common stock, or the Closing Stock Consideration. The Closing Stock Consideration was determined
by dividing $150.0 million by the volume-weighted average price per share of our common stock on (cid:1)asdaq for the 10 consecutive
trading-day period ending on the second trading-day immediately preceding the closing of the Merger. Agilis equityholders may
become entitled to receive contingent payments from us based on the achievement of certain development, regulatory and net
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sales milestones as well as based upon a percentage of net sales of certain products. Under the Merger Agreement, we are required
to pay $40.0 million of the development milestone payments upon the passing of the second anniversary of the closing of the
Merger, August 23, 2020, regardless of whether the applicable milestones have been achieved.
BioElectron Technology Corporation
On October 25, 2019, we completed the acquisition of substantially all of the assets of BioElectron pursuant to an Asset Purchase
Agreement by and between the Company and BioElectron, dated October 1, 2019, or the Asset Acquisition Agreement.
Upon the closing of the Asset Acquisition, we paid to BioElectron total upfront consideration of $10.0 million, funded with cash
on hand, less (i) transaction expenses incurred by BioElectron, (ii) the amount of outstanding indebtedness of BioElectron including
a $4.0 million loan advance to BioElectron plus accrued and unpaid interest thereon and (iii) $1.5 million held in an escrow account
to secure potential indemnification obligations owed to us. Subject to the terms and conditions of the Asset Acquisition Agreement,
BioElectron may become entitled to receive contingent milestone payments of up to $200.0 million (in cash or in shares of our
common stock, as determined by us) from us based on the achievement of certain regulatory and net sales milestones. Subject to
the terms and conditions of the Asset Acquisition Agreement, BioElectron may also become entitled to receive contingent payments
based on a percentage of net sales of certain products.
Intellectual Property
Patents and trade secrets
Our success depends in part on our ability to obtain and maintain proprietary protection for our product candidates, technology
and know-how, to operate without infringing the proprietary rights of others and to prevent others from infringing our proprietary
rights. Our policy is to seek to protect our proprietary position by, among other methods, filing U.S. and certain ex-U.S. patent
applications related to our proprietary technology, inventions and improvements that we believe are important to the development
of our business, where patent protection is available. We also rely on trade secrets, know-how, continuing technological innovation
and in-licensing opportunities to develop and maintain our proprietary position.
As of January 31, 2020, our patent portfolio included a total of 84 active U.S. patents and 48 pending U.S. patent applications,
including original filings, continuations and divisional applications, as well as numerous ex-U.S. counterparts to many of these
patents and patent applications. We own or exclusively in-license these patents and patent applications with claims directed to
composition of matter, pharmaceutical formulation and methods of use of many of our compounds, including ataluren, the active
ingredient in the formulated product TranslarnaTM (ataluren).
The patent rights relating to Translarna owned by us consist of 40 issued U.S. patents relating to composition of matter, methods
of use, formulation, dosing regimens and methods of manufacture and multiple pending U.S. patent applications relating to
composition of matter, methods of use, formulation, and dosing regimens. We do not license any material patent rights relating to
ataluren to unaffiliated parties. The issued U.S. patents relating to composition of matter are currently scheduled to expire in 2024
and all U.S. patents that issue from U.S. patent applications arising from the composition of matter would also be scheduled to
expire in 2024. Issued U.S. patents relating to therapeutic methods of use are currently scheduled to expire in 2026 and 2027,
including patent term adjustment. We have patent rights that are the subject of granted patents or pending counterpart patent
applications in a number of other jurisdictions, including Canada, certain South American countries, Europe, certain Middle Eastern
countries, certain Africa countries, certain Asian countries and certain Eurasian countries. We own 12 European patents relating
to composition of matter, uses, dosing regimens and methods of manufacture of ataluren, as well as multiple pending European
patent applications relating to composition of matter, uses and formulations. The expiration dates of the granted European patents
occur for composition of matter in 2024, for dosing regimen patents in 2026 and 2027, and for the manufacturing process in 2027.
Except as indicated above, the anticipated expiration dates referred to above are without regard to potential patent term extension,
patent term adjustment or other marketing exclusivities that may be available to us.
The term of individual patents depends upon the legal term for patents in the countries in which they are obtained. In most countries,
including the United States, the patent term is 20 years from the earliest filing date of a non-provisional patent application. In the
United States, a patent’s term may, in certain cases, be lengthened by patent term adjustment, which compensates a patentee for
administrative delays by the U.S. Patent and Trademark Office in examining and granting a patent, or may be shortened if a patent
is terminally disclaimed over an earlier filed patent. The term of a U.S. patent that covers a drug, biological product or medical
device approved pursuant to a pre-market approval, or PMA, may also be eligible for patent term extension when FDA approval
is granted, provided statutory and regulatory requirements are met. The length of the patent term extension is related to the length
of time from (cid:1)DA submission that the drug is under regulatory review until the approval date while the patent is in force. The
Hatch-Waxman Act permits a patent term extension of up to five years beyond the expiration date set for the patent. Patent extension
based on Hatch-Waxman Act cannot extend the remaining term of a patent beyond a total of 14 years from the date of product
approval, only one patent applicable to each regulatory review period may be granted an extension and only those claims reading
on the approved drug may be extended.
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Similar provisions are available in Europe and certain other ex-U.S. jurisdictions to extend the term of a patent that covers an
approved drug. One means of patent term extension in Europe after EMA approval is based on obtaining a Supplementary Protection
Certificate, or SPC. We have applied for SPCs for ataluren in all applicable European countries in which we have a European
patent and expect that all will be granted. The maximum patent term extension provided by an SPC is a total of 5 years from the
date of patent term expiration. For example, in jurisdictions where an SPC with maximum patent term extension has been granted,
the ataluren composition of matter patent would be scheduled to expire in 2029. In the future, if and when our product candidates
receive approval by the FDA or other non-European ex-U.S. regulatory authorities, we expect to apply for patent term extensions
on issued patents covering those products, depending upon the length of the clinical trials for each drug and other factors.
We presently have no patent rights to protect the approved use of Emflaza, and we rely on non-patent market exclusivity periods
under the Orphan Drug Act and the Hatch-Waxman Act to commercialize Emflaza in the United States. See “Item 1. Business-
Government Regulation-The new drug and biologic approval process-Hatch-Waxman Act for Drugs” for further information
regarding the exclusivity periods that we rely on.
We are pursuing patent protection for PTC-AADC and our other gene therapy product candidates, and, in the meantime, if PTC-
AADC is approved, we expect to rely on the non-patent market exclusivity periods under the Orphan Drug Act and the BPCIA,
to commercialize PTC-AADC in the United States. See “Item 1. Business-Government Regulation-BPCIA exclusivity” for further
information regarding the exclusivity periods that we rely on.
We may rely, in some circumstances, on trade secrets to protect our technology. However, trade secrets can be difficult to protect.
We seek to protect our proprietary technology and processes, in part, by confidentiality agreements with our employees, consultants,
scientific advisors and contractors. We also seek to preserve the integrity and confidentiality of our data and trade secrets by
maintaining physical security of our premises and physical and electronic security of our information technology systems. While
we have confidence in these individuals, organizations and systems, agreements or security measures may be breached, and we
may not have adequate remedies for any breach. In addition, our trade secrets may otherwise become known or be independently
discovered by competitors. To the extent that our consultants, contractors or collaborators use intellectual property owned by others
in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions.
License agreements
We are a party to a number of license agreements under which we license patents, patent applications and other intellectual property
from third parties. We enter into these agreements to augment our proprietary intellectual property portfolio. The licensed intellectual
property covers some of the compounds that we are researching and developing, some post-transcriptional control targets and
some of the scientific processes that we use. These licenses impose various diligence and financial payment obligations on us. We
expect to continue to enter into these types of license agreements in the future.
We exclusively in-license all of the patents and patent applications, with claims directed to composition of matter, formulation
and methods of use, for our gene therapy programs, including for the target disease AADC. For a further discussion of the material
agreements relating to our in-licensing of PTC-AADC for the treatment of AADC deficiency, see “Item 1. Business-Our
Collaborations, License Agreements and Funding Arrangements-(cid:1)ational Taiwan University.”
Manufacturing
We do not currently own or operate functional manufacturing or distribution facilities for the production of clinical or commercial
quantities of our products or product candidates or compounds that we are testing in our preclinical programs. We currently rely,
and expect to continue to rely, on third parties for the manufacture, packaging, labeling and distribution of clinical and commercial
supplies of our products or product candidates that we may develop, other than small amounts of compounds that we may synthesize
ourselves for preclinical testing. We are currently taking steps to increase our internal and external manufacturing capabilities for
our gene therapy platform.
The active pharmaceutical ingredients in our products and product candidates are provided by third-parties. We currently rely on
a single source for the production of some of our raw materials and we obtain our supply of the drug substance for Translarna
from two third-party manufacturers and the drug substance for our oncology program through another third-party manufacturer.
We engage two separate manufacturers to provide bulk drug product for Translarna. We have a relationship with three manufacturers
that are capable of providing fill and finish services for our finished commercial and clinical Translarna product.
We currently obtain our supplies of Translarna and our other products and product candidates from our third-party manufacturers
pursuant to agreements that include specific supply timelines and volume expectations. If a manufacturer should become unavailable
to us for any reason, we would seek to obtain supply from another manufacturer engaged by us for the applicable product or
service. In the event that we were unable to procure the applicable supply from a validated manufacturer, we believe that there
are a number of potential replacements for each of our outsourced services, however we likely would experience delays in our
ability to supply Translarna to patients or in advancing our clinical trials while we identify and qualify replacement suppliers.
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We obtain our supply of the drug substance for Emflaza through a third-party manufacturer that is currently the only third-party
manufacturer qualified to provide Emflaza drug substance. All of our drug product manufacturing, processing and packaging needs
for Emflaza tablet and suspension product are fulfilled pursuant to two different exclusive supply agreements assumed by us in
connection with our acquisition of Emflaza. We expect to fulfill all of our requirements for Emflaza tablets as well as secondary
packaging of pre-filled Emflaza oral suspension bottles pursuant to one of these agreements, which has an initial term of five
years. We expect to fulfill all of our requirements for Emflaza suspension product pursuant to the other agreement. Through the
seventh year anniversary of FDA approval of Emflaza, we are obligated to pay to the manufacturer of the Emflaza suspension
product royalty payments, on a quarterly basis, based on a percentage (ranging from low to middle-low double digits) of, or a
fixed payment with respect to, our annual net sales of suspension product in the United States, subject to reduction in accordance
with the terms of the agreement. The royalty payments for the suspension product are subject to a minimum aggregate annual
payment ranging from €0.5 million to €1.5 million per year.
If our drug substance provider or either of our drug product manufacturers was to be unable to provide drug substance or manufacture
Emflaza product in sufficient quantities to meet projected demand, future sales could be adversely affected, which in turn could
have a detrimental impact on our ability to maintain our marketing authorization in the United States and on our ability to
commercialize Emflaza, which in turn would have a material adverse effect on our business, financial results and results of
operations. Further, as we presently have no patent rights to protect the approved use of Emflaza, we expect to rely market exclusivity
periods available to us under the Orphan Drug Act and Hatch-Waxman Act to commercialize Emflaza for DMD in the United
States. As the holder of orphan exclusivity, we are required to assure the availability of sufficient quantities of Emflaza to meet
the needs of patients. Failure to do so could result in loss of the drug's orphan exclusivity in the United States, which would have
a material adverse effect on our ability to generate revenue from sales of Emflaza.
Translarna and Emflaza are manufactured in reliable and reproducible synthetic processes. Our raw materials are not scarce and
are readily available. We currently rely on a single source for the production of some raw materials and switching to an alternative
source could, in some instances, take time and could lead to delays in manufacturing. (cid:1)o shortages or delays of raw materials
were encountered in 2019, and none are currently expected in 2020. The chemistry is amenable to scale up and does not require
unusual equipment in the manufacturing process. We expect to continue to develop drug candidates that can be produced cost-
effectively at contract manufacturing facilities.
We currently have a contract with a pharmacy and hospital distributor in the EU that distributes Translarna for clinical programs
and limited commercial and EAP programs. We have engaged with third party logistic providers, or 3PLs, which distribute
Translarna for the majority of our commercial and EAP programs on our behalf.
We utilize third parties for the commercial distribution of Emflaza, including a 3PL to warehouse Emflaza as well as a specialty
pharmacy to sell and distribute Emflaza to patients. The specialty pharmacy provides us with third-party call center services to
provide patient support and financial services, prescription intake and distribution, reimbursement adjudication, and ongoing
compliance support.
Pursuant to our Collaboration and License Agreement with Akcea, we have entered into a master supply agreement with Akcea
whereby Akcea or its affiliates shall manufacture and supply, or cause to be manufactured and supplied, Tegsedi and Waylivra in
quantities sufficient to support the commercialization of Tegsedi and Waylivra in the PTC Territory. This is currently the only
manufacturing and supply agreement that we have entered into for Tegsedi and Waylivra. If the master supply agreement is
terminated and we are unable to find an alternative third party contractor, we may encounter delays in manufacturing Tegsedi and
Waylivra.
We presently contract with third parties for the manufacturing of program materials for our gene therapy product candidates.
However, we have entered into a lease agreement for office, manufacturing and laboratory space at a facility located in Hopewell
Township, (cid:1)ew Jersey, or the Hopewell Facility, that we plan to utilize to begin our own manufacturing of program materials for
certain of our gene therapy product candidates. Although we are taking steps to increase our manufacturing capabilities for our
gene therapy platform, we currently rely on third-party manufacturers to be capable of providing sufficient quantities of our program
materials to meet anticipated clinical trial and commercial scale demands. We have personnel with manufacturing and quality
experience to oversee our contract manufacturers.
Manufacturers and suppliers of product candidates are subject to the FDA’s current Good Manufacturing Practices, or cGMP,
requirements, and other rules and regulations prescribed by ex-U.S. regulatory authorities. We depend on our third-party suppliers
and manufacturers for continued compliance with cGMP requirements and applicable ex-U.S. standards.
Commercial Matters
Sales and marketing team
Our product revenue has been attributable to sales of Translarna for the treatment of nmDMD in territories outside of the United
States and to sales of Emflaza for treatment of DMD in the United States. We have employees across the globe, with the largest
concentrations being in the United States, Latin America and Europe.
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In addition, in select territories, we have engaged full time consultants, marketing partners and distribution partners to assist us
with our international commercialization efforts for our products. We continue to evaluate new territories to determine in which
geographies we might, if approved, choose to commercialize our products ourselves and in which geographies we might choose
to collaborate with third parties. We expect that our internal team and partnership network will continue to grow, as needed, to
maximize access to patients.
Customers
During 2019, our product revenue was primarily attributable to Translarna for the treatment of nmDMD and to Emflaza for
treatment of DMD. Translarna for the treatment of nmDMD was available on a commercial basis or via reimbursed EAP programs
in multiple territories outside of the United States. In some territories, orders for Translarna are placed directly with us and in other
territories we have engaged with third-party distributors. As a result, orders for Translarna are generally received from hospital
and retail pharmacies and, in some cases, one of our third-party partner distributors. Our third-party distributors act as intermediaries
between us and end-users and do not typically stock significant quantities of Translarna. The ultimate payor for Translarna is
typically a government authority or institution or a third-party health insurer. The payment terms are generally 30 to 90 days after
receipt of products.
Emflaza for treatment of DMD is available on a commercial basis throughout the United States. We utilize a single, exclusive
specialty pharmacy to sell and distribute Emflaza to patients. The specialty pharmacy receives prescription orders for Emflaza
directly from physicians and ships Emflaza directly to the end-user upon fulfillment of the order. As such, there is very little
inventory of Emflaza stocked. The ultimate payor for Emflaza is typically a state health insurance program or a third-party health
insurer. The payment terms are generally 30 to 90 days after receipt of products.
During 2019, three of our distributors each accounted for over 10% of our net product sales. Financial information about our net
product revenues and other revenues generated in the principal geographic regions in which we operate and our long-lived assets
is set forth in our financial statements and in (cid:1)ote 16, “Geographic Information” to our consolidated financial statements included
in this Annual Report on Form 10-K.
Translarna and Emflaza can generally only be returned if agreed upon in writing by us and the product is not opened nor in receipt
by the final user, except in the case of quality issues associated with the product. Product is generally shipped when a specific
patient is approved by the applicable government or insurer and an individual prescription has been written. The right of return is
eliminated as a matter of course when the product is dispensed to patients. Other than in connection with our transition to a new
third party distributor, we have never had a request for a product return for either Translarna or Emflaza.
In some countries, including those in Latin America, orders for named patient sales may be for multiple months of therapy, which
can lead to an unevenness in orders which could result in significant fluctuations in quarterly net product sales.
Market Access Considerations
Translarna for the treatment of nmDMD is currently available on a commercial basis in multiple countries outside of the United
States. We consider our products to be commercially available when we are permitted to market treatment to patients.
Translarna for the treatment of nmDMD is also currently available through EAP programs in select countries where funded named
patient or cohort programs exist, both within the EEA and in other territories. These programs generally reference the EMA’s
determinations with respect to our marketing authorization in the EEA. As of today, Translarna is available under EAP or similar
styled programs in various countries outside of the United States. Generally, EAP programs allow for access to Translarna pursuant
to a named patient program, under which a physician requests access to Translarna on behalf of the specific, or “named” patient
or pursuant to a cohort program, which allows for a broader temporary authorization for use for nmDMD meeting the inclusion
criteria. Our EAP programs are named patient or similar styled programs in all territories other than France, which is a cohort
program.
Our ability to make Translarna available via commercial or EAP programs is largely dependent upon our ability to maintain our
marketing authorization in the EEA for Translarna for the treatment of nmDMD in ambulatory patients aged two years and older.
The marketing authorization is subject to annual review and renewal by the European Commission following reassessment by the
EMA as well as the specific obligation to conduct and submit the results of Study 041. Additionally, the marketing authorization
of Translarna in Brazil is subject to renewal every five years. See “Item 1. Business-Global commercial footprint-Global DMD
franchise” and “Risk Factors-Risks Related to Regulatory Approval of our Product and our Product Candidates” for further
information regarding the marketing authorization in the EEA and related risks.
Our future revenues from our products and any other product candidates we may develop, depends largely on our ability to obtain
and maintain reimbursement from governments and third-party insurers. Each country in the EEA has its own pricing and
reimbursement regulations and many countries in the EEA have other regulations related to the marketing and sale of pharmaceutical
products in the applicable country. The pricing and reimbursement process varies from country to country and can take a substantial
amount of time from initiation to completion. As a result, our commercial launch of Translarna in the EEA has been and is expected
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to continue to be on a country-by-country basis and we generally will not be able to commence commercial sales of Translarna
for the treatment of nmDMD pursuant to our marketing authorization in the EEA in any particular member state of the EEA until
we conclude the applicable pricing and reimbursement negotiations and comply with any licensing, employment or related
regulatory requirements in that country.
We have submitted pricing and reimbursement dossiers with respect to Translarna for the treatment of nmDMD in key EEA
countries and have received both pricing and reimbursement approval on terms that are acceptable to us in a number of countries.
The price that is approved by local governmental authorities pursuant to commercial pricing and reimbursement processes may
be lower than the price for purchases of product in that country pursuant to a reimbursed early access program.
In some instances, reimbursement may be subject to challenge, reduction or denial by the government and other payers. For
example, in France, EAP programs and commercial sales of a product can begin while pricing and reimbursement rates are under
discussion with the applicable government health programs. In the event that the negotiated price of the product is lower than the
amount reimbursed for sales made prior to the conclusion of price negotiations, we may become obligated to repay such excess
amount to the applicable government health program. Such retroactive reimbursement would be made following the conclusion
of price negotiations with the applicable government health authority.
For Emflaza, we are engaged in pricing, coverage and reimbursement discussions with third-party payors, such as state and federal
governments, including Medicare and Medicaid, managed care providers, private commercial insurance plans and pharmacy
benefit management plans. Decisions regarding the extent of coverage and the amount of reimbursement to be provided for Emflaza
are made on a plan-by-plan, and in some cases, on a patient-by-patient basis. Coverage and reimbursement decisions by third-
party payors, including the processing and adjudication of prescriptions, may vary from weeks to several months. Certain third-
party payors routinely impose additional requirements before approving reimbursement of a prescription, including prior
authorization and the requirement to try another therapy first. The specialty pharmacy we utilize provides patient services programs
to support product access and, when eligible, out-of-pocket assistance.
Tegsedi for the treatment of hATTR amyloidosis and Waylivra for the treatment of FCS are currently available on a commercial
basis in multiple countries outside of the United States and we have the right to commercialize these products in the PTC Territory.
Tegsedi has received marketing authorization from A(cid:1)VISA for the treatment of stage 1 or stage 2 polyneuropathy in adult patients
with hATTR amylodosis in Brazil and our commercial launch of Tegsedi in Brazil is ongoing. The marketing authorization of
Tegsedi in Brazil is subject to renewal every five years. We have also made both Tegsedi and Waylivra available in certain countries
within the PTC Territory through EAP Programs. Our ability to make Tegsedi and Waylivra available via EAP programs within
the PTC Territory is largely dependent upon the maintenance of the marketing authorizations in the EU, which in the case of
Waylivra, is subject to certain conditions.
We record revenue net of estimated third party discounts and rebates. Allowances are recorded as a reduction of revenue at the
time revenues from product sales are recognized. These allowances are adjusted to reflect known changes in factors and may
impact such allowances in the quarter those changes are known.
For important information regarding market access and pricing and reimbursement considerations see “Item 1. Business-
Pharmaceutical Pricing and Reimbursement” and “Item 1A. Risk Factors-Risks Related
the Development and
Commercialization of our Product and our Product Candidates” and “-Risks Related to Regulatory Approval of our Product and
our Product Candidates”.
to
Competition
The biotechnology and pharmaceutical industries are characterized by rapidly advancing technologies, intense competition and a
strong emphasis on proprietary products. While we believe that our technologies, knowledge, experience and scientific resources
provide us with competitive advantages, we face potential competition from many different sources, including commercial
pharmaceutical and biotechnology enterprises, academic institutions, government agencies and private and public research
institutions. Any product candidates that we successfully develop and commercialize will compete with existing therapies and
new therapies that may become available in the future. In addition, other gene therapy companies may in the future decide to
utilize existing technologies to address unmet needs that could potentially compete with our product candidates.
Many of our competitors may have significantly greater financial resources and expertise in research and development,
manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approved products than
we do. These competitors also compete with us in recruiting and retaining qualified scientific and management personnel, as well
as in acquiring technologies complementary to, or necessary for, our programs. Smaller or early stage companies may also prove
to be significant competitors, particularly through collaborative arrangements with large and established companies.
Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are safer,
more effective, have fewer side effects, are more convenient or are less expensive than any products that we may develop. In
addition, our ability to compete may be affected because in some cases insurers or other third-party payors seek to encourage the
use of generic products. This may have the effect of making branded products less attractive, from a cost perspective, to buyers.
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The key competitive factors affecting the success of our products and product candidates are likely to be its efficacy, safety,
convenience, price and the availability of coverage and reimbursement from government and other third-party payors.
The competition for our products and product candidates includes the following:
• Translarna for nmDMD. There is currently no marketed therapy, other than Translarna in the EEA, which has received
approval for the treatment of the underlying cause of nmDMD. Sarepta Therapeutics, or Sarepta, has received approval
in the United States for two treatments (Exondys 51 (eteplirsen) and Vyondys 53 (golodirsen)) addressing the underlying
cause of disease for different mutations in the DMD gene. Other biopharmaceutical companies are developing treatments
addressing the underlying cause of disease for different mutations in the DMD gene, including Sarepta (Casimersen
(SRP-4045), Daiichi Sankyo (DS-5141)), (cid:1)ippon Shinyaku (Viltolarsen ((cid:1)S-065/(cid:1)C(cid:1)P-01) and (cid:1)S-089/(cid:1)C(cid:1)P-02)),
and Astellas (AT-702). Other pharmaceutical companies are developing micro dystrophin gene therapies for patients
with DMD regardless of genotype, including Sarepta (SRP-9001), Pfizer (PF-06939926) and Solid Biosciences
(SGT-001).
• Translarna for Other Indications. Diacomit (stiripentol) is marketed in the EU by Laboratoires Biocodex for the
treatment of Dravet syndrome. In the United States, GW Pharmaceuticals (EPIDIOLEX (cannabidiol)) has an approved
product for the treatment of Dravet syndrome and Zogenix (FI(cid:1)TEPLA (ZX008, fenfluramine)) has a product candidate
that has received a PDUFA date from the FDA for March 2020 for the treatment of Dravet syndrome. Aniridia therapeutic
interventions, such as artificial iris implantation, are being developed by HumanOptics AG.
• Emflaza for DMD. The FDA has not approved a corticosteroid specifically for DMD in the United States other than
Emflaza. However, prednisone/prednisolone, which is not approved for DMD in the United States, is generically
available and has been prescribed off label for DMD patients. ReveraGen BioPharma is developing a glucocorticoid
antagonist (vamorolone) for DMD patients with anticipated (cid:1)DA filing in 2021.
• PTC-AADC. Currently, no treatment options are available for the underlying cause of AADC deficiency, and care is
limited to palliative options with significant burden on caregivers. Additionally, we are not aware of any late-stage
development product candidates for AADC deficiency.
• Risdiplam. Risdiplam also faces competition. For example, in December 2016, the FDA approved Spinraza
(nusinersen), a drug developed by Ionis Pharmaceuticals, Inc. and marketed by Biogen, to treat SMA. In May 2019
the FDA approved Zolgensma (onasemnogene abeparvovec), a gene therapy drug developed by AveXis, Inc., (acquired
by (cid:1)ovartis Pharmaceuticals Corporation, or (cid:1)ovartis, in 2018) for the treatment of SMA in patients under 2 years of
age. The drug is currently undergoing regulatory review in Europe and Japan with decisions expected in the first half
of 2020. Other companies are also pursuing product candidates for the treatment of SMA, including Kowa (sodium
valproate), Catalyst Pharmaceuticals (amifampridine), Scholar Rock (SRK-015) and Cytokinetics (reldesemtiv).
• PTC743 for Friedreich ataxia. While there are currently no treatment options available for Friedrich ataxia, Voyager
Therapeutics, Pfizer, (cid:1)ovartis, Stride Bio in collaboration with Takeda, AavantiBio, and Fulcrum Therapeutics are also
working on pre-clinical studies for a potential gene therapy solution. Other drugs are being investigated for the treatment
of Friedrich ataxia, including omaveloxolone which is being developed by Reata Pharmaceuticals.
• PTC743 for mitochondrial epilepsies. There are no drugs approved for the treatment of mitochondrial epilepsy and
we are not aware of any late-stage development product candidates for mitochondrial epilepsy.
• Waylivra. If approved, Waylivra could face competition from drugs like metreleptin. Metreleptin, produced by (cid:1)ovelion
Therapeutics, Inc., is currently approved for use in generalized lipodystrophy patients.
• Tegsedi. Tegsedi faces competition from drugs like Onpattro (patisiran) which was launched by Alnylam in the United
States in September 2018 and is under regulatory review in Brazil with a mid-2020 decision expected. Vyndaqel
(tafamids meglumine) and Vyndamax (tafamidis) are commercialized in the United States, EU and some countries in
LATAM by Pfizer. Other companies are also pursuing product candidates for the treatment of ATTR Amyloidosis with
polyneuropathy including Alnylam (vutrisiran), Eidos Therapeutics (AG-10), Proclara Biosciences ((cid:1)PT-189),
Prothena (PRX-004) and SOM Biotech (tolcapone).
Government Regulation
Government authorities in the United States, at the federal, state and local level, and in other countries extensively regulate, among
other things, the research, development, testing, quality control, approval, manufacturing, labeling, post-approval monitoring and
reporting, recordkeeping, packaging, promotion, storage, advertising, distribution, marketing and export and import of
biopharmaceutical products such as those we are developing. In addition, sponsors of biopharmaceutical products and drug products
participating in Medicaid and Medicare are required to comply with mandatory price reporting, discount, and rebate requirements.
The process of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state, local and ex-U.S.
statutes and regulations require the expenditure of substantial time and financial resources. See “Item 1A. Risk Factors-Risks
Related to Regulatory Approval of our Product and our Product Candidates” for important information regarding some of the risks
to our business arising as a result of government regulation.
U.S. government regulation
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In the United States, the FDA regulates drugs and biologic products, including gene therapy products, under the Federal Food,
Drug, and Cosmetic Act, or the FDCA, the Public Health Service Act, or the PHSA, and regulations and guidance implementing
these laws. The FDCA, PHSA and their corresponding regulations govern, among other things, the testing, manufacturing, safety,
efficacy, labeling, packaging, storage, record keeping, distribution, reporting, advertising and other promotional practices involving
drugs and biologic products. Applications to the FDA are required before conducting human clinical testing of drugs or biologic
products. Failure to comply with the applicable FDA requirements at any time pre- or post-approval may result in a delay of
approval or administrative or judicial sanctions. These sanctions could include the FDA’s imposition of a clinical hold on trials,
refusal to approve pending applications or supplements, withdrawal of an approval, issuance of warning or untitled letters, product
recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, civil penalties or criminal
prosecution, among other actions further described in this filing. Any agency or judicial enforcement action could have a material
adverse effect on us.
Regulatory requirements governing our business are also evolving. For example, until recently, the (cid:1)ational Institutes of Health,
or the (cid:1)IH, through its Recombinant D(cid:1)A Advisory Committee, or RAC, also reviewed certain proposed gene therapy trials
pursuant to the (cid:1)IH Guidelines for Research Involving Recombinant or Synthetic (cid:1)ucleic Acid Molecules, or (cid:1)IH Guidelines;
however, in April 2019, the (cid:1)IH changed this practice so that the RAC will no longer review individual human gene transfer
protocols. Certain aspects of the (cid:1)IH Guidelines, such as review of certain studies by Institutional Biosafety Committees, or IBCs
may still apply. The FDA has issued a growing body of guidance documents on CMC, clinical investigations and other areas of
gene therapy development, all of which are intended to facilitate the industry’s development of gene therapy products.
The new drug and biologic approval process
In the United States, the information that must be submitted to the FDA in order to obtain approval to market a new drug or biologic
product varies depending upon whether the drug is a new product whose safety and efficacy have not previously been demonstrated
in humans or a drug whose active ingredients and certain other properties are the same as those of a previously approved drug. A
(cid:1)ew Drug Application, or (cid:1)DA, is the vehicle through which the FDA approves a new pharmaceutical drug product for sale and
marketing in the United States. A BLA is the vehicle through which the FDA approves a new biologic product for sale and marketing
in the United States.
To market a new drug or biologic product in the United States, a sponsor generally must undertake the following:
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completion of preclinical laboratory tests, animal studies and formulation studies under the FDA’s Good Laboratory
Practice, or GLP, regulations and other applicable laws or regulations;
submission with the FDA of an investigational new drug application, or I(cid:1)D, for clinical testing, which must become
effective before clinical trials may begin at United States clinical trial sites;
approval by an independent Institutional Review Board, or IRB, and in the case of certain gene therapy studies, IBC,
prior to initiation and subject to continuing review;
completion of adequate and well-controlled clinical trials to establish safety and efficacy, in the case of a drug product
candidate, or safety purity, and potency, in the case of a biologic product candidate for its intended use, performed in
accordance with Good Clinical Practices, or GCP, and the International Conference on Harmonisation of Technical
Requirements for Registration of Pharmaceuticals for Human Use, or ICH, E6 GCP guidelines. Certain gene therapy
research must also be conducted in accordance with the (cid:1)IH Guidelines;
development of manufacturing processes to ensure the product candidate’s identity, strength, quality, purity, and potency;
submission and FDA acceptance of an (cid:1)DA, in the case of a drug product candidate, or BLA in the case of a biologic
product candidate, and satisfactory completion of an FDA Advisory Committee meeting, if applicable;
satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the product is produced
to assess compliance with cGMPs, which require that the facilities, methods and controls are adequate to preserve the
product’s identity, strength, quality and purity, as well as satisfactory completion of an FDA inspection of selected
clinical sites and selected clinical investigators to determine GCP compliance; and
FDA review and approval of the (cid:1)DA or BLA to permit commercial marketing for particular indications for use.
Preclinical Studies and I(cid:1)D Submission
Preclinical tests include laboratory evaluations of product chemistry, pharmacology, stability, toxicity and product formulation,
as well as animal studies to assess potential safety and efficacy. In order to begin clinical testing, a sponsor must submit an I(cid:1)D
to the FDA, which includes, among other things, the results of the preclinical tests, manufacturing information, analytical data,
proposed clinical protocols, and any available clinical data or literature on the product candidate. Some preclinical testing may
continue after the I(cid:1)D is submitted. The I(cid:1)D must become effective before human clinical trials may begin. An I(cid:1)D will
automatically become effective 30 days after receipt by the FDA, unless before that time the FDA raises concerns or questions
about issues such as the conduct of the trials as outlined in the I(cid:1)D. In that case, the I(cid:1)D sponsor and the FDA must resolve any
outstanding FDA concerns or questions before clinical trials can proceed. In other words, submission of an I(cid:1)D may not result in
the FDA allowing clinical trials to commence. Clinical holds also may be imposed by the FDA at any time before or during trials
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due to safety concerns or non-compliance. As a result, submission of an I(cid:1)D may not result in FDA authorization to commence
or continue a clinical trial.
Clinical Trials
Clinical trials involve the administration of the investigational product to human subjects under the supervision of qualified
investigators. Clinical trials are conducted in accordance with protocols detailing, among other things, the objectives of the study,
the parameters to be used in monitoring safety, the effectiveness criteria to be evaluated, and a statistical analysis plan. A protocol
for each clinical trial and subsequent protocol amendments must be filed with the FDA as part of the I(cid:1)D. All research subjects
or their legally authorized representatives must provide their informed consent in writing prior to their participation in a clinical
trial. Each clinical trial must be reviewed and approved by an IRB and is subject to ongoing IRB monitoring. The IRB must approve
the protocol, protocol amendments, the informed consent form, and communications to study subjects before a study commences
at the site. An IRB considers among other things, whether the risks to individuals participating in the trials are minimized and are
reasonable in relation to anticipated benefits, and whether the planned human subject protections are adequate. The IRB must
continue to oversee the clinical trial while it is being conducted. In the case of certain gene therapy studies, an IBC at the local
level may also review and maintain oversight over the particular study, in addition to the IRB. If the product candidate is being
investigated for multiple intended indications, separate I(cid:1)Ds may also be required. Progress reports detailing the results of the
clinical trials must be submitted at least annually to FDA and the IRB and more frequently if serious adverse events or other
significant safety information is found. Certain reports may also be required to be submitted to the IBC.
Additionally, some clinical trials are overseen by an independent group of qualified experts organized by the clinical trial sponsor,
known as a data safety monitoring board or committee. This group regularly reviews accumulated data and advises the study
sponsor regarding the continuing safety of the trial. This group may also review interim data to assess the continuing validity and
scientific merit of the clinical trial. The data safety monitoring board receives special access to unblinded data during the clinical
trial and may advise the sponsor to halt the clinical trial if it determined there is an unacceptable safety risk for subjects or on other
grounds, such as no demonstration of efficacy.
Information about certain clinical trials must be submitted within specific timeframes to the (cid:1)IH to be publicly posted on the
Clinicaltrials.gov website. Sponsors or distributors of investigational products for the diagnosis, monitoring, or treatment of one
or more serious disease or conditions must also have a publicly available policy on evaluating and responding to requests for
expanded access requests. Investigators must also provide certain information to clinical trial sponsors to allow the sponsors to
make certain financial disclosures to the FDA.
The manufacture of investigational drugs and biologics for the conduct of human clinical trials is subject to cGMP requirements.
Investigational drugs and biologics and active ingredients and therapeutic substances imported into the United States are also
subject to regulation by the FDA. Further, the export of investigational products outside the United States is subject to regulatory
requirements of the receiving country as well as U.S. export requirements under the FDCA.
In general, for the purposes of (cid:1)DA and BLA approval, human clinical trials typically are conducted in three sequential phases,
but the phases may overlap or be combined. Phase 1 clinical trials may be conducted in patients or healthy volunteers to evaluate
the product’s safety, dosage tolerance, structure-activity relationships, mechanism of action, absorption, metabolism distribution,
excretion, and pharmacokinetics and, if possible, seek to gain an early indication of its effectiveness. Phase 2 clinical trials usually
involve controlled trials in a larger but still relatively small number of subjects from the relevant patient population to evaluate
dosage tolerance and appropriate dosage; identify possible short-term adverse effects and safety risks; and provide a preliminary
evaluation of the efficacy of the drug or biologic product for specific indications.
Phase 2 clinical trials are sometimes denoted by companies as Phase 2a or Phase 2b clinical trials. Phase 2a clinical trials typically
represent the first human clinical trial of a drug or biologic product candidate in a smaller patient population and are designed to
provide earlier information on safety and efficacy. Phase 2b clinical trials typically involve larger numbers of patients or longer
durations of therapy and may involve comparison with placebo, standard treatments or other active comparators.
Phase 3 clinical trials usually further evaluate clinical efficacy and test further for safety in an expanded patient population at
geographically dispersed clinical trial sites, to generate enough data to provide statistically significant evidence of clinical efficacy
and safety of the product candidate for approval. Phase 3 clinical trials usually involve comparison with placebo, standard treatments
or other active comparators. These trials are well-controlled and are intended to establish the overall risk- benefit profile of the
product or product candidate and provide an adequate basis for physician labeling. Phase 3 clinical trials are usually larger, more
time consuming, more complex and more costly than Phase 1 and Phase 2 clinical trials.
Additional kinds of data may also help support a BLA or (cid:1)DA, such as patient experience data and real world evidence. Real
world evidence may also be used to assist in clinical trial design or support an (cid:1)DA for already approved products. For genetically
targeted populations and variant protein targeted products intended to address an unmet medical need in one or more patient
subgroups with a serious or life threatening rare disease or condition, the FDA may allow a sponsor to rely upon data and information
previously developed by the sponsor or for which the sponsor has a right of reference, that was submitted previously to support
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an approved application for a product that incorporates or utilizes the same or similar genetically targeted technology or a product
that is the same or utilizes the same variant protein targeted drug as the product that is the subject of the application.
Clinical trials may not be completed successfully within any specified period, if at all. The FDA, the sponsor, or a data safety
monitoring board may suspend or terminate clinical trials at any time on various grounds, including a finding that the subjects are
or would be exposed to an unreasonable and significant risk of illness or injury. Similarly, an IRB can suspend or terminate approval
of a clinical trial if the trial is not being conducted in accordance with the IRB’s requirements or if the research has been associated
with unexpected serious harm to patients. IBCs can also require that research activities be ceased if applicable requirements are
not being met. The FDA typically requires that an (cid:1)DA or BLA include data from two adequate and well-controlled clinical trials,
but, in certain circumstances, approval may be based upon a single adequate and well-controlled clinical trial plus confirmatory
evidence or a single large multicenter trial without confirmatory evidence. In some cases, the FDA may condition approval of an
(cid:1)DA or BLA on the applicant’s agreement to conduct additional clinical trials to further assess the product’s safety and effectiveness
after (cid:1)DA or BLA approval. Such post-approval trials are typically referred to as Phase 4 studies. The results of Phase 4 studies
can confirm or refute the effectiveness of a product candidate, and can provide important safety information.
The FDA’s accelerated approval process allows for potentially faster development and approval of certain drugs or biologic products
intended to treat serious or life- threatening illnesses that provide meaningful therapeutic benefit to patients over existing treatments.
Under the accelerated approval process, the adequate and well-controlled clinical trials conducted with the drug or biologics
product establish that the drug or biologics product has an effect on a “surrogate” endpoint that is reasonably likely to predict
clinical benefit or on the basis of an effect on a clinical endpoint other than survival or irreversible morbidity, that is reasonably
likely to predict an effect on irreversible morbidity or mortality, taking into account the severity, rarity, or prevalence of the condition
and availability or lack of alternative treatments. Drugs or biologics products approved through the accelerated approval process
are subject to certain post-approval requirements, including that the applicant complete Phase 4 clinical trials to demonstrate the
drug’s or biological product’s clinical benefit. If the trials fail to verify the clinical benefit of the drug or biologics product, the
FDA may withdraw approval of the application through a streamlined process. Promotional materials for a drug or biologic
approved under the accelerated approval pathway are subject to FDA prior review.
Concurrent with clinical trials, companies usually complete additional preclinical studies and must also develop additional
information about the physical characteristics of the drug or biologic product candidate as well as finalize a process for
manufacturing the product candidate in commercial quantities in accordance with cGMP requirements. The manufacturing process
must be capable of consistently producing quality batches of the product candidate and, among other requirements, the sponsor
must develop methods for testing the identity, strength, quality, potency and purity of the final biologic product. Additionally,
appropriate packaging must be selected and tested and adequate stability studies must be conducted to demonstrate that the product
candidate does not undergo unacceptable deterioration over its shelf life.
Companion Diagnostics and Other Combination Products
A drug or biologic product may be regulated as combination product if it is intended for use in conjunction with a medical device,
such as a drug delivery device or in vitro diagnostic device, as further discussed below. In such cases, the use of the two products
together (i.e., the drug/biological product and the device) must be shown to be safe and effective for the proposed intended use
and the labeling of the two products must reflect their combined use. In some cases, the device component may require a separate
premarket submission; for example, when the device component is intended for use with multiple drug products. Sponsors of
clinical studies using investigational devices are required to comply with FDA’s investigational device exemption regulations.
Once approved or cleared, the sponsor of the device component submission (or the combination product submission, if both
components are covered by one premarket submission) would need to comply with FDA’s post-market device requirements,
including establishment registration, device listing, device labeling, unique device identifier, quality system regulation, medical
device reporting, and reporting of corrections and removals requirements.
If the safety or effectiveness of a drug or biologic product candidate for its proposed indication is dependent on the measurement
or detection of specified biomarkers, the FDA may require the contemporaneous approval or clearance of an in vitro companion
diagnostic device that measures such biomarkers, and require the labeling of both the drug/biological product and the companion
diagnostic to including instructions for use of the two products together. The FDA has explained in guidance that in vitro diagnostic
companion diagnostic devices may be used for a number of purposes, including identifying appropriate subpopulations for
treatment. The type of premarket submission required for a companion diagnostic device will depend on the FDA classification
of the device. A premarket approval, or PMA, application is required for high risk devices classified as Class III; a 510(k) premarket
notification is required for moderate risk devices classified as Class II; and a de novo request may be used for novel devices not
previously classified by FDA that are low or moderate risk. The guidance states that the FDA generally will not approve a drug
or biologic that is dependent upon the use of a companion diagnostic device if no such device is contemporaneously FDA-approved
or -cleared for the relevant indication. According to the guidance, however, the FDA may approve such a drug/biologic product
without an approved/cleared companion diagnostic when the drug/ biologic “is intended to treat a serious or life-threatening
condition for which no satisfactory alternative treatment exists” and the FDA determines that the benefits from the use of the drug/
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biologic “are so pronounced as to outweigh the risks from the lack of an” approved/cleared companion diagnostic. Under these
circumstances, the FDA expects that a companion diagnostic would be subsequently approved/cleared, and that the drug/biologic
labeling would be revised “to stipulate the use of the” companion diagnostic device. The FDA would also consider whether
additional protections, such as risk evaluation and mitigation strategies, or REMS, or post-approval requirements, are necessary.
In a separate guidance, specific to DMD and related dystrophinopathies, the FDA has stated that a sponsor should
contemporaneously develop a companion diagnostic device in situations where (1) the safety or efficacy of the drug or biologic
product “may be related to the patient’s specific dystrophin mutation or to another type of finding related to a biomarker,” and (2)
a suitable companion diagnostic device is not currently available. However, given “the serious and life-threatening nature of
dystrophinopathies and the lack of satisfactory alternative treatments that currently exist,” the guidance further states that the FDA
may approve a drug/biologic “even if a companion diagnostic device is not yet approved or cleared, if the benefits are so pronounced
as to outweigh the risks from the lack of an approved or cleared in vitro companion diagnostic device.” During the review, the
“FDA will determine the need for clearance or approval of the device.” The FDA guidance documents represent the FDA’s current
thinking on a topic but do not establish legally enforceable responsibilities.
FDA Approval Process
Assuming successful completion of the required clinical testing, the results of the preclinical studies and of the clinical trials,
together with other detailed information, including proposed labeling and information on the chemistry, manufacture and
composition of the product, are submitted to the FDA in the form of an (cid:1)DA or BLA requesting approval to market the product
for one or more indications. In most cases, the (cid:1)DA or BLA must be accompanied by a substantial user fee, though a waiver of
such fees may be obtained under certain limited circumstances. Product candidates that are designated as orphan products are not
subject to application user fees unless the application includes an indication other than the orphan indication. The user fees must
be paid at the time of the first submission of the application, even if the application is being submitted, by section, on a rolling
basis. The FDA has 60 days from its receipt of an (cid:1)DA or BLA to determine whether the application will be accepted for filing
based on the FDA’s threshold determination that it is sufficiently complete to permit a substantive review.
If the FDA determines that the (cid:1)DA or BLA is incomplete, the FDA may refuse to file the application. If the FDA refuses to file
an (cid:1)DA or BLA, the applicant may refile the application with information addressing the FDA identified deficiencies, which
refiling would be subject to FDA review before it is accepted for filing, or the applicant may request an informal conference with
the FDA about whether the application should be filed. After the conference, the applicant may request that the application be filed
over protest. When an application is filed over protest, the FDA is required to review the application as filed. Generally, the FDA
does not favor the file over protest procedure. There are also certain consequences of filing an application over protest. For example,
such an application would not be eligible for certain FDA communications over the course of the review cycle.
In addition, an applicant that receives an RTF can, in some circumstances, appeal the decision using the FDA’s dispute resolution
procedures. After the (cid:1)DA or BLA submission is accepted for filing, the FDA reviews the (cid:1)DA or BLA to determine, among
other things, whether a product meets FDA’s approval standard and whether the product is being manufactured in accordance with
cGMP to assure and preserve the product’s identity, strength, quality and purity. Under the goals and policies agreed to by the
FDA under the PDUFA, the FDA has set the review goal of completing its review of 90% of all standard applications for new
molecular entities and original BLAs within ten months of the 60-day filing date. Under the FDA’s priority review program,
however, the FDA set a review goal of completing its review of 90% of all applications for products that, if approved, would
present significant improvements in the safety or effectiveness of the treatment, diagnosis, or prevention of serious conditions,
within 6 months of the 60-day filing date. The FDA does not always meet its PDUFA goal dates for review of (cid:1)DAs or BLAs.
The review process and the PDUFA goal date may be extended by additional three-month review periods whenever the FDA
requests or the (cid:1)DA or BLA sponsor otherwise provides additional information or clarification regarding information already
provided in the submission at any time during the review cycle. If, however, an application is filed with the FDA over protest, the
FDA generally will not review amendments to the application during any review cycle and will not issue information requests to
the applicant during the agency’s review.
Under the Pediatric Research Equity Act of 2003, or PREA, (cid:1)DAs or BLAs or supplements to (cid:1)DAs or BLAs for a new active
ingredient, dosage form, dosage regimen, or route of administration, unless subject to the below requirement for molecularly
targeted cancer products, must contain data to assess the safety and effectiveness of the product for the claimed indications in all
relevant pediatric subpopulations and to support dosing and administration for each pediatric subpopulation for which the product
is safe and effective. The FDA may, on its own initiative or at the request of the applicant, grant deferrals for submission of data
or full or partial waivers. PREA does not generally apply to products for an indication for which orphan designation has been
granted. However, PREA compliance may be required if approval is sought for other indications for which the product has not
received orphan designation.
The FDA Reauthorization Act of 2017 introduced a provision regarding required pediatric studies. Under this statute, for product
candidates intended for the treatment of adult cancer which are directed at molecular targets that the FDA determines to be
substantially relevant to the growth or progression of pediatric cancer, original application sponsors must submit, with the marketing
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application, reports from molecularly targeted pediatric cancer investigations designed to yield clinically meaningful pediatric
study data, gathered using appropriate formulations for each applicable age group, to inform potential pediatric labeling. The FDA
may, on its own initiative or at the request of the applicant, grant deferrals or waivers of some or all of this data, as above. Unlike
PREA, orphan products are not exempt from this requirement.
The FDA will typically inspect one or more clinical sites to assure compliance with GCP before approving an (cid:1)DA or BLA. The
FDA also will inspect the facility or the facilities at which the product is manufactured before the (cid:1)DA or BLA is approved. The
FDA will not approve the product unless cGMP compliance is satisfactory. If the FDA determines the application, manufacturing
process or manufacturing facilities are not acceptable, it will outline the deficiencies in the submission and often will request
additional testing or information.
(cid:1)otwithstanding the submission of any requested additional information, the FDA ultimately may decide that the application does
not satisfy the regulatory criteria for approval.
We may encounter difficulties or unanticipated costs in our efforts to secure necessary FDA approvals, which could delay or
prevent us from marketing our products. The FDA may refer applications for novel drug products or biologic products to an
advisory committee for review, evaluation and recommendation as to whether the application should be approved and under what
conditions. Specifically, for a product candidate for which no active ingredient (including any ester or salt of active ingredients)
has previously been approved by the FDA, the FDA must either refer that product candidate to an advisory committee or provide
in an action letter, a summary of the reasons why the FDA did not refer the product candidate to an advisory committee. The FDA
may also refer other product candidates to an advisory committee if FDA believes that the advisory committee’s expertise would
be beneficial. The advisory committee process may cause delays in the approval timeline. The FDA is not bound by the
recommendation of an advisory committee, but it considers such recommendations carefully, particularly any negative
recommendations or limitations, when making drug or biologic product approval decisions.
After evaluating the marketing application and all related information, including the advisory committee recommendation, if any,
and inspection reports regarding the manufacturing facilities and clinical trial sites, the FDA may issue an approval letter, or, in
some cases, a Complete Response Letter, or CRL. A CRL indicates that the review cycle of the application is complete and the
application is not ready for approval and describes all of the specific deficiencies that the FDA identified. A CRL generally contains
a statement of specific conditions that must be met in order to secure final approval of the marketing application, and may require
additional clinical or preclinical testing in order for the FDA to reconsider the application. The deficiencies identified may be
minor, for example, requiring labeling changes; or major, for example, requiring additional clinical trials. If a CRL is issued, the
applicant may either: resubmit the marketing application, addressing all of the deficiencies identified in the letter; withdraw the
application; or request an opportunity for a hearing. The FDA has the goal of reviewing 90% of application resubmissions in either
two or six months of the resubmission date, depending on the kind of resubmission. However, if the application that was the
subject of a CRL was filed over protest, these review timeframes do not apply and any such resubmission will be reviewed by
FDA as available resources permit. Moreover, even with submission of additional information, the FDA ultimately may decide
that the application does not satisfy the regulatory criteria for approval. If and when those conditions have been met to the FDA’s
satisfaction, the FDA may issue an approval letter. An approval letter authorizes commercial marketing of the product with specific
prescribing information for specific indications.
The testing and approval process requires substantial time, effort and financial resources, and may take years to complete. Data
obtained from clinical trials are not always conclusive and may be susceptible to varying interpretations, which could delay, limit
or prevent regulatory approval. The FDA may not grant approval on a timely basis, or at all.
Even if approval is granted, the FDA may limit the indications for use, approve narrow labeling relegating a drug or biologic
product to second- line or later-line use, add limitations of use to the labeling or place other conditions on approvals, which could
restrict the marketing of the products. Further, the FDA may require that certain contraindications, warnings or precautions be
included in the product labeling, including black box warnings, require testing and surveillance programs to monitor the product
after commercialization, or impose other conditions, including distribution restrictions or other risk management mechanisms
under a REMS which can materially affect the potential market and profitability of the product. The FDA may also not approve
label statements that are necessary for successful commercialization and marketing. After approval, some types of changes to the
approved product, such as adding new indications or label claims, which may themselves require further clinical testing, or changing
the manufacturing process are subject to further FDA review and approval.
The FDA may also withdraw the product approval if compliance with the pre-and post-marketing regulatory standards are not
maintained or if problems occur after the product reaches the marketplace, among other consequences. Further, should new safety
information arise, additional testing, product labeling, or FDA notification may be required.
Additional regulation for gene therapy clinical trials
In addition to the regulations discussed above, there are a number of additional standards that apply to clinical trials involving the
use of gene therapy. The FDA has issued various guidance documents regarding gene therapies, which outline additional factors
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that the FDA will consider at each of the above stages of development and relate to, among other things: the proper preclinical
assessment of gene therapies; the CMC information that should be included in an I(cid:1)D application; the proper design of tests to
measure product potency in support of an I(cid:1)D or BLA application; and long term patient and clinical study subject follow up and
regulatory reporting.
Post-approval requirements
After FDA approval of a product is obtained, we are required to comply with a number of post-approval requirements, including,
among other things, establishment registration and product listing, record-keeping requirements, reporting certain adverse reactions
and production problems to the FDA, providing updated safety and efficacy information, and complying with requirements
concerning advertising and promotional labeling. As a condition of approval of an (cid:1)DA or BLA, the FDA may require the applicant
to conduct additional clinical trials or other post market testing and surveillance to further monitor and assess the product’s safety
and efficacy. There also are continuing annual program user fee requirements for approved products, though orphan products may
receive exemptions if certain criteria are met.
The FDA also has the authority to require a specific REMS to ensure the safe use of the drug or biologic. In determining whether
a REMS is necessary, the FDA must consider the size of the population likely to use the product, the seriousness of the disease or
condition to be treated, the expected benefit of the product, the duration of treatment, the seriousness of known or potential adverse
events, and whether the product is a new molecular entity. A REMS may be required to include various elements, such as a
medication guide or patient package insert, a communication plan to educate health care providers of the product’s risks, limitations
on who may prescribe or dispense the product, or other measures that the FDA deems necessary to assure the safe use of the drug.
The REMS strategy must be approved by the FDA. In addition, the REMS must include a timetable to assess the strategy at
18 months, three years, and seven years after the strategy’s approval. The FDA may also impose a REMS requirement on an
approved product if the FDA determines, based on new safety information, that a REMS is necessary to ensure that the product’s
benefits outweigh its risks.
The FDA strictly regulates marketing, labeling, advertising and promotion of products that are placed on the market. Although
physicians may prescribe a drug or biologic for off-label uses, manufacturers may only promote the product for the approved
indications and in accordance with the approved labeling. The FDA and other agencies actively enforce the laws and regulations
prohibiting the promotion of off-label uses. Failure to comply with the laws and regulations governing advertising and promotion
can have negative consequences, including adverse publicity, warning and untitled letters from the FDA, requests for corrective
advertising or communications with doctors, civil penalties or criminal prosecution, exclusion from participation in federal
healthcare programs, mandatory compliance programs under corporate integrity agreements, suspension and debarment from
government contracts, and refusal or orders under existing government contracts, among others.
In addition, the distribution of prescription pharmaceutical products is subject to the Prescription Drug Marketing Act, or PDMA,
which regulates the distribution of samples at the federal level. The Drug Supply Chain Security Act, or DSCSA, added new
sections in the FDCA that require manufacturers, repackagers, wholesale distributors, dispensers, and third-party logistics providers
to take steps to identify and trace certain prescription drugs and biologics to protect against the threats of counterfeit, diverted,
stolen, contaminated, or otherwise harmful products in the supply chain. The DSCSA regulates the distribution of prescription
pharmaceutical drugs and biologics, requiring passage of documentation to track and trace each prescription product at the saleable
unit level through the distribution system. This documentation must be transferred electronically. Products subject to the DSCSA
must only be transferred to appropriately licensed purchasers. The DSCSA also requires manufacturers and repackagers to affix
or imprint a unique product identifier (comprised of a standardized numerical identifier, lot number, and expiration date of the
product) on product packages in both a human-readable and on a machine-readable data carrier. The standardized numerical
identifier is comprised of the product’s corresponding (cid:1)ational Drug Code combined with a unique alphanumeric serial number.
A product is misbranded if it does not bear the product identifier. The DSCSA also establishes several requirements relating to the
verification of product identifiers. Further, under this legislation, sponsors have product investigation, quarantine, disposition, and
notification responsibilities related to counterfeit, diverted, stolen, and intentionally adulterated products that would result in
serious adverse health consequences or death to humans, as well as products that are the subject of fraudulent transactions or which
are otherwise unfit for distribution such that they would be reasonably likely to result in serious health consequences or death.
Similar requirements additionally are and will be imposed through this legislation on other companies within the biopharmaceutical
product supply chain, such as distributors and dispensers, as well as certain sponsor licensees and affiliates. Implementation of
the DSCSA requirements, such as the product identifier requirements has imposed and will continue to impose increased costs
and administrative burdens and may lead to potential liability associated with the marketing and sale of products subject to these
requirements. The PDMA, DSCSA, and state laws limit the distribution of prescription pharmaceutical product samples and impose
requirements to ensure accountability in distribution.
Also, quality control and manufacturing procedures must continue to conform to cGMP after approval, including quality control
and quality assurance and maintenance of records and documentation. Changes to the manufacturing process are strictly regulated
and often require prior FDA approval or notification before being implemented. FDA regulations also require investigation and
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correction of any deviations from cGMP and specifications, and impose reporting and documentation requirements upon the
sponsor and any third-party manufacturers that the sponsor may decide to use.
Manufacturers and others involved in the manufacture and distribution of such products also must register their establishments
with the FDA and certain state agencies. Both domestic and ex-U.S. manufacturing establishments must register and provide
additional information to the FDA upon their initial participation in the manufacturing process for a commercial product.
Establishments may be subject to periodic, unannounced inspections by government authorities to ensure compliance with cGMP
requirements and other laws. Discovery of problems may result in a government entity placing restrictions on a product,
manufacturer or holder of an approved (cid:1)DA or BLA, and may extend to requiring withdrawal of the product from the market
among other consequences further described in this filing. Accordingly, manufacturers must continue to expend time, money and
effort in the area of production and quality control to maintain compliance with cGMP and other aspects of regulatory compliance.
The FDA may take into account results of inspections performed by certain counterpart ex-U.S. regulatory agencies in assessing
compliance cGMPs. The FDA has entered into international agreements with ex-U.S. agencies, including the EU, in order to
facilitate this type of information sharing.
We rely, and expect to continue to rely, on third parties for the production of clinical and commercial quantities of our product and
product candidates. We plan, however, to begin our own manufacturing of program materials for certain of our gene therapy
product candidates. Future FDA inspections may identify compliance issues at our facilities or at the facilities of our contract
manufacturers that may disrupt production or distribution, or require substantial resources to correct. In addition, discovery of
problems with a product or the failure to comply with applicable requirements may result in restrictions on a product, manufacturer
or holder of an approved (cid:1)DA, including withdrawal or recall of the product from the market or other voluntary, FDA-initiated
or judicial action, among other consequences further described in this filing, that could delay or prohibit further marketing.
Once approval is granted, the FDA may withdraw the approval if compliance with regulatory requirements is not maintained or
if issues bearing on the product’s safety or efficacy are discovered. (cid:1)ewly discovered or developed safety or effectiveness data or
other information may also require changes to a product’s approved labeling, including the addition of new warnings and
contraindications, and also may require the implementation of other risk management measures. Such actions may include refusal
to approve pending applications, license or approval suspension or revocation, imposition of a clinical hold or termination of
clinical trials, warning letters, untitled letters, cyber letters, modification of promotional materials or labeling, provision of corrective
information, imposition of post-market requirements including the need for additional testing, imposition of distribution or other
restrictions under a REMS, product recalls, product seizures or detentions, refusal to allow imports or exports, total or partial
suspension of production or distribution, FDA debarment, injunctions, fines, consent decrees, corporate integrity agreements,
suspension and debarment from government contracts, and refusal of orders under existing government contracts, exclusion from
participation in federal and state healthcare programs, restitution, disgorgement, or civil or criminal penalties, including fines and
imprisonment, and adverse publicity, among other adverse consequences. (cid:1)ew government requirements, including those resulting
from new legislation, may be established that could delay or prevent FDA approval of our products under development or negatively
impact the marketing of any future approved products.
Additional controls for biologics
To help reduce the risk of the introduction of adventitious agents or of causing other adverse events with the use of biologic
products, the PHSA emphasizes the importance of manufacturing control for products whose attributes cannot be precisely defined.
The PHSA also provides authority to the FDA to immediately suspend licenses in situations where there exists a danger to public
health, to prepare or procure products in the event of shortages and critical public health needs, and to authorize the creation and
enforcement of regulations to prevent the introduction or spread of communicable diseases in the United States and between states.
After a BLA is approved, the product may also be subject to official lot release as a condition of approval. As part of the manufacturing
process, the manufacturer is required to perform certain tests on each lot of the product before it is released for distribution. If the
product is subject to official release by the FDA, the manufacturer submits samples of each lot of product to the FDA together
with a release protocol showing the results of all of the manufacturer’s tests performed on the lot. The FDA may also perform
certain confirmatory tests on lots of some products before releasing the lots for distribution by the manufacturer.
In addition, the FDA conducts laboratory research related to the regulatory standards on the safety, purity, potency, and effectiveness
of biological products.
Orphan drug designation.
We have received orphan drug designation from the FDA for Translarna for the treatment nmDMD and nonsense mutation aniridia,
for PTC-AADC for the treatment of AADC deficiency, for risdiplam for the treatment of SMA, for PTC-FA for the treatment of
Friedreich ataxia, PTC-AS for the treatment of Angelman syndrome, PTC299 for the treatment of AML and PTC596 for the
treatment of LMS. The FDA may grant orphan drug designation to drugs and biologics intended to treat a “rare disease or condition,”
which is defined as a disease or condition that affects fewer than 200,000 individuals in the United States, or more than 200,000
individuals in the United States and for which there is no reasonable expectation that the cost of developing and making available
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in the United States a product for this type of disease or condition will be recovered from sales in the United States for that product.
Additionally, sponsors must present a plausible hypothesis for clinical superiority to obtain orphan designation if there is a product
already approved by the FDA that that is considered by the FDA to be the same as the already approved product and is intended
for the same indication. This hypothesis must be demonstrated to obtain orphan exclusivity. Orphan drug designation must be
requested before submitting an application for marketing approval. Orphan drug designation does not convey any advantage in,
or shorten the duration of, the regulatory review and approval process. Orphan drug designation can provide opportunities for
grant funding towards clinical trial costs, tax advantages and FDA user-fee benefits. The tax advantages, however, were limited
in 2017 Tax Cuts and Jobs Act. In addition, if a product which has an orphan drug designation subsequently receives the first FDA
approval for the indication for which it has such designation, the product is entitled to orphan drug exclusivity, which means the
FDA may not approve any other application to market the same drug or biologic for the same indication for a period of seven
years, except in limited circumstances, such as a showing of clinical superiority to the product with orphan exclusivity or the same
drug or biologic for different indications. However, competitors may receive approval of different drugs or biologics for the
indications for which the orphan product has exclusivity. The FDA awarded an orphan drug designation to Emflaza for the treatment
of patients with DMD and approved Emflaza on February 9, 2017, as the first corticosteroid approved in the United States for the
treatment of patients with DMD, granting Emflaza orphan drug exclusivity for this disease as of the date of approval. The FDA
recently issued a draft guidance document on how the agency will determine the “sameness” of gene therapy products. Any FDA
sameness determinations could impact our ability to receive approval for our product candidates and to obtain or retain orphan
drug exclusivity.
Rare Pediatric Disease Voucher Program
Under the FDCA, the FDA awards priority review vouchers to sponsors of rare pediatric disease products that meet certain criteria.
To qualify, the rare disease must be serious or life-threatening in which the serious or life-threatening manifestations primarily
affect individuals aged from birth to 18 years. Also, the product must contain no active ingredient (including any ester or salt of
the active ingredient) that has been previously approved in any other application and the application must meet certain additional
qualifying criteria, including eligibility for FDA priority review. If FDA determines that a product is for a rare pediatric disease
and the qualifying application criteria are met, upon a sponsor’s request, FDA may award the sponsor a priority review voucher.
This voucher may be redeemed to receive priority review (i.e., a review time of 6 months as compared to 10 months for standard
review) of a subsequent marketing application for a different product. Use of a priority review voucher is subject to an FDA user
fee. These vouchers are transferable. Accordingly, sponsors may sell these vouchers for substantial sums of money. Vouchers
may also be revoked by FDA under certain circumstances and sponsors of approved rare pediatric disease products must submit
certain reports to FDA.
Changes to the FDCA, however, have limited the future use of pediatric priority review vouchers. Under the law’s sunset provision,
the drug or biologic must be designated by FDA for a rare pediatric disease no later than September 30, 2020, and approved no
later than September 30, 2022, unless the law is reauthorized by Congress. Accordingly, while PTC-AADC currently has a rare
pediatric disease designation, if we cannot secure FDA BLA approval prior to September 30, 2022, we may not be able to receive
the benefit of such designation.
Hatch-Waxman Act for Drugs.
Section 505 of the FDCA describes three types of drug marketing applications that may be submitted to the FDA to request
marketing authorization for a new drug. A Section 505(b)(1) (cid:1)DA is an application that contains full reports of investigations of
safety and efficacy. A 505(b)(2) (cid:1)DA is an application that contains full reports of investigations of safety and efficacy but where
at least some of the information required for approval comes from investigations that were not conducted by or for the applicant
and for which the applicant has not obtained the right of reference or use from the person by or for whom the investigations were
conducted. This regulatory pathway enables the applicant to rely, in part, on the FDA’s prior findings of safety and efficacy for
an existing product, or published literature, in support of its application. Section 505(j) establishes an abbreviated approval process
for a generic version of approved drug products through the submission of an Abbreviated (cid:1)ew Drug Application, or A(cid:1)DA. An
A(cid:1)DA provides for marketing of a generic drug product that generally has the same active ingredients, dosage form, strength,
route of administration, labeling, performance characteristics and intended use, among other things, to a previously approved
product, called the reference listed drug. Certain differences, however, between the reference listed drug and A(cid:1)DA product may
be permitted pursuant to a suitability petition. Certain labeling differences may also be permitted if information in the reference
listed drug’s label is protected by patent or exclusivities. A(cid:1)DAs are termed “abbreviated” because they are generally not required
to include preclinical (animal) and clinical (human) data to establish safety and efficacy. Instead, generic applications must
scientifically demonstrate that their product is bioequivalent to, or performs in the same manner as, the innovator drug through in
vitro, in vivo, or other testing. The generic version must deliver the same amount of active ingredients to the site of action in the
same amount of time as the innovator drug and can often be substituted by pharmacists under prescriptions written for the reference
listed drug. In seeking approval for a drug through an (cid:1)DA, applicants are required to list with the FDA each patent with claims
that cover the applicants drug or a method of using the drug. Upon approval of a drug, each of the patents listed in the application
for the drug is then published in the FDA’s list of Approved Drug Products with Therapeutic Equivalence Evaluations, commonly
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known as the Orange Book. Drugs listed in the Orange Book can, in turn, be cited by potential competitors in support of approval
of an A(cid:1)DA or 505(b)(2) (cid:1)DA.
Upon submission of an A(cid:1)DA or 505(b)(2) (cid:1)DA, an applicant must certify to the FDA that (1) no patent information has been
submitted to the FDA; (2) such patent has expired; (3) the date on which such patent expires; or (4) such patent is invalid or will
not be infringed upon by the manufacturer, use or sale of the drug product for which the application is submitted. Generally, the
A(cid:1)DA or 505(b)(2) (cid:1)DA approval cannot be made effective until all listed patents have expired, except where the A(cid:1)DA or
505(b)(2) (cid:1)DA applicant challenges a listed patent through the last type of certification, also known as a paragraph IV certification.
If the A(cid:1)DA or 505(b)(2) (cid:1)DA applicant has provided a paragraph IV certification to the FDA, the applicant must send notice of
the certification to the (cid:1)DA and patent holders. The (cid:1)DA and patent holders may then initiate a patent infringement lawsuit in
response to the notice of the paragraph IV certification, in which case the FDA may not make an approval effective until the earlier
of 30 months from the patent or application owner’s receipt of the notice of the paragraph IV certification, the expiration of the
patent, when the infringement case concerning each such patent is favorably decided in the applicant’s favor or settled, or such
shorter or longer period as may be ordered by a court. This prohibition is generally referred to as the 30-month stay. In instances
where an A(cid:1)DA or 505(b)(2) (cid:1)DA applicant files a paragraph IV certification, the (cid:1)DA holder or patent owner(s) regularly take
action to trigger the 30-month stay. Thus, approval of an A(cid:1)DA or 505(b)(2) (cid:1)DA could be delayed for a significant period of
time depending on the patent certification the applicant makes and the reference drug sponsor’s decision to initiate patent litigation.
In addition to the above, the Hatch Waxman Act established certain periods of regulatory exclusivity. As we presently have no
patent rights to protect the approved use of Emflaza, we rely on non-patent market exclusivity periods under the Orphan Drug Act
and the Hatch-Waxman Act to commercialize Emflaza in the United States.
Market and data exclusivity provisions under the FDCA can delay the submission or the approval of certain applications for
competing products. The FDCA provides a five-year period of non-patent data exclusivity within the United States to the first
applicant to gain approval of an (cid:1)DA for a new chemical entity. A drug is a new chemical entity if the FDA has not previously
approved any other new drug containing the same active moiety, which is the molecule or ion responsible for the therapeutic
activity of the drug substance. During the exclusivity period, the FDA generally may not accept for review an A(cid:1)DA or a 505(b)
(2) (cid:1)DA submitted by another company that references the previously approved drug. However, an A(cid:1)DA or 505(b)(2) (cid:1)DA
may be submitted after four years if it contains a certification of patent invalidity or non-infringement.
The FDCA also provides a shorter three-year period of market exclusivity for an (cid:1)DA, 505(b)(2) (cid:1)DA, or supplement to an
existing (cid:1)DA or 505(b)(2) (cid:1)DA if new clinical investigations, other than bioavailability studies, that were conducted or sponsored
by the applicant are deemed by the FDA to be essential to the approval of the application. Three-year exclusivity may be granted
for example, for new indications, dosages, strengths or dosage forms of an existing drug. This three-year exclusivity covers only
the conditions of use associated with the new clinical investigations and, as a general matter, does not prohibit the FDA from
approving A(cid:1)DAs or 505(b)(2) (cid:1)DAs for generic versions of the original, unmodified drug product. Five-year and three-year
exclusivity will not delay the submission or approval of a full (cid:1)DA; however, an applicant submitting a full (cid:1)DA would be required
to conduct or obtain a right of reference to all of the preclinical studies and adequate and well-controlled clinical trials necessary
to demonstrate safety and effectiveness.
BPCIA Exclusivity
We are currently pursuing patent protection for GT-AADC for the treatment of AADC deficiency, and, in the meantime, we expect
to rely on the twelve-year BPCIA regulatory exclusivity to commercialize PTC-AADC in the United States, if it is approved.
The 2010 Patient Protection and Affordable Care Act included the BPCIA as a subtitle. The BPCIA established a regulatory scheme
authorizing the FDA to approve biosimilars and interchangeable biosimilars. The FDA has issued a number of guidance documents
outlining an approach to review and approval of biosimilars, including guidance documents on the demonstration of
interchangeability and the licensure of biosimilar and interchangeable products for fewer than all of the reference product’s licensed
conditions of use.
Under the BPCIA, a manufacturer may submit an application for licensure of a biologic product that is “biosimilar to” or
“interchangeable with” a previously approved biological product or “reference product.” In order for the FDA to approve a
biosimilar product, it must find that there is a high degree of similarity to the reference product, notwithstanding minor differences
in clinically inactive components, and that there are no clinically meaningful differences between the reference product
and proposed biosimilar product in terms of safety, purity and potency. Biosimilarity must be shown through analytical studies,
animal studies, and at least one clinical trial, absent a waiver by the FDA. There must be no difference between the reference
product and a biosimilar in mechanism of action, conditions of use, route of administration, dosage form, and strength. For the
FDA to approve a biosimilar product as interchangeable with a reference product, the FDA must find that the biosimilar product
can be expected to produce the same clinical results as the reference product, and (for products administered multiple times) that
the biologic and the reference biologic may be switched after one has been previously administered without increasing safety risks
or risks of diminished efficacy relative to exclusive use of the reference biologic.
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Under the BPCIA, an application for a biosimilar product may not be submitted to the FDA until four years following the date of
approval of the reference product. The FDA may not approve a biosimilar product until 12 years from the date on which the
reference product was approved. However, certain changes and supplements to an approved BLA, and subsequent applications
filed by the same sponsor, manufacturer, licensor, predecessor in interest, or other related entity do not qualify for the 12 year
exclusivity period. Even if a product is considered to be a reference product eligible for exclusivity, another company could market
a competing version of that product if the FDA approves a full BLA for such product containing the sponsor’s own preclinical
data and data from adequate and well-controlled clinical trials to demonstrate the safety, purity and potency of their product. The
BPCIA also created certain exclusivity periods for biosimilars approved as interchangeable products.
The BPCIA also includes provisions to protect reference products that have patent protection. The biosimilar product sponsor and
reference product sponsor may exchange certain patent and product information for the purpose of determining whether there
should be a legal patent challenge. Based on the outcome of negotiations surrounding the exchanged information, the reference
product sponsor may bring a patent infringement suit and injunction proceedings against the biosimilar product sponsor. The
biosimilar applicant may also be able to bring an action for declaratory judgment concerning the patent.
In an effort to increase competition in the drug and biologic product marketplace, Congress, the executive branch, and FDA have
taken certain legislative and regulatory steps. For example, in 2019, the FDA introduced a proposed rule to facilitate drug importation
and a draft guidance to facilitate drug and biologic product importation. Moreover, the 2020 Further Consolidated Appropriations
Act included provisions requiring that sponsors of approved drug and biologic products, including those subject to REMS, provide
samples of the approved products to persons developing 505(b)(2) (cid:1)DA or A(cid:1)DA drug products, or biosimilar products within
specified timeframes, in sufficient quantities, and on commercially reasonable market-based terms. Failure to do so can subject
the approved product sponsor to civil actions, penalties, and responsibility for attorney’s fees and costs of the civil action. This
same bill also includes provisions with respect to shared and separate REMS programs for reference and generic drug products.
Patent Term Restoration
If approved, drug and biologic products may also be eligible for periods of U.S. patent term restoration. If granted, patent term
restoration extends the patent life of a single unexpired patent, that has not previously been extended, for a maximum of five years.
The total patent life of the product with the extension also cannot exceed fourteen years from the product’s approval date. Subject
to the prior limitations, the period of the extension is calculated by adding half of the time from the effective date of an I(cid:1)D to
the initial submission of a marketing application, and all the time between the submission of the marketing application and its
approval. This period may also be reduced by any time that the applicant did not act with due diligence.
Pediatric exclusivity
Pediatric exclusivity is another type of non-patent market exclusivity in the United States and, if granted, provides for the attachment
of an additional six months of market protection to the term of any existing Orange Book- listed patents or regulatory exclusivity,
including the non-patent exclusivity periods described above. This six-month exclusivity may be granted based on the voluntary
completion of a pediatric study or studies in accordance with an FDA-issued “Written Request” for such a study or studies within
a specified timeframe prior to the expiration of the underlying patent or market exclusivity period to be extended.
Regulation outside the United States
In order to market any product outside of the United States, we would need to comply with numerous and varying regulatory
requirements of other countries regarding safety and efficacy and governing, among other things, clinical trials, marketing
authorization, commercial sales and distribution of our products. Whether or not we obtain FDA approval for a product, we would
need to obtain the necessary approvals by the comparable regulatory authorities of ex-U.S. countries before we can commence
clinical trials or marketing of the product in those countries. The approval process varies from country to country and can involve
additional product testing and additional administrative review periods. The time required to obtain approval in other countries
might differ from and be longer than that required to obtain FDA approval. Regulatory approval in one country does not ensure
regulatory approval in another, but a failure or delay in obtaining regulatory approval in one country may negatively impact the
regulatory process in others. And, even if regulatory approval is granted, it may be withdrawn or limited under certain circumstances
or post-approval requirements may be imposed by the applicable regulatory authority. Because biologically sourced raw materials
are subject to unique contamination risks, their use may be restricted in some countries.
Regulation in the European Union
We have obtained an orphan medicinal product designation from the European Commission, following an evaluation by the EMA’s
Committee for Orphan Medicinal Products, for Translarna for the treatment of nmDMD, Becker muscular dystrophy and aniridia
- but have only received marketing authorization for Translarna for the treatment of nmDMD. The European Commission can
grant orphan medicinal product designation to products for which the sponsor can establish that it is intended for the diagnosis,
prevention, or treatment of (1) a life-threatening or chronically debilitating condition affecting not more than five in 10,000 people
in the EU, or (2) a life threatening, seriously debilitating or serious and chronic condition in the EU and that without incentives it
is unlikely that sales of the drug in the EU would generate a sufficient return to justify the necessary investment. In addition, the
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sponsor must establish that there is no other satisfactory method approved in the EU of diagnosing, preventing or treating the
condition, or if such a method exists, the proposed orphan drug will be of significant benefit to patients. Orphan drug designation
is not a marketing authorization. It is a designation that provides a number of benefits, including fee reductions, regulatory assistance,
and the possibility to apply for a centralized EU marketing authorization, as well as 10 years of EU market exclusivity following
a marketing authorization. During this market exclusivity period, neither the EMA, nor the European Commission nor any EU
member states can accept an application or grant a marketing authorization for a “similar medicinal product.” A “similar medicinal
product” is defined as a medicinal product containing a similar active substance or substances as contained in an authorized orphan
medicinal product, and which is intended for the same therapeutic indication. The market exclusivity period for the authorized
therapeutic indication may be reduced to six years if, at the end of the fifth year, it is established that the orphan designation criteria
are no longer met, including where it is shown that the product is sufficiently profitable not to justify maintenance of market
exclusivity. In addition, a competing similar medicinal product may in limited circumstances be authorized prior to the expiration
of the market exclusivity period, including if it is shown to be safer, more effective or otherwise clinically superior to our product.
Our product candidates can lose orphan designation, and the related benefits, prior to us obtaining a marketing authorization if it
is demonstrated that the orphan designation criteria are no longer met.
Clinical Trial Developments. The structure and general regulation of clinical trials for both small molecule and biological medicines
in the EU is similar to that in the United States. Separately, a new regulation, (EU) (cid:1)o.536/2014, regarding clinical trials of
medicinal products for humans is included in the European regulatory framework and fills a series of regulatory gaps in the clinical
trials regime through the creation of a uniform framework for the authorization of clinical trials by all interested EU member states
with a single assessment of the results. The regulation is thus intended to facilitate cross-border cooperation through streamlining
of the rules on clinical trials across the EU, including by requiring the submission of clinical trial authorization applications via a
new electronic EU portal.
Alongside the portal, a database is being created that will contain information on clinical trial data. The information on the database
will be publicly accessible unless the trial data’s confidentiality can be justified on the basis of protection of commercially
confidential information, protection of personal data, protection of confidential communication between EU countries, or ensuring
effective supervision of the conduct of clinical trials by EU countries. A sponsor of a trial conducted in the EU under the new
regulation will be required to submit a summary of the clinical trial results to the EU database within a year of the end of the trial.
In addition, where the trial was intended to be used for obtaining a marketing authorization (whether through the centralized
procedure or via the national authorities), the applicant must submit the clinical study report within 30 days after the marketing
authorization has been granted (or refused or withdrawn).
Full application of the new regulation and the timing of its application will depend on the confirmation of full functionality of the
EU portal which has been repeatedly delayed. In December 2019, the European Commission propose commencing the audit of
the system in December 2020.
Overview of application process. To obtain regulatory approval of a drug under the EU’s regulatory systems and authorization
procedures, an applicant may submit marketing authorization applications under a centralized, decentralized, or national procedure.
The centralized procedure is compulsory for certain medicinal products, including orphan medicinal products, like Translarna for
the treatment of nmDMD, and medicinal products produced by certain biotechnological processes, and optional for certain other
innovative products. The centralized procedure enables applicants to obtain a marketing authorization that is valid in all EU member
states based on a single application. Under the centralized procedure, the EMA’s Committee for Human Medicinal Products, or
CHMP, is required to adopt an opinion on a valid application within 210 days, excluding clock stops, when additional written or
oral information is to be provided by the applicant in response to questions. More specifically, on day 120 of the procedure, once
the CHMP has received the preliminary assessment reports and opinions from the rapporteur and co-rapporteur, it prepares a list
of potential outstanding issues, referred to as “other concerns” or “major objections”. These are sent to the applicant together with
CHMP’s recommendation. The CHMP can make one of two recommendations: (1) the marketing authorization could be granted
provided that satisfactory answers are given to the “other concerns” and/or “major objections” identified and that all conditions
outlined in the list of outstanding issues are implemented and complied with; or (2) the product is not approvable since there are
“major objections”.
Applicants have three months from the date of receiving the potential outstanding issues to respond to the CHMP, and can request
a three-month extension if necessary. The granting of a marketing authorization will depend on the recommendations and potential
major objections identified by the CHMP as well as the ability of the applicant to adequately respond to these findings. An
accelerated assessment can be granted by the CHMP in exceptional cases, when a medicinal product is expected to be of a major
public health interest, in particular from the viewpoint of therapeutic innovation. In this circumstance, the EMA ensures that the
opinion of the CHMP is given within 150 days. After the adoption of the CHMP opinion, a decision on the marketing authorization
application must be adopted by the European Commission, after consulting the EU member states, which in total can take more
than 60 days.
An applicant for a marketing authorization application may request a re-examination in the event of a negative opinion, in connection
with which CHMP appoints new rapporteurs. Within 60 days of receipt of the negative opinion, the applicant must submit a
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document explaining the basis for its request for re-examination. The CHMP has 60 days to consider the applicant’s request for
re-examination. The applicant may request an oral explanation before the CHMP, which is routinely granted, following which
CHMP will adopt a final opinion. The final opinion, whether positive or negative, is published by the CHMP shortly following
the CHMP meeting at which the oral explanation takes place. The EMA publishes a European Public Assessment Report, or EPAR,
for every medicine granted a central marketing authorization by the European Commission following an assessment by the CHMP.
EPARs are full scientific assessment reports of medicines authorized by the EMA.
Conditional marketing authorizations. In specific circumstances, as with Translarna for the treatment of nmDMD, EU legislation
enables applicants to obtain a marketing authorization on a conditional basis prior to obtaining the comprehensive clinical data
required for an application for a full marketing authorization. Such conditional approvals may be granted for products designated
as orphan medicinal products, if (1) the benefit-risk balance of the product is positive, (2) it is likely that the applicant will be in
a position to provide the required comprehensive clinical trial data, (3) the product fulfills unmet medical needs, and (4) the benefit
to public health of the immediate availability on the market of the medicinal product concerned outweighs the risk inherent in the
fact that additional data are still required. A conditional marketing authorization may contain specific obligations to be fulfilled
by the marketing authorization holder, including obligations with respect to the completion of ongoing or new studies, and with
respect to the collection of pharmacovigilance data. Conditional marketing authorizations are valid for one year, and may be
renewed annually, if the benefit-risk balance remains positive, and after an assessment of the need for additional or modified
conditions and/or specific obligations. The timelines for the centralized procedure described above also apply with respect to the
review by the CHMP of applications for a conditional marketing authorization. The granting of a conditional marketing authorization
will depend on the applicant’s ability to fulfill the conditions imposed within the agreed upon deadline.
For important information about matters that may adversely affect our ability to renew our conditional marketing authorization
for Translarna, see “Item 1A. Risk Factors-Risks Related to the Development and Commercialization of our Product and our
Product Candidates” and “Risks Related to Regulatory Approval of our Product and our Product Candidates.”
Variations to conditional marketing authorizations. After the granting of a conditional marketing authorization, the marketing
authorization holder may submit an application to vary the conditional marketing authorization under a variation procedure. In
the case of the introduction of an additional therapeutic indication, the timeframe for the variation procedure for the initial assessment
of the dossier is generally 90 days (plus up to 20 days for validation).
However, in the framework of a variation application assessment procedure, the EMA may send one or more requests for
supplementary information to the marketing authorization holder, requiring that additional information be provided by the marketing
authorization holder to support its variation application. Such supplementary requests will be sent together with a timetable stating
the date by when the marketing authorization holder must submit the requested data and, where appropriate, the extended evaluation
period to be applied to such variation procedure. The 90-day variation procedure may be suspended for up to three months for the
marketing authorization holder to submit its responses to such supplementary requests. The marketing authorization holder will
be notified of the outcome of the CHMP’s assessment of the variation procedure within 15 days from the adoption of the CHMP
opinion. If unfavorable, the CHMP opinion may be subject to a re-examination procedure upon the marketing authorization holder’s
request. This may imply an additional minimum two-month procedure. If the CHMP opinion is favorable, the European Commission
will usually vary the marketing authorization to introduce the additional therapeutic indication within approximately two months
from the receipt of the final CHMP opinion.
Additional requirements and considerations. Prior to obtaining a marketing authorization in the EU, applicants have to
demonstrate compliance with all measures included in an EMA-approved Pediatric Investigation Plan, or PIP, covering all subsets
of the pediatric population, unless the EMA has granted (1) a product-specific waiver, (2) a class waiver, or (3) a deferral for one
or more of the measures included in the PIP. In the case of orphan medicinal products, completion of an approved PIP can result
in an extension of the aforementioned market exclusivity period from ten to twelve years.
In the EU, for a period of eight years from the grant of a marketing authorization of an innovative product (the “reference medicinal
product”), competent authorities may not accept marketing authorization applications from applicants seeking to market “generic
medicinal products” where such applications rely on the data in the marketing authorization dossier of the reference product.
Moreover, generic medicinal products that rely on the independently generated data of the reference product may not be placed
on the market for 10 years from the granting of the initial marketing authorization for that reference medicinal product. This is
extended to a maximum of 11 years if, during the first eight years of those 10 years, the marketing authorization holder obtains
an authorization for one or more new therapeutic indications considered to offer a significant clinical benefit in comparison with
existing therapies. These periods of data exclusivity do not prevent other companies from obtaining a marketing authorization
based on their own independently generated data.
If a marketing authorization is granted in the EEA for a medicinal product, such as the marketing authorization granted for Translarna
for the treatment of nmDMD by the European Commission, the marketing authorization holder is required to comply with a range
of requirements applicable to the manufacturing, marketing, promotion and sale of the medicinal products that are in addition to
the other conditions of the marketing authorization described above. The marketing authorization holder must, for example, comply
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with the EU’s stringent pharmacovigilance or safety reporting rules, pursuant to which post- authorization studies and additional
monitoring obligations can be imposed. Other requirements relate to, for example, the manufacturing of products and active
pharmaceutical ingredients in accordance with good manufacturing practice standards. Competent authorities of EU member states
may conduct inspections to verify compliance with applicable requirements, and the marketing authorization holder will have to
continue to expend time, money and effort to remain compliant. (cid:1)on-compliance with EU requirements regarding safety monitoring
or pharmacovigilance, and with requirements related to the development of products for the pediatric population, can also result
in significant financial penalties in the EU Similarly, failure to comply with the EU’s requirements regarding the protection of
individual personal data can also lead to significant penalties and sanctions. Individual EU member states may also impose various
sanctions and penalties in case we do not comply with locally applicable requirements.
Off-label promotion of medicinal products is prohibited in the EU. The applicable laws at EU level and in the individual EU
member states also prohibit the direct-to-consumer advertising of prescription-only medicinal products. Violations of the rules
governing the promotion of medicinal products in the EU could be penalized by administrative measures, fines and imprisonment.
These laws may further limit or restrict our promotional activities with health care professionals. In addition, legislation adopted
at the EU level and by individual EU member states require that promotional materials and advertising in relation to medicinal
products comply with the product’s Summary of Product Characteristics, or SmPC, as approved by the competent authorities. The
SmPC is the document that provides information to physicians concerning the safe and effective use of the medicinal product.
Promotion of indications not covered by the SmPC is specifically prohibited.
The EMA is responsible for coordinating inspections to verify compliance with the principles of GCP, good manufacturing practice,
or GMP, GLP, and good pharmacovigilance practice. These inspections are also intended to verify compliance with other aspects
of the supervision of authorized medicinal products in use in the EU. The EMA coordinates any inspection by the relevant member
state regulatory authority as requested by the CHMP in connection with the assessment of marketing authorization applications
or matters referred to these committees. Inspections may be routine or triggered by issues arising during the assessment of the
dossier or by other information, such as previous inspection experience. Inspections usually are requested during the initial review
of a marketing authorization application, but could arise post-authorization.
Inspectors are drawn from the regulatory authorities of member states of the EU and the EEA. Following an inspection, the
inspectors provide a written inspection report to the inspected site or applicant and provide an opportunity for response. Some
inspection reports require follow-up and may result in additional adverse consequences due to critical or major findings. The
inspectors and the CHMP will comment on any response from an inspected site or applicant and may monitor future compliance
with any proposed corrective action plan.
In the GCP area, inspectors grade their findings according to the following scale:
• Critical: Conditions, practices or processes that adversely affect the rights, safety or well-being of the subjects or the
quality and integrity of data. Observations classified as critical may include a pattern of deviations classified as major.
• Major: Conditions, practices or processes that might adversely affect the rights, safety or well-being of the subjects
and/or the quality and integrity of data. Observations classified as major may include a pattern of deviations or numerous
minor observations.
• Minor: Conditions, practices or processes that would not be expected to adversely affect the rights, safety or wellbeing
of the subjects or the quality and integrity of data. Minor observations indicate the need for improvement of conditions,
practices and processes.
• Comments: Suggestions on how to improve quality or reduce the potential for a deviation to occur in the future.
Possible consequences of critical and major findings include rejection of clinical trial data, causing significant delays in obtaining
final marketing authorization, or other direct action by national regulatory authorities.
Falsified Medicines Directive - As of February 2019, new legislation requires manufacturers of marketed prescription medicines
to place safety features on all medicines and contribute financially to the establishment of a verification system that will allow the
authenticity of a medicine to be assessed at the time of supply to the patient. Under the legislation, all new packages of prescription
medicines placed on the market in Europe will have to bear two safety features: a unique identifier in the form of a two-dimensional
data matrix (barcode) and an anti-tamper device.
Early access programs
Many jurisdictions allow the supply of unauthorized medicinal products in the context of strictly regulated and exceptional EAP
programs, and some countries may provide reimbursement for drugs provided in the context of such programs. In the EU, the
legal basis for EAP programs, also referred to as named-patient and compassionate use programs, is set out in the EU legislation
regulating the authorization, manufacture, distribution and marketing of medicinal products. Detailed regulatory requirements
applicable to EAP programs have been adopted and implemented by EU member states in their national laws. The promotion,
advertising and marketing of unauthorized medicinal products is generally prohibited, and authorization for EAP programs must
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generally be obtained from national competent authorities, which might not grant such authorization. Obtaining authorization for
an EAP program in one country does not ensure that authorization will be obtained in another country.
U.S. law permits “expanded access” (also known as compassionate use and treatment use) for certain patients with serious diseases
who have no comparable alternative treatment options. The potential patient benefit must justify the potential risks of the treatment
use and those potential risks must not be unreasonable in the context of the disease or condition to be treated. Moreover, providing
the investigational drug or biologic for the requested use must not interfere with the initiation, conduct, or completion of clinical
investigations that could support marketing approval of the expanded access use or otherwise compromise the potential development
of the expanded access use. Additional requirements apply depending on the size of the expanded access population. To provide
expanded access, sponsors, including individual physicians, must submit detailed regulatory information to the FDA and receive
the agency’s approval for the use. However, if there is an emergency that requires that a patient be treated before a written
submission can be made, the FDA may authorize the expanded access use by telephone. In such a case, a written expanded access
submission must be submitted to the FDA within fifteen working days of the FDA’s authorization. Following approval for expanded
access use, both the sponsor of the use and the investigator (i.e., physician) must comply with certain FDA requirements. Sponsors
may not promote products as safe or effective for expanded-access uses.
U.S. law further permits access to investigational drugs or biologics for treatment use under new federal Right to Try legislation.
Under this law, patients diagnosed with a life-threatening disease or condition, who have exhausted all approved treatment options,
may be able to obtain access, with the agreement of the product manufacturer and the patient’s physician to certain investigational
drugs and biologics. The patient must further be unable to participate in a clinical trial involving the investigational drug or biologic
and must provide informed consent. If all of the statutory criteria are satisfied, FDA approval of the use of the investigational
drug or biologic for patient treatment is not required but certain reports must be submitted to the agency annually. Individual
states also have their own Right to Try statutes.
Pharmaceutical Pricing and Reimbursement
The containment of healthcare costs has become a priority of federal, state and ex-U.S. governments, and the prices of
pharmaceuticals have been a focus of this effort. Ex-U.S. governments, the U.S. government, and state legislatures have shown
significant interest in implementing cost-containment programs to limit the growth of government-paid healthcare costs, including
price controls, restrictions on reimbursement and requirements for substitution of generic products for branded prescription drugs.
In some countries, particularly the countries of the EU, the pricing of prescription pharmaceuticals is subject to governmental
control. In these countries, pricing and reimbursement negotiations with governmental authorities can take considerable time after
the receipt of marketing approval for a product. In addition, there can be considerable pressure by governments and other
stakeholders on prices and reimbursement levels, including as part of cost containment measures. In some countries, governments
can set conditions that must be satisfied for prices to be set at a certain value. Political, economic and regulatory developments
may further complicate pricing and reimbursement negotiations, and pricing negotiations may continue after reimbursement has
been obtained. Reference pricing used by various EU member states, and parallel distribution (arbitrage between low-priced and
high- priced member states), can further reduce prices. In some countries we may be required to conduct a clinical trial or other
studies that compare the cost-effectiveness of our product or product candidate to other available therapies in order to obtain
reimbursement or pricing approval.
In the United States, federal price reporting laws require manufacturers to calculate and report complex pricing metrics used to
determine prescription rebates paid under the Medicaid Drug Rebate Program and amounts reimbursed pharmacies and other
providers by the Medicaid and Medicare programs. Various state health care programs similarly obligate us to report drug pricing
information that is used as the basis for their reimbursement of pharmacies and other health care providers. Payment for a
manufacturer’s drugs by these programs is conditioned on submission of this pricing information. Some government health care
programs impose penalties if drug price increases exceed specified percentages or inflation rates, and these penalties can result in
mandatory penny prices for certain federal and 340B program customers. States, such as California, have also enacted transparency
laws that require manufacturers to report price increases and related information, and cap price increases. Failure to comply with
the rules for calculating and submitting pricing information or otherwise overcharging the government or its beneficiaries may
result in criminal, civil, or administrative sanctions or enforcement actions, and expose us to U.S. False Claims Act, or the False
Claims Act, liability.
The Veterans Health Care Act of 1992 requires, as a condition of payment by certain federal agencies and the Medicaid program,
that manufacturers of “covered drugs” (including all drugs approved under an (cid:1)DA) enter into a Master Agreement and Federal
Supply Schedule (FSS) contract with the Department of Veterans Affairs through which their covered drugs must be offered for
sale at a mandatory ceiling price to certain federal agencies, including the VA and Department of Defense. FSS contracts require
compliance with applicable federal procurement laws and regulations, including disclosure of commercial prices during contract
negotiations and maintenance of price relationships during the term of the contract, and subject manufacturers to contractual
remedies as well as administrative, civil, and criminal sanctions. The Veterans Health Care Act also requires manufacturers to
enter into pricing agreements with the Department of Health and Human Services to charge no more than a different ceiling price
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(derived from the Medicaid rebate percentage) to covered entities participating in the 340B drug discount program. Failure to
provide the mandatory discount may subject the manufacturer to specific civil monetary penalties. Termination of either of these
agreements also jeopardizes payment by Medicaid and Medicare for the manufacturer’s drugs in an outpatient setting.
Coverage policies, third-party reimbursement rates and drug pricing regulation may change at any time. For example, in the United
States, healthcare reform measures under the Affordable Care Act, contain provisions that may affect the profitability of drug
products. However, since its passage, Congress has repealed and amended certain provisions of the Affordable Care Act, and repeal
efforts may occur again, and there are ongoing legal challenges to the Affordable Care Act which may contribute to the uncertainty
of the ongoing implementation and impact of the Affordable Care Act and also underscores the potential for additional reform
going forward. Certain provisions of enacted or proposed legislative changes may negatively impact coverage and reimbursement
of healthcare items and services. We cannot assure that the Affordable Care Act, as currently enacted or as amended in the future,
will not adversely affect our business and financial results and we cannot predict how future federal or state legislative or
administrative changes relating to healthcare reform will affect our business.
Legislators and regulators at both the federal and state level are increasingly focused on containing the cost of drugs, and there
has been increasing legislative and enforcement interest in the United States with respect to specialty drug pricing practices.
Specifically, there have been recent U.S. Congressional inquiries and proposed bills designed to, among other things, bring more
transparency to drug pricing, penalize companies that do not agree to cap prices paid for certain drugs, review the relationship
between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drugs.
For example, in 2016, the Centers for Medicare and Medicaid Services, or CMS, issued a final rule regarding the Medicaid drug
rebate program, which among other things, revises the manner in which the “average manufacturer price” or AMP is to be calculated
by manufacturers participating in the program and implements certain amendments to the Medicaid rebate statute created under
the Affordable Care Act, or ACA. More recently, Congress amended the Medicaid statute, effective October 1, 2019, to exclude
prices paid by secondary manufacturers for an authorized generic drug (but not a product approved under the BLA process) from
the (cid:1)DA holder’s AMP for the brand, thereby increasing the rebate amount and the 340B price for the brand. Similarly, 340B
program guidance regulations on civil monetary penalties for statutory violations, which had been finalized in early 2017 but
deferred, recently went into effect. In October 2018, CMS issued an advance notice of proposed rulemaking paving the way for
a proposed rule in 2019 that would significantly reduce the price of drugs paid by Medicare Part B by basing reimbursement on
the average prices among other industrialized countries, These and any additional healthcare reform measures could further
constrain our business or limit the amounts that federal and state governments will pay for healthcare products and services, which
could result in additional pricing pressures.
Any regulatory approval of a product is limited to specific diseases and indications for which such product has been deemed safe
and effective by the FDA. Coverage by federal healthcare programs, however, may be more limited than the indications for which
a drug is approved by the FDA or comparable ex-U.S. regulatory authorities’ coverage of the same products. Sales of any products
for which we may receive regulatory approval for commercial sale will depend in part on the extent to which the costs of the
products will be covered and reimbursed by third-party payors, including government healthcare programs (such as, in the United
States, Medicare and Medicaid), private health insurers and other organizations. Obtaining reimbursement for orphan drugs may
be particularly difficult because of the significant research and development challenges and costs and resulting pricing
considerations typically associated with drugs developed to treat conditions that affect a small population of patients. In addition,
third-party payors are likely to impose strict requirements for reimbursement in connection with drugs that are perceived as having
high costs. (cid:1)et prices for products may be reduced by mandatory discounts or rebates required by government healthcare programs
or private payors.
The process for determining whether a payor will provide coverage for a product may be separate from the process for setting the
price or reimbursement rate that the payor will pay for the product once coverage is approved. Third- party payors may limit
coverage to specific products on an approved list, or formulary, which might not include all of the approved products for a particular
indication. Third-party payors are increasingly challenging the price and examining the cost-effectiveness of medical products
and services. We may need to conduct expensive pharmacoeconomic studies in order to demonstrate the cost-effectiveness of our
product or product candidates or conduct direct head-to-head studies to demonstrate clinical superiority and cost-effectiveness.
Our products and product candidates may not be considered clinically superior and cost-effective to competitor products.
The marketability of any products for which we receive regulatory approval for commercial sale may suffer if the government
and other third-party payors fail to provide adequate coverage and reimbursement.
For important information regarding certain pricing and reimbursement matters see “Item 1. Business-Commercial Matters-Market
Access Considerations” and “Item 1A. Risk Factors,” including the risk factor titled “Commercialization of Translarna has been
in, and is expected to continue to take place in, countries that tend to impose strict price controls, which may adversely affect our
revenues. Failure to obtain and maintain acceptable pricing and reimbursement terms for Translarna for the treatment of nmDMD
in the EEA and other countries where Translarna is available would delay or prevent us from marketing our product in such
regions, which would adversely affect our business, results of operations, and financial condition.”
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Freedom of Information Requests and Affirmative Disclosures
We are also subject, in the U.S. and many other countries, to various regulatory schemes that require disclosure of clinical trial
data or allow access to our data via freedom of information requests. We have been and may, from time to time, be notified by
regulators, such as the EMA or the competent authorities of EU member states that they have received a freedom of information
request for documents that they hold relating to our company, including information related to our product or our product candidates.
For example, in 2015, we were notified by the EMA that it had received from another pharmaceutical company a request under
Regulation (EC) (cid:1)o 1049/2001 seeking access to aspects of our marketing authorization application for Translarna for the treatment
of nmDMD. Following the decision of the EMA to release such documentation with only minimal redactions we initiated litigation
before the General Court of the EU to prevent disclosure of this information. In the first quarter of 2018, the Court ruled in favor
of the EMA, allowing the EMA to release the documentation. We appealed the General Court’s decision to the Court of Justice of
the EU, or CJEU, but the CJEU dismissed our appeal in January 2020 and released the information to the requester. In addition,
under policies recently adopted in the EU, clinical trial data submitted to the EMA in MAAs that were traditionally regarded as
confidential commercial information is now subject to automatic public disclosure. Further, once the Clinical Trials Regulation
536/2014 is fully in place, the sponsor of an EU trial must submit a summary of the results to an EU database within a year of the
end of the trial. In addition, where the trial was intended to be used for obtaining a marketing authorization the applicant must
submit the clinical study report 30 days after MA has been granted, refused or withdrawn. Subject to our limited ability to review
and redact a narrow sub-set of confidential commercial information, these new EU policies will result in the EMA’s public disclosure
of certain of our clinical study reports, clinical trial data summaries and clinical overviews for recently completed and future MAA
submissions. The move toward public disclosure of development data could adversely affect our business in many ways, including,
for example, resulting in the disclosure of our confidential methodologies for development of our products, preventing us from
obtaining intellectual property right protection for innovations, requiring us to allocate significant resources to prevent other
companies from violating our intellectual property rights, adding even more complexity to processing health data from clinical
trials consistent with applicable data privacy regulations, and enabling competitors to use our data to gain approvals for their own
products.
Fraud and Abuse Laws
Any present or future arrangements or interactions with third-party payors, healthcare providers and professionals, patients and
customers may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that may restrict certain
marketing and contracting practices. These laws include, and are not limited to, anti-kickback and false claims statutes.
Both the federal Foreign Corrupt Practices Act, or FCPA, and the UK Bribery Act of 2010, or Bribery Act are broad in scope and
will require companies to make and keep books and records that accurately and fairly reflect the transactions of the company and
to devise and maintain an adequate system of internal accounting controls. The FCPA prohibits the offering, promising, giving,
or authorizing others to give anything of value, either directly or indirectly, to a non-U.S. government official, political party or
candidate for public office in order to improperly influence any act or decision, secure any other improper advantage, or obtain
or retain business. The FCPA also prohibits any U.S. person from corruptly acting outside the U.S. in furtherance of such offer,
promise or payment. Under the UK Bribery Act, companies which carry on a business or part of a business in the United Kingdom
may be held liable for bribes given, offered or promised to any person, including non-UK government officials and private persons,
by employees and persons associated with the company in order to obtain or retain business or a business advantage for the
company. Similar statutes have been adopted, or may be adopted in the future, by other countries in which we operate and with
which we are or may be required to comply.
The federal Anti-Kickback Statute prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving
remuneration, directly or indirectly, in cash or kind, to induce or reward either the referral of an individual for, or the purchase, or
order or recommendation of, any good or service, for which payment may be made under federal and state healthcare programs
such as Medicare and Medicaid. This statute imposes criminal penalties and has been broadly interpreted to apply to manufacturer
arrangements with prescribers, purchasers and formulary managers, among others. Although a number of statutory exemptions
and regulatory safe harbors exist to protect certain common activities from prosecution, the exemptions and safe harbors for this
statute are narrow, and practices that involve compensation intended to induce prescriptions, purchases, or recommendations may
be subject to scrutiny if they do not qualify for an exemption or safe harbor. Our practices may not always meet all of the criteria
for safe harbor protection. A person or entity need not have knowledge of the statutes or the specific intent to violate it in order to
have committed a violation. In addition, the government may assert that a claim including items or services resulting from a
violation of the federal anti-kickback statute constitutes a false or fraudulent claim for purposes of the federal False Claims Act.
Many states have adopted laws similar to the federal Anti-Kickback Statute, which apply to items and services reimbursed under
Medicaid and other state programs; furthermore, in several states, these statutes and regulations apply regardless of the payor.
Sanctions under these federal and state laws may include civil monetary penalties, exclusion of a manufacturer’s product from
reimbursement under government programs, debarment, criminal fines, and imprisonment. Several other countries, including the
United Kingdom, have enacted similar anti-kickback, fraud and abuse laws and regulations.
45
The federal civil False Claims Act imposes civil liability and penalties on individuals or entities for knowingly presenting, or
causing to be presented, to the federal government, claims for payment that are false or fraudulent, as well as for making a false
statement to avoid, decrease or conceal an obligation to pay money to the federal government. Claims may be pursued by
whistleblowers through qui tam actions, even if the government declines to intervene. Intent to deceive is not necessary to establish
civil liability, which may be predicated on reckless disregard for the truth. The federal government continues to use the False
Claims Act, and the accompanying threat of significant liability, in investigations against pharmaceutical and health care companies.
These investigations have involved, for example, allegations of providing free product to customers with the expectation that the
customers would bill federal programs for the free product, as well as the promotion of products for unapproved uses and reporting
false pricing information. Violations of the Anti-Kickback Statute may also be grounds for civil False Claims Act actions. Potential
liability under the federal False Claims Act includes treble damages and significant per claim penalties. The criminal federal False
Claims Act imposes criminal fines or imprisonment against individuals or entities who make or present a claim to the government
knowing such claim to be false fictitious or fraudulent. Conviction or civil judgment for violation of the False Claims Act can
also result in debarment from government contracting and exclusion from participation in federal healthcare programs. The majority
of states also have statutes or regulations similar to the federal False Claims Act, which apply to items and services reimbursed
under Medicaid and other state programs.
The Affordable Care Act authorized the imposition of civil monetary penalties on manufactures participating in the 340B program
for failure to charge the statutory ceiling price, and required HHS to promulgate regulations establishing the standards for
implementing this Civil Monetary Penalty, or CMP, authority. CMS’ final CMP rule went into effect January 1, 2019.
The Affordable Care Act included a provision requiring certain providers and suppliers of items and services to Federal Health
Care Programs to report and return overpayments within sixty days after they are “identified” (the “Overpayment Statute”). The
law prohibits a recipient of a payment from the government from keeping an overpayment when the government mistakenly pays
more than the amount to which the recipient is entitled even if the overpayment is not caused by any conduct of the recipient. In
2014 and 2016, the CMS released regulatory guidance (in the form of a final rule) to Medicare providers, suppliers and managed
care and prescription drug plans regarding how to comply with the Overpayment Statute. Although these Medicare providers,
suppliers and plans have faced federal False Claims Act liability since 2010 for failures to comply with the Overpayment Statute,
these final rules interpreting the Overpayment Statute provide guidance regarding how to comply with applicable obligations, and
guidance to government regulators and enforcement authorities regarding monitoring and prosecuting suspected violations. These
final rules are not directly applicable to manufacturers, except if a manufacturer is a direct recipient of payment by an agency such
as a research grant but may impact their customers and potential customers who are Medicare providers, suppliers, and plans.
The federal Physician Payments Sunshine Act, enacted as part of the Affordable Care Act, and its implementing regulations, require
manufacturers of drugs, devices, biologics and medical supplies to report to CMS information related to payments and other
transfers of value made to or at the request of covered recipients, such as physicians and teaching hospitals, as well as physician
ownership and investment interests. Payments made to physicians and certain research institutions for clinical trials are included
within the ambit of this law. Pharmaceutical manufacturers are required annually to report and disclose payments and ownership
and investment interests held by physicians and their immediate family members during the preceding calendar year. Such
information is made publicly available by CMS in a searchable format, with data collected in each calendar year published the
following June. Failure to submit required information may result in civil monetary penalties, with increased penalties for “knowing
failures,” for all payments, transfers of value or ownership or investment interests not reported in an annual submission. If not
preempted by this federal law, several states currently require pharmaceutical companies to report expenses relating to the marketing
and promotion of pharmaceutical products and to report gifts and payments to healthcare professionals in those states. Depending
on the state, legislation may prohibit various other marketing related activities, or require the posting of information relating to
clinical studies and their outcomes. In addition, certain states, such as California, (cid:1)evada, Connecticut and Massachusetts, require
pharmaceutical companies to implement compliance programs or marketing codes and several other states are considering similar
proposals. States may also consider additional or similar proposals with respect to the sale and marketing of biologic and
pharmaceutical products. Manufacturers that fail to comply with these state laws can face civil penalties.
Statutory requirements to disclose publicly payments made to healthcare professionals and healthcare organizations have also
been enacted in certain European Union member states. In addition, self-regulatory bodies of the pharmaceuticals industry, such
as the European Federation of Pharmaceutical Industries and Associations, or EFPIA, have published codes of conduct to which
its members have agreed to abide to, that require the public disclosure of payments made to healthcare professionals and healthcare
organizations. In some countries (including France, Denmark and Portugal) such requirements are enforceable by law.
The federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, also created federal criminal statutes that
prohibit, among other actions, knowingly and willfully executing, or attempting to execute, a scheme to defraud or to obtain, by
means of false or fraudulent pretenses, representations or promises, any of the money or property owned by, or under the custody
or control of, a healthcare benefit program, regardless of whether the payor is public or private, in connection with the delivery
or payment for health care benefits, knowingly and willfully embezzling or stealing from a health care benefit program, willfully
obstructing a criminal investigation of a health care offense and knowingly and willfully falsifying, concealing, or covering up by
46
any trick or device a material fact or making any materially false statements in connection with the delivery of, or payment for,
healthcare benefits, items, or services relating to healthcare matters. Additionally, the Affordable Care Act amended the intent
requirement of certain of these criminal statutes under HIPAA so that a person or entity no longer needs to have actual knowledge
of the statute, or the specific intent to violate it, to have committed a violation.
HIPAA, the Health Information Technology for Economic and Clinical Health Act of 2009, or HITECH, and similar state laws,
also impose obligations on certain entities with respect to safeguarding the privacy, security and transmission of certain individually
identifiable health information, known as protected health information. Among other things, HITECH and implementing
regulations makes HIPAA's security and certain privacy standards directly applicable to “business associates,” defined as persons
or organizations of covered entities, other than members of the covered entity’s workforce, that create, receive, maintain or transmit
protected health information on behalf of a covered entity for a function or activity regulated by HIPAA. HITECH also strengthened
the civil and criminal penalties that may be imposed against covered entities, business associates and individuals, and gave state
attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws
and seek attorney's fees and costs associated with pursuing federal civil actions. In addition, other federal and state laws, such as
the California Consumer Privacy Act, may regulate the privacy and security of information that we maintain, many of which may
differ from each other in significant ways and may not be preempted by HIPAA.
Outside of the U.S., additional privacy and data protection laws may apply to our operations. For example, the European General
Data Protection Regulation, and supplementary member state, United Kingdom, European Economic Area, and Swiss legislation
may apply to some or all of the clinical or other protected data obtained, transmitted, or stored from those territories. These laws
require specific, freely given and fully informed consent to be obtained from patients or clinical study participants. There are also
other requirements for lawful processing, including transparency obligations, data minimization requirements, and compliance
with individuals’ stringent rights to access their personal data and to otherwise control the processing of their personal data. There
are data breach notification obligations, to supervisory authorities and to individuals, where there are high risks to them arising
from the data breach. These laws impose high regulatory fines in the event of breach of processing requirements of up to 4% of
global annual turnover or EUR 20 million (whichever is the higher amount). Further certain privacy laws and genetic testing laws
may apply directly to our operations and/or those of our collaborators and may impose restrictions on our use and dissemination
of individuals’ health information.
Any continuing efforts by the Trump Administration and the U.S. Congress to modify, repeal, or otherwise invalidate all, or certain
provisions of, the Affordable Care Act, could have an impact on fraud and abuse provisions and other requirements, including the
Physician Payments Sunshine Act, that were authorized and enacted under the Affordable Care Act.
The foregoing discussion should be read in conjunction with the information appearing under “Item 1A. Risk Factors-Our
relationships with customers, healthcare providers and professionals, patients, patient organizations, and third-party payors are
or will be subject to applicable anti-kickback, fraud and abuse, transparency and other healthcare laws and regulations, which
could expose us to criminal sanctions, civil penalties, contractual damages, reputational harm and diminished profits and future
earnings.” which contains important information regarding some of the risks to our business arising as a result fraud and abuse
laws.
Employees
As of December 31, 2019, we had 761 employees, of whom 754 were employed on a full-time basis, and 66 consultants and
contractors, of whom 57 were full-time. (cid:1)one of our U.S. based employees are represented by labor unions or covered by collective
bargaining agreements, although certain international employees are covered by collective labor agreements established under
local law. We consider our relationship with our employees to be good.
Our Corporate Information
We were incorporated under the laws of the State of Delaware on March 31, 1998, under the name PTC Therapeutics, Inc. Our
principal executive offices are located at 100 Corporate Court, South Plainfield, (cid:1)ew Jersey 07080. Our telephone number is
(908) 222-7000. We maintain a website at www.ptcbio.com.
Additional Information
We make available, free of charge on our website, www.ptcbio.com, our annual reports on Form 10-K, quarterly reports on Form 10-
Q, current reports on Form 8-K, and all amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934, as amended, or the Exchange Act, as soon as reasonably practicable after we electronically file
those reports with, or furnish them to, the Securities and Exchange Commission, or SEC. We also make available, free of charge
on our website, the reports filed with the SEC by our executive officers, directors and 10% stockholders pursuant to Section 16
under the Exchange Act as soon as reasonably practicable after copies of those filings are provided to us by those persons. Such
reports, proxy statements and other information may be obtained through the SEC’s website (www.sec.gov). The information
contained on, or that can be accessed through, our website is not a part of or incorporated by reference in this Annual Report on
Form 10-K.
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Item 1A. Risk Factors
The following risk factors and other information included in this Annual Report on Form 10-K should be carefully considered.
The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known
to us or that we presently deem less significant may also impair our business operations. Please see page 1 of this Annual Report
on Form 10-K for a discussion of some of the forward-looking statements that are qualified by these risk factors. If any of the
following risks occur, our business, financial condition, results of operations and future growth prospects could be materially and
adversely affected.
Risks Related to Our Gene Therapy Platform
We may fail to obtain regulatory approval for PTC-AADC for the treatment of AADC deficiency within our expected timeline
or at all.
In July 2017, an end-of-phase 2 meeting was held with the United States Food and Drug Administration, or FDA, and the clinical
data from two completed PTC-AADC clinical trials, and non-clinical and manufacturing data available to date were reviewed.
The FDA provided feedback indicating that the clinical and non-clinical data available to date were sufficient to support a submission
for a biologics license application, or BLA, without undertaking additional trials at this time. In late 2019, the FDA requested
additional information concerning the use of the commercial delivery system for PTC-AADC in young patients. Based on the
FDA input, including with respect to manufacturing, we are preparing a BLA for PTC-AADC for the treatment of AADC deficiency
in the United States, which we anticipate submitting to the FDA in the second quarter of 2020. In April 2018, Agilis held a protocol
assistance meeting with the Scientific Advice Working Party of the European Medicines Agency, or EMA, in anticipation of the
expected submission of a Marketing Authorization Application, or MAA, in the European Union, or EU and received feedback
indicating the clinical and non-clinical data available to date were sufficient to support a submission for an MAA without undertaking
additional trials or studies at this time. In January 2020, we submitted an MAA to the EMA for PTC-AADC for the treatment of
AADC deficiency in the EEA. We expect to receive an opinion from the Committee for Medicinal Product for Human Use, or
CHMP, of the EMA regarding our MAA submission by the end of 2020. There is no guarantee that we will be able to make our
BLA submission within our expected timeline or that the FDA, upon making our BLA submission, or the EMA would not have
additional comments or requirements with respect to the respective submissions that we would be required to address before such
applications would be accepted for regulatory review or before obtaining regulatory approval, or that the FDA or the EMA will
approve PTC-AADC for the treatment of AADC deficiency at all. Any delays in obtaining regulatory approval from either the
FDA and/or the EMA, or if we never obtain regulatory approval from either the FDA and/or the EMA, could have a material
adverse effect on our business, financial condition and results of operations.
Gene therapies are novel, complex and difficult to manufacture. We could experience manufacturing problems that result in
delays in the development or commercialization of our gene therapy product candidates or otherwise harm our business.
The manufacture of gene therapy products and our other gene therapy product candidates, such as PTC-AADC, is technically
complex and necessitates substantial expertise and capital investment. Production difficulties caused by unforeseen events may
delay the availability of material for clinical studies and commercial product for any of our gene therapy product candidates that
may receive regulatory approval in the future. We presently contract with third parties for the manufacturing of program materials
for our gene therapy product candidates. We plan, however, to begin our own manufacturing of program materials for certain of
our gene therapy product candidates. To the extent we rely on contract manufacturers, we have personnel with manufacturing and
quality experience to oversee our contract manufacturers.
Although we are taking steps to increase our manufacturing capabilities for our gene therapy platform, we currently rely on third-
party manufacturers to be capable of providing sufficient quantities of our program materials to meet anticipated clinical trial scale
demands. To meet our projected needs for commercial manufacturing, we or the third party from whom we currently obtain our
clinical supply of PTC-AADC may need to increase the scale of production and confirm with the applicable regulatory authorities
that the commercial material is comparable to the material used in clinical trials in addition to satisfying other regulatory obligations,
or we will need to secure alternate suppliers. In general, gene therapy products have only in limited cases been manufactured at
scales sufficient for pivotal trials and commercialization. Few pharmaceutical contract manufacturers specialize in gene therapy
products and those that do are still developing appropriate processes, controls and facilities for large-scale production. While we
believe that there are alternate sources of supply that can satisfy our clinical and commercial requirements, we cannot be certain
that we will be able to identify and establish relationships with such sources, if necessary, in a timely manner or at all, and what
the terms and costs of such new arrangements would be, or that such alternate suppliers would be able to supply our potential
commercial needs. Any switch from our current manufacturer would result in a significant delay, would require FDA approval,
and cause material additional costs.
As further described in these risks, the manufacturers of pharmaceutical products must comply with strictly enforced cGMP
requirements, state and federal regulations, as well as ex-U.S. requirements when applicable. Any failure by us or our contract
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manufacturing organizations to adhere to or document compliance to such regulatory requirements could lead to a delay or
interruption in the availability of our program materials for clinical studies or commercial use, among other consequences. If we
or our manufacturers fail to comply with the requirements set forth by the FDA, EMA, or other regulatory authorities, it could
result in sanctions being imposed on us, including fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals,
clinical holds or termination of clinical studies, warning or untitled letters, regulatory communications warning the public about
safety issues with a product, import or export refusals, license revocation, seizures, detentions, or recalls of product candidates or
product, operating restrictions, criminal prosecutions or debarment, suits under the civil False Claims act, corporate integrity
agreements, or consent decrees any of which could significantly and adversely affect supplies of our product candidates and our
business, results of operations and financial condition could be materially adversely affected.
Any dependence upon others for the manufacture of our product candidates may also adversely affect our business, results of
operations, financial condition and prospects, and our ability to commercialize any product candidates that receive regulatory
approval on a timely and competitive basis.
We have no experience manufacturing gene therapy products on our own and could encounter problems and delays in
establishing our biologics manufacturing facility that could adversely affect our business.
We currently contract, and have in the past contracted, with third parties for the manufacturing of program materials for our gene
therapy product candidates. However, we have entered into a lease agreement for office, manufacturing and laboratory space at
a facility located in Hopewell Township, (cid:1)ew Jersey, or the Hopewell Facility, that we plan to utilize to begin our own manufacturing
of program materials for certain of our gene therapy product candidates. The Hopewell Facility requires substantial investment
and significant expertise, and our management devotes substantial time to its preparation. While some of our employees have
experience with gene therapy manufacturing, we have never manufactured gene therapy product materials as a company and we
may encounter unforeseen delays, equipment failure, labor shortages, natural disasters, power failures, transportation difficulties,
quality control or other issues, including those resulting from compliance with regulatory requirements, as further described in
these risks, that could prevent us from realizing the intended benefits of our manufacturing strategy. In addition, establishing an
operational manufacturing facility may cost more than we currently anticipate. If we experience any problems or delays with the
Hopewell Facility, we may need to rely on contract manufacturers for the manufacturing of program materials that we intended
to produce ourselves, which may cause additional timing delays due to the availability of contract manufacturers, and our business,
financial condition and results of operations could be materially and adversely affected.
The process for administering PTC-AADC is complex and includes specific specialized requirements that could delay or prevent
the regulatory approval of PTC-AADC for the treatment of AADC deficiency, limit its commercial potential or result in
significant negative consequences following any potential marketing approval.
PTC-AADC is administered directly to the putamen in the brain using stereotactic surgery, a brain surgery requiring significant
skill and training. There is little experience with such surgeries being used to deliver drugs and for such surgeries being performed
on children. Delivery of PTC-AADC to the putamen also requires certain medical devices, which may result in our product
candidate being deemed to be a combination product by FDA. This would potentially require additional development work and
collaboration with medical device manufacturers, which may delay the submission of product candidate marketing applications
and approval. If we are unable to engage with and train sufficient brain surgeons to perform the procedure properly, the availability
of PTC-AADC for the treatment of AADC deficiency could be substantially diminished. The need to train brain surgeons to
perform the procedures may also expose us to additional regulatory risks as our interactions with such health care providers must
comply with all applicable laws and regulations. For example, if PTC-AADC receives approval in the United States, such
interactions would need to comply with FDA’s laws and regulations on product promotion, as well as laws and regulations related
to healthcare fraud and abuse. As a result, we will need to invest significant resources to ensure all personnel and contractors are
adequately trained on these requirements and to monitor their conduct.
Any contamination in our manufacturing process, shortages of raw materials or failure of any of our key suppliers to deliver
necessary components could result in delays in our clinical development or marketing schedules and adversely affect our ability
to meet our supply obligations.
Given the nature of biologics manufacturing, there is a risk of contamination. Any contamination could materially adversely affect
our ability to produce our gene therapy product candidates on schedule and could, therefore, harm our results of operations and
cause reputational damage.
Some of the raw materials and other components required in our manufacturing process are derived from diverse biologic sources.
Such raw materials are difficult to procure and may be subject to contamination or recall. A material shortage, contamination,
recall or restriction on the use of biologically derived substances in the manufacture of our product candidates could adversely
impact or disrupt the production of clinical material, which could materially and adversely affect our development and
49
commercialization timelines, including with respect to PTC-AADC for the treatment of AADC deficiency, and our business,
financial condition and results of operations.
Regulatory requirements governing gene therapy products have changed frequently and may continue to change in the future.
Such requirements may lengthen the regulatory review process, require us to perform additional studies, and increase our
development costs, or may force us to delay, limit, or terminate certain of our programs.
We may experience development problems related to our gene therapy programs that cause significant delays, changes in plans
or unanticipated costs, or that cannot be solved. Although numerous companies are currently advancing gene therapy product
candidates through clinical trials, to date, the FDA has only approved a limited number of gene therapy treatments, including
vector-based gene therapies. In addition, there are also only limited gene therapy products for genetic diseases approved to date
in the EU. As a result, it is difficult to determine how long it will take or how much it will cost to obtain regulatory approvals for
PTC-AADC for the treatment of AADC deficiency or our other gene therapy product candidates in any jurisdiction, if at all.
Regulatory requirements governing gene therapy products are still evolving and may continue to change in the future. For example,
the FDA has issued a number of new guidance documents on human gene therapy development. The FDA will likely continue to
issue new guidance and replace existing guidance. Similarly, in April 2019 the U.S. (cid:1)ational Institutes of Health issued a rule to
streamline the oversight of gene therapy protocols and reduce duplicative reporting requirements that are already captured within
existing regulatory frameworks. The European Commission may also issue new guidelines concerning the development and
marketing authorization for gene therapy medicinal products and require that we comply with these new guidelines. Regulatory
review agencies and the new requirements and guidelines they promulgate may lengthen the regulatory review process, require
us to perform additional or larger studies, increase our development costs, lead to changes in regulatory positions and interpretations,
delay or prevent approval and commercialization of our product candidates or lead to significant post-approval studies, limitations
or restrictions. Moreover, while there are significant risks that accompany all development programs, because gene therapy products
are a relatively new development, less is known about such products and product candidates. Accordingly, there is an increased
risk that such products and product candidates may not perform in clinical or preclinical trials as we expect. Additionally, because
gene therapy products are complex, the manufacture of such products and product candidates is more difficult and costly. We
may not be able to reliably manufacture such products in accordance with the applicable regulatory requirements in sufficient
quantities to support our development programs and, if ultimately approved, commercial supply. Delay, failure or unexpected
costs in obtaining, the regulatory approval necessary to bring our product candidates to market, as well as manufacturing difficulties
or challenges, could have a material adverse effect on our business, results of operations, financial condition and prospects. Even
if we do obtain regulatory approval, ethical, social and legal concerns about gene therapy arising in the future could result in
additional regulations restricting or prohibiting sale of our products.
In addition, the clinical trial requirements of the FDA, the EMA and other regulatory authorities and the criteria these regulators
use to determine the safety and efficacy of a product candidate vary substantially according to the type, complexity, novelty and
intended use and market of such product candidates. The regulatory approval process for novel product candidates such as ours
can be more expensive and take longer than for other, better known or more extensively studied product candidates.
The FDA has established the Office of Tissues and Advanced Therapies within the Center for Biologics Evaluation and Research,
or CBER, to consolidate the review of gene therapy and related products, and has established the Cellular, Tissue and Gene
Therapies Advisory Committee to advise the CBER in its review; other international regulatory agencies have also dedicated
personnel and/or offices to review gene therapy programs and products.
These regulatory review committees and advisory groups and any new guidelines they promulgate, as well as any unexpected
results or manufacturing difficulties, may lengthen the regulatory review process, require us to perform additional studies, increase
our development costs, lead to changes in regulatory positions and interpretations, delay or prevent approval and commercialization
of our product candidates or lead to significant post-approval limitations or restrictions. As we advance our gene therapy product
candidates, we will be required to consult with these regulatory and advisory groups and comply with applicable laws, regulations
and guidelines. If we fail to do so, we may be required to delay or discontinue development of certain of our product candidates.
These additional requirements may result in a review and approval process that is longer than we otherwise would have expected.
Delays as a result of lengthier regulatory approval process and further restrictions on development of our gene therapy product
candidates can be costly and could negatively impact our or our collaborators’ ability to complete clinical trials and commercialize
our current and future product candidates in a timely manner, if at all, any of which could have a material adverse effect on our
business, results of operations, financial condition and prospects.
Our gene therapy product candidates and the process for administering such product candidates may cause undesirable side
effects or have other properties that could delay or prevent their regulatory approval, limit their commercial potential or result
in significant negative consequences following any potential marketing approval.
The goal of gene therapy is to be able to correct an inborn genetic defect through one-time administration of therapeutic genetic
material containing non-defective gene copies. The gene copies are designed to reside permanently in a patient, allowing the
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patient to produce an essential protein or ribonucleic acid, or R(cid:1)A, molecule that a healthy person would normally produce. There
is a risk, however, that the new gene copies will produce too much or too little of the desired protein or R(cid:1)A. There is also a risk
that production of the desired protein or R(cid:1)A will increase or decrease over time. Because the treatment is irreversible, there may
be challenges in managing side effects, particularly those caused by overproduction. Adverse effects would not be able to be
reversed or relieved by stopping dosing and might require us to develop additional clinical safety procedures. Furthermore, because
the new gene copies are designed to reside permanently in a patient, there is a risk that they will disrupt other normal biological
molecules and processes, including other healthy genes, and we may not learn the nature and magnitude of these side effects until
long after clinical trials have been completed. Accordingly, long-term patient and clinical study subject follow up and associated
regulatory reporting may be required for gene therapies to assess delayed adverse events.
There have been several significant adverse side effects in gene therapy treatments in the past, including reported cases of leukemia,
immune- and complement-mediated responses, and death seen in other trials using other vectors. While new recombinant vectors
have been developed to potentially reduce these side effects, gene therapy is still a relatively new approach to disease treatment
and additional adverse side effects could develop. Accordingly, depending on the vector that is used, additional manufacturing,
clinical, and preclinical testing may be required, as well as additional analyses, assessments, and potential long-term patient and
clinical study subject monitoring and sample testing and associated regulatory reporting. There also is the potential risk of delayed
adverse events following exposure to gene therapy products due to persistent biologic activity of the genetic material or other
components of products used to carry the genetic material.
Possible adverse side effects that could occur with treatment with gene therapy products include an immunologic or complement-
mediated reactions early after administration which, while not necessarily adverse to the patient’s health, could substantially limit
the effectiveness of the treatment.
In addition to any potential side effects caused by any gene therapy product candidate, the administration process or related
procedures also can cause adverse side effects. If any such adverse events occur, our clinical trials could be suspended, modified,
or terminated or we may be required to interrupt or cease commercial sales of any product candidates that may receive regulatory
approval. If in the future we are unable to demonstrate that such adverse events were caused by the administration process or
related procedures, the FDA, the European Commission, the EMA or other regulatory authorities could order us to cease further
development of, or deny approval of, our product candidates for any or all targeted indications. Even if we are able to demonstrate
that all future serious adverse events are not product-related, such occurrences could affect patient recruitment or the ability of
enrolled patients to complete the trial, as well as the receptivity of patients and physicians to try any approved gene therapy
products. Moreover, if we elect, or are required, to delay, suspend or terminate any clinical trial of any of our product candidates,
the commercial prospects of such product candidates may be harmed and our ability to generate product revenues from any of
these product candidates may be delayed or eliminated. Any of these occurrences may harm our ability to develop other product
candidates, and may have a material adverse effect on our business, results of operations, financial conditions and prospects.
Furthermore, if we or others later identify undesirable side effects caused by any of our gene therapy product candidates, several
potentially significant negative consequences could result, including:
•
regulatory authorities may suspend or withdraw approvals of any product candidate that may receive regulatory approval,
thereby preventing or delaying its commercialization;
•
regulatory authorities may require additional warnings or limitations of use in product labeling;
• we may be required to change the way a product candidate is administered or conduct additional clinical trials;
• we could be sued and held liable for harm caused by our products to patients; and
•
our reputation may suffer.
Any of these events could prevent us from achieving or maintaining market acceptance of our gene therapy assets for which we
receive marketing approval and could materially harm our business, financial condition, results of operations and prospects.
Our gene therapy approach utilizes vectors derived from viruses, which may be perceived as unsafe or may result in unforeseen
adverse events. (cid:1)egative public opinion and increased regulatory scrutiny of gene therapy may damage public perception of
the safety of PTC-AADC for the treatment of AADC deficiency or our other potential gene therapy product candidates and
adversely affect our ability to conduct our business or obtain regulatory approvals for PTC-AADC or our other potential gene
therapy product candidates.
Because gene therapy remains a novel technology, we face uncertainty as to whether gene therapy will gain the acceptance of the
public or the medical community. Even if we obtain regulatory approval for our product candidates, the commercial success of
our product candidates will depend, in part, on the acceptance of physicians, patients and healthcare payers of gene therapy products
in general, and of our product candidates in particular, as medically necessary, cost-effective and safe. Public perception may be
51
influenced by claims that gene therapy is unsafe, and gene therapy may not gain the acceptance of the public or the medical
community. In particular, our success will depend in part upon physicians who specialize in the treatment of genetic diseases
targeted by our product candidates, if approved, prescribing treatments that involve the use of our product candidates, if approved,
in lieu of, or in addition to, existing treatments, if any, with which they are familiar and for which greater clinical data may be
available. Even if a product candidate displays a favorable efficacy and safety profile in clinical trials and is ultimately approved,
market acceptance of the product candidate will not be fully known until after it is commercialized. More restrictive government
regulations or negative public opinion would have an adverse effect on our business, financial condition, results of operations and
prospects and may delay or impair the development and commercialization of our product candidates or demand for any product
candidates that receive regulatory approval. For example, earlier gene therapy trials conducted by other organizations have led to
several well-publicized adverse events, including cases of leukemia, immune- and complement-mediated adverse events, and
death seen in other such organizations' trials using other vectors. A significant negative development in any other gene therapy
program or our failure to satisfy any post-marketing regulatory commitments and requirements to which we may become subject
may adversely impact the commercial results and potential of our product candidates. Serious adverse events in our clinical trials,
or other clinical trials involving gene therapy products or our competitors’ products, even if not ultimately attributable to the
relevant product candidates, and the resulting publicity, could result in increased government regulation, unfavorable public
perception, potential regulatory delays in the testing or approval of our product candidates, stricter labeling requirements for those
product candidates that are approved and a decrease in demand for any gene therapy products for which we obtain marketing
approval. Any of the foregoing could have a material adverse effect on our business, results of operations, financial condition and
prospects.
The insurance coverage and reimbursement status of newly approved products is uncertain. Failure to obtain or maintain
adequate coverage and reimbursement for our products candidates, if approved, could limit our ability to market those products
and decrease our ability to generate product revenue.
We expect the cost of a single administration of gene therapy products, including PTC-AADC for the treatment of AADC deficiency,
to be substantial. We expect that coverage and reimbursement by government and private payers will be essential for most patients
to be able to afford these treatments. Accordingly, sales of any product candidates, if approved, will depend substantially, both
domestically and abroad, on the extent to which the prices of such product candidates will be paid by health maintenance, managed
care, pharmacy benefit and similar healthcare management organizations, or will be reimbursed by government authorities, private
health coverage insurers and other third-party payers. Coverage and reimbursement by a third-party payer may depend upon several
factors, including the availability of alternative therapies or a third-party payer’s determination that use of a product is:
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a covered benefit under its health plan;
safe, effective and medically necessary;
appropriate for the specific patient;
cost-effective; and
neither experimental nor investigational.
Obtaining coverage and reimbursement for a product from third-party payers is a time-consuming and costly process that could
require us to provide to the payer supporting scientific, clinical and cost-effectiveness data. We may not be able to provide data
sufficient to gain acceptance with respect to coverage and reimbursement.
There is significant uncertainty related to third-party coverage and reimbursement of newly approved products, including potential
one-time gene therapies, such as PTC-AADC for the treatment of AADC deficiency. In the United States, third-party payers,
including government payers such as the Medicare and Medicaid programs, play an important role in determining the extent to
which new drugs and biologics will be covered and reimbursed. Expensive specialty drugs in particular are often subject to
restriction. The Medicare and Medicaid programs increasingly are used as models for how private payers and government payers
develop their coverage and reimbursement policies. Currently, there is limited experience with Centers for Medicare and Medicaid
Services, or CMS, coverage of gene therapy product. We cannot be assured that Medicare or Medicaid will cover our product
candidates that may be approved or provide reimbursement without restriction and at adequate levels to realize a sufficient return
on our investment. Moreover, reimbursement agencies in the EU may be more conservative than CMS. It is difficult to predict
what third-party payers will decide with respect to the coverage and reimbursement for our products for which we obtain marketing
approval. Additionally, within Europe, each country has its own reimbursement regime employing various health technology
assessment approaches to assess the cost-effectiveness of the product (in the United Kingdom a HTA assessment is conducted by
(cid:1)ICE) which may significantly affect the effective access to the market.
We may face competition from biosimilars approved through an abbreviated regulatory pathway or from separate full
applications for approval.
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Biologics, including our gene therapy product candidates are regulated by the FDA under the Federal Food, Drug and Cosmetics
Act, or FDCA, and the Public Health Service Act, or PHSA. Biologics require the submission of a BLA and approval by the FDA
prior to being marketed in the United States. Historically, a biologic product approved under a BLA was not subject to the generic
drug review and approval provisions of the FDCA. However, the Biologics Price Competition and Innovation Act of 2009, or
BPCIA, created a regulatory pathway under the PHSA for the abbreviated approval of biological products that are demonstrated
to be “biosimilar” or “interchangeable” with an FDA approved biological product. To demonstrate biosimilarity, the biosimilar
sponsor must show that the product candidate is highly similar to the reference product, notwithstanding minor differences in
clinically inactive components, and that there is no clinically meaningful difference between the biosimilar product and the reference
product in terms of safety, purity, and potency. In order to meet the standard of interchangeability, a sponsor must demonstrate
that the biosimilar product can be expected to produce the same clinical result as the reference product, and for a product that is
administered more than once, that the risk of switching between the reference product and biosimilar product is not greater than
the risk of maintaining the patient on the reference product.
Such biosimilars would reference biological products approved in the United States. The BPCIA, however, establishes certain
protections for reference biologic products. For example, the BPCIA sets up a complex and involved framework for reference and
biologic product sponsors to bring patent infringement actions and actions for declaratory judgment. If another company pursues
approval of a product that is biosimilar to any biologic product for which we receive FDA approval, we may need to pursue costly
and time-consuming patent infringement actions, which may include certain statutorily specified regulatory steps before an
infringement action may be brought. We may also need to spend time and money defending an action for declaratory judgement
that is brought by the biosimilar product sponsor,
Another protection established by the BPCIA is a period of 12 years of exclusivity for reference products that begins on the date
that the reference product was first licensed by FDA. During this time, FDA may not make the licensure of a biosimilar product
effective. Biosimilar applications can, however, be submitted for FDA review beginning four years after the date of the reference
product’s first licensure. Any of our product candidates that may be approved under BLAs in the future could be reference products
for biosimilar marketing applications. As a result, any of our product candidates that may receive regulatory approval may face
competition from other biological products that receive regulatory approval pursuant to an abbreviated pathway, which may have
a material adverse effect on our results of operations, business, financial condition or prospects.
In addition, the biologic exclusivity period has certain limitations that may limit its ability to protect our product candidates, if
approved, from biosimilar or interchangeable product competition. For example, certain changes and supplements to an approved
BLA, and certain subsequent applications filed by the same sponsor, manufacturer, licensor, predecessor in interest, or other related
entity do not qualify for the 12-year exclusivity period. Moreover, there have been legislative efforts to decrease this period of
exclusivity to a shorter timeframe. Future proposed budgets, international trade agreements and other arrangements or proposals
may affect periods of exclusivity. Further, even if our biologic product candidates qualify for the BPCIA’s 12-year period of
exclusivity, there is a risk that the FDA will not consider our product candidates to be reference products for competing products,
potentially creating the opportunity for biosimilar competition sooner than anticipated. Additionally, this period of regulatory
exclusivity does not apply to companies pursuing regulatory approval via their own traditional BLA, rather than via the abbreviated
pathway. Accordingly, another company could market a competing version of a biological product if the FDA approves a full BLA
for such product containing the sponsor’s own preclinical data and data from adequate and well-controlled clinical trials to
demonstrate the safety, purity and potency. Moreover, the extent to which a biosimilar, once approved, will be substituted for any
one of our reference products in a way that is similar to traditional generic substitution for non-biological products is not yet fully
clear, and will depend on a number of marketplace and regulatory factors that are still developing. It is also possible that payers
will give reimbursement preference to biosimilars, even over reference biologics, absent a determination of interchangeability.
In the EU, another company could gain approval for a competing product based on an MAA with a complete independent data
package of pharmaceutical tests, preclinical tests and clinical trials.
To the extent we do not receive any anticipated periods of regulatory exclusivity or to the extent the FDA or ex-U.S. regulatory
authorities approve any biosimilar, interchangeable, or other competing products, our business would be adversely impacted.
Competition that our products may face from biosimilar, interchangeable, or other competing products could materially and
adversely impact our future revenue, profitability, and cash flows and substantially limit our ability to obtain a return on the
investments we have made in those product candidates. In the United States, this risk has increased in recent years as the FDA
and the U.S. government have taken steps to encourage increased biosimilar competition in the market, in an effort to bring down
the cost of biologic products.
Risks Related to the Development and Commercialization of our Products and our Product Candidates
If we are unable to continue to execute our commercial strategy for our products, fail to obtain renewal of, or satisfy the
conditions of our marketing authorization for our products, or if we experience significant delays in accomplishing such goals,
our business will be materially harmed.
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We have invested a significant portion of our efforts and financial resources to bring our products to market through research and
development, collaborations and acquisitions. Our ability to continue to generate product revenues will depend heavily on the
successful commercialization of our products.
As we presently have no patent rights to protect the approved use of Emflaza, we rely on the concurrently running market exclusivity
periods currently available to us under the Hatch-Waxman Act and the Orphan Drug Act to commercialize Emflaza for DMD in
the United States. Further, we are obligated to complete certain FDA post-marketing requirements in connection with our marketing
authorization of Emflaza. Failure to maintain these market exclusivity periods, complete the FDA post-marketing requirements,
maintain our marketing authorization for Emflaza in the United States, or timely execute our commercialization plans for Emflaza,
would have a material adverse effect on our business, financial position and results of operations.
While we have obtained marketing authorization for Translarna for the treatment of nmDMD in the EEA, such authorization is
subject to annual review and renewal by the European Commission following the annual EMA reassessment as well as the specific
obligation to conduct and submit the results of Study 041. For a review of recent developments that have had, and may continue
to have, a material adverse effect on our ability to commercialize Translarna for the treatment of nmDMD, please review the risk
factor titled, “ACT DMD did not meet its primary efficacy endpoint, and there is substantial risk that regulators will not agree
with our interpretation of the results of ACT DMD and the totality of clinical data from our trials in Translarna for the treatment
of nmDMD, which would have a material adverse effect on our business, financial performance and results of operations.”
We and our collaborators are currently pursuing further clinical development efforts for our products for other indications. Each
genetic disorder has unique genetic and pathophysiological characteristics and we believe that regulators, including the FDA and
the EMA, will evaluate the effectiveness of such products for any given indication based on the merits of the clinical efficacy
evidence available for such indication. However, because we are developing products for the treatment of multiple indications,
there is a risk that negative results in a clinical or pre-clinical trial of a product for one indication, could adversely affect the
perception of such product in a different indication. There can be no assurance that regulators, including the FDA and the EMA,
will not consider such results when making determinations with respect to our ongoing or future regulatory submissions for
marketing authorization of our products for any indication, including the FDA’s Complete Response Letter to our (cid:1)DA for
Translarna for the treatment of nmDMD and the EMA’s annual reassessment of our marketing authorization for Translarna for the
treatment of nmDMD, which could have an adverse effect on the outcome of the applicable regulatory review. There can be no
assurance that regulators will agree with our interpretation of data from our clinical trials.
If we do not successfully maintain our marketing authorizations for our products, our ability to generate additional revenue will
be jeopardized and, consequently, our business will be materially harmed. The success of of our products will depend on a number
of additional factors, including the following:
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our ability to negotiate, secure and maintain adequate pricing, coverage and reimbursement terms on a timely basis,
or at all;
the timing and scope of commercial launches;
the maintenance and expansion of a commercial infrastructure capable of supporting product sales, marketing and
distribution;
the implementation and maintenance of marketing and distribution relationships with third parties in territories where
we do not pursue direct commercialization;
our ability to establish and maintain commercial manufacturing arrangements with third-party manufacturers;
the ability of our third-party manufacturers to successfully produce commercial and clinical supply of drug on a timely
basis sufficient to meet the needs of our commercial and clinical activities;
successful identification of eligible patients;
acceptance of the drug as a treatment for the approved indication by patients, the medical community and third-party
payors;
effectively competing with other therapies;
a continued acceptable safety profile of the drug;
the costs, timing and outcome of post-marketing studies and trials required for our products, including, with respect to
Translarna, Study 041;
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protecting our rights in our intellectual property portfolio, obtaining and maintaining regulatory exclusivity and,
including with respect to Emflaza, whether we are able to maintain market exclusivity periods under the Hatch-Waxman
Act and Orphan Drug Act;
• whether, with respect to Translarna, we are able to continue to satisfy our obligations under, and maintain, the marketing
authorization in the EEA for Translarna for the treatment of nmDMD, including whether the EMA determines on an
annual basis that the benefit-risk balance of Translarna supports renewal of our marketing authorization in the EEA,
on the current approved label;
• whether, and within what timeframe, we are able to advance Translarna for the treatment of nmDMD in the United
States, including, whether we will be required to perform additional clinical trials, non-clinical studies or CMC
assessments or analyses at significant cost which, if successful, may enable FDA review of an (cid:1)DA submission by us
and, ultimately, may support approval of Translarna for nmDMD in the United States;
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our ability to obtain additional and maintain existing reimbursed named patient and cohort EAP programs for our
products on adequate terms;
our ability to successfully prepare and advance regulatory submissions for marketing authorizations for our products
in additional territories and for additional or expanded indications and whether and in what timeframe we may obtain
such authorizations;
the ability and willingness of patients and healthcare professionals to access our products through alternative means if
pricing and reimbursement negotiations in the applicable territory do not have a positive outcome; and
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protecting our rights in our intellectual property portfolio.
If we do not achieve one or more of these factors in a timely manner or at all, we could experience significant delays or an inability
to continue to commercialize our products, either of which would have a material adverse effect on our business, results of operations
and financial condition.
ACT DMD did not meet its primary efficacy endpoint, and there is substantial risk that regulators will not agree with our
interpretation of the results of ACT DMD and the totality of clinical data from our trials in Translarna for the treatment of
nmDMD, which would have a material adverse effect on our business, financial performance and results of operations.
In October 2015, we announced that the primary efficacy endpoint in the ITT population did not achieve statistical significance
in ACT DMD. We submitted our analyses of the ACT DMD data and meta-analyses of the combined ACT DMD and Phase 2b
subgroup data to the EMA to support continuation of our marketing authorization in the EEA, which is subject to annual review
and renewal by the European Commission following reassessment by the EMA of the benefit-risk balance of the authorization.
The EMA and European Commission did not approve our request for full marketing authorization of Translarna for the treatment
of nmDMD and, instead, approved the annual renewal of our marketing authorization with the specific obligation to confirm the
efficacy and safety of Translarna for the treatment of nmDMD in ambulatory patients age 5 years or older via Study 041.
Enrolling, conducting and reporting a clinical trial is a time-consuming, expensive and uncertain process that takes years to
complete, and we expect that we will incur material costs related to the implementation and conduct of Study 041. We expect that
conducting a placebo-controlled trial in nmDMD of this size will be challenging and it is probable that we will enroll patients in
territories where Translarna has already become available on a reimbursed basis, which could negatively impact growth in our
product sales. We may enroll patients in countries with a different standard of care for nmDMD patients or at clinical trial sites
that are inexperienced with clinical trials in general, or specifically with nmDMD trials. In addition, we may experience unknown
complications with Study 041 and may not achieve the pre-specified endpoint with statistical significance, which would have a
material adverse effect on our ability to maintain our marketing authorization in the EEA.
There is substantial risk that other regulators in regions where we have not yet sought or are currently seeking marketing
authorization will not agree with our interpretation of the results of ACT DMD and the totality of clinical data from our trials in
Translarna for the treatment of nmDMD, which would have a material adverse effect on our ability to generate revenue from the
sales of Translarna for the treatment of nmDMD in those applicable territories. In addition, we may not be able to maintain or
obtain marketing authorizations in areas where such authorizations are contingent upon decisions of the EMA with respect to our
marketing authorization in the EEA.
For additional information, see “Risks Related to Regulatory Approval of our Products and our Product Candidates” below.
The marketing authorization granted by the European Commission for Translarna for the treatment of nmDMD is limited to
ambulatory patients aged two years and older located in the EEA, which significantly limits an already small treatable patient
population, which reduces our commercial opportunity and is also subject to annual reassessment of the benefit-risk balance
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by the EMA as well as the specific obligation to conduct Study 041, and may be varied, suspended or withdrawn by the European
Commission if we fail to satisfy those requirements.
We have obtained orphan drug designations from the EMA and from the FDA for Translarna for the treatment of nmDMD because
the number of patients who could benefit from treatment with Translarna is small. The marketing label approved by the European
Commission further limits the currently treatable patient population to ambulatory nmDMD patients aged two years and older
who have been identified through genetic testing as having a nonsense mutation in the dystrophin gene. Prevalence estimates for
rare diseases are uncertain due to the uncertainties associated with the methodologies used to derive estimates, such as epidemiology
assumptions. It can take many years of experience in rare disease market places before prevalence becomes well characterized.
Our estimates of both the number of people who have DMD caused by a nonsense mutation, as well as the subset of people with
nmDMD who are ambulatory and at least two years old (and, therefore, satisfy the conditions for treatment under our current
product label in the EEA), are based on our beliefs and estimates derived from a variety of sources and may prove to be either
incorrect or subject to additional refinement or characterization on a country specific basis over the coming years. Prevalence
estimates vary given some degree of variation in the incidence of live male births, the incidence of DMD, the incidence of nonsense
mutations and other factors. Information concerning the eligible patient population is generally limited to certain geographies and
may not employ definitive measures capable of establishing with precision the actual number of nmDMD patients in such geography.
If the market opportunities for Translarna for the treatment of nmDMD are smaller than we believe they are, our business and
anticipated revenues will be negatively impacted. If we decide to seek to expand the approved product label of Translarna for the
treatment of nmDMD in the future, the timing of, and our ability to generate, the necessary data or results required to obtain
expanded regulatory approval is currently uncertain. Given the small number of patients who have nmDMD, and the smaller
number of patients who meet the criteria for treatment under our current marketing authorization, our commercial opportunity is
limited. It is critical to the commercial success of Translarna for nmDMD that we successfully identify and treat these patients.
In order to continue to generate revenue from Translarna, we must maintain our marketing authorization in the EEA for Translarna
for the treatment of nmDMD in ambulatory patients aged two years and older, maintain our marketing authorization for Translarna
in Brazil from A(cid:1)VISA, the Brazilian health regulatory authority, for the treatment of nmDMD in ambulatory patients aged five
years and older and we also may need to receive marketing authorizations in other territories. The marketing authorization in the
EEA is conditional and subject to annual review and renewal by the European Commission following reassessment by the EMA
of the benefit-risk balance of the authorization, which we refer to as the annual EMA reassessment, as well as the specific obligation
to complete and report the results of Study 041 to the EMA. We expect that as part of the annual EMA assessment, the EMA will
consider the ongoing status of Study 041. The final report on Study 041 is to be submitted by us to the EMA by the end of the
third quarter of 2022. The marketing authorization was last renewed in July 2019 and is effective, unless extended, through August
5, 2020. Enrolling Study 041 may further reduce the number of patients available for reimbursed treatment.
If the EMA determines in any annual renewal cycle that the balance of benefits and risks of using Translarna for the treatment of
nmDMD has changed materially or that we have not or are unable to comply with any conditions that have been or may be placed
on the marketing authorization, the European Commission could, at the EMA’s recommendation, vary, suspend, withdraw or refuse
to renew the marketing authorization for Translarna or require the imposition of other conditions or restrictions. As such, there is
ongoing risk to our ability to maintain our marketing authorization in the EEA.
If we are unable to renew our marketing authorization in the EEA during any annual renewal cycle, or if our product label is
materially restricted, we would lose all, or a significant portion of, our ability to generate revenue from sales of Translarna, whether
pursuant to a commercial or an EAP program, and in all territories, which would have a material adverse effect on our business,
results of operations and financial condition. See “Risks Related to Regulatory Approval of our Products and our Product
Candidates” below for further detail regarding conditional marketing authorizations in the EEA.
Delays or failures in obtaining regulatory approval in the United States, may prevent us from commercializing Translarna for
nmDMD in that territory and our ability to generate revenue will be materially impaired. In the event that the FDA requires
us to conduct additional clinical trials in nmDMD which, if successful, may enable FDA review of an (cid:1)DA submission by us,
we would expect to incur significant costs, which may have a material adverse effect on our business and results of operations.
In the first quarter of 2017, we filed our Translarna (cid:1)DA for nmDMD with the FDA via the “file over protest” process that allows
a company to have its (cid:1)DA filed and reviewed when there is a disagreement with regulators over the acceptability of the (cid:1)DA
submission. In October 2017, the Office of Drug Evaluation I of the FDA issued a Complete Response Letter for the (cid:1)DA, stating
that it was unable to approve the application in its current form. In response, we filed a formal dispute resolution request with the
Office of (cid:1)ew Drugs of the FDA. In February 2018, the Office of (cid:1)ew Drugs of the FDA denied our appeal of the Complete
Response Letter. In its response, the Office of (cid:1)ew Drugs recommended a possible path forward for the ataluren (cid:1)DA submission
based on the accelerated approval pathway. This would involve a re-submission of an (cid:1)DA containing the current data on
effectiveness of ataluren with new data to be generated on dystrophin production in nmDMD patients’ muscles. We intend to
follow the FDA’s recommendation and will collect, using newer technologies via procedures and methods that we designed, such
dystrophin data in a new study, Study 045, which we initiated in the fourth quarter of 2018. We plan to re-submit the (cid:1)DA with
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the data from Study 045 in mid-year 2020. Additionally, should a re-submission of an (cid:1)DA receive accelerated approval, the
Office of (cid:1)ew Drugs stated that Study 041, which is currently enrolling, could serve as the confirmatory post-approval trial required
in connection with the accelerated approval framework.
While we have discussed the procedures and methods for Study 045 with the FDA, the procedures and methods have never
previously been utilized in DMD studies. In addition to us providing data showing positive results, the FDA will need to accept
the methods utilized in the study. There is a substantial risk that Study 045, or any other studies we may use to collect the dystrophin
data, will not provide the necessary data to support a marketing approval for Translarna for the treatment of nmDMD in the U.S.
or that the FDA will not accept the methods used to collect the data. Even if we are successful in resolving some or all of the
matters raised by the FDA in its denial of our appeal of the Complete Response Letter, there is significant risk that we will be
unable to obtain FDA approval of Translarna for nmDMD, on a timely basis or at all, and we may be required to perform additional
clinical trials, non-clinical studies or CMC assessments or analyses at significant cost. Even if we are able to enroll and fund any
such additional trials or studies or complete such assessments or analyses, there is substantial risk that the results would not
ultimately support the approval of a re-submission of an (cid:1)DA in the United States for Translarna for nmDMD. In addition, any
such requirement for additional trials would most likely result in our inability to sell Translarna in the United States for a significant
period of time, which would have a material adverse effect on our ability to generate revenue from the sales of Translarna for the
treatment of nmDMD.
Even if we do ultimately receive approval for Translarna in the United States, if such approval is via the accelerated approval
pathway, there is a risk that the FDA would not view our completed studies as satisfying the requirement for post-approval
confirmatory studies of the product’s clinical benefit. In such an instance, we would potentially need to invest substantial time,
effort, and funds into the conduct of such a post-approval study. Moreover, if Translarna is ultimately approved through the
accelerated approval pathway, we would be subject to additional regulatory requirements, such as the pre-submission of promotional
materials to FDA and potential restrictions, such as distribution restrictions, to assure the product’s safe use. Accelerated approval
would also subject us to the risk of expedited FDA withdrawal procedures if we do not conduct required post-approval studies,
such studies do not meet FDA’s standards, such studies do not confirm the product’s clinical benefit, or FDA finds that any post
market restrictions are inadequate to assure the safe use of the product, among other circumstances. Due to these and other
uncertainties, we are unable to estimate the timing or potential for a launch of Translarna for the treatment of nmDMD in the
United States or the cost or effort required to receive FDA approval for Translarna and meet FDA’s regulatory requirements both
before and after approval. Even if we receive approval for Translarna, there is no guarantee that we would be able to maintain
such approval.
The FDA has repeatedly disagreed with our interpretation of the study results for Translarna. In 2010, we filed a (cid:1)DA for ataluren
based on our Phase 2b clinical data, which the FDA refused to file. We filed a formal dispute resolution request concerning this
decision in 2011 and, in 2012, the FDA reaffirmed its previous decision to refuse to file the 2010 (cid:1)DA.
In October 2015, we announced that the primary efficacy endpoint in the ITT population did not achieve statistical significance
in ACT DMD. On the basis of our position that the totality of clinical data from ACT DMD and our prior Phase 2b trial support
the clinical benefit of Translarna for the treatment of nmDMD, in December 2015, we submitted our analyses of the ACT DMD
data and meta-analysis of the combined ACT DMD and Phase 2b subgroup data to the FDA, as part of our (cid:1)DA, after commencing
our submission on a rolling basis in December 2014.
On February 22, 2016, we received a Refuse to File letter from the FDA stating that our (cid:1)DA was not sufficiently complete to
permit a substantive review in particular because, in the view of the FDA, both the Phase 2b and Phase 3 ACT DMD trials were
negative and do not provide substantial evidence of effectiveness and that our (cid:1)DA does not contain adequate information regarding
the abuse potential of Translarna. Additionally, the FDA stated that we had proposed a post-hoc adjustment of ACT DMD that
eliminates data from a majority of enrolled patients. In addition, the FDA noted that our (cid:1)DA does not contain adequate information
regarding the abuse potential of Translarna. While other comments and requests were noted in the letter as items to be addressed
if the (cid:1)DA were to be resubmitted, the FDA specified that they were not related to its refusal to file our (cid:1)DA.
Following the refusal to file of our (cid:1)DA, we initiated dialogue with the FDA to discuss and clarify the matters set forth in the
letter and determine our best path forward. In accordance with the formal dispute resolution process that exists within the Center
for Drug Evaluation and Research of the FDA, we filed a formal appeal of the Refuse to File letter, which was denied in October
2016. In the first quarter of 2017, we filed our Translarna (cid:1)DA for nmDMD via the FDA’s file over protest regulations. We included
additional retrospective and post hoc analyses from our clinical trials with the (cid:1)DA filed in 2017, including analyses of the 6-
minute walk test using alternative statistical and analytical methods and new analyses from the (cid:1)orth Star Ambulatory Assessment
test, a functional scale designed for boys affected by DMD. Filing over protest is a procedural path permitted by FDA regulations
that allows a company to have its (cid:1)DA filed and reviewed when there is a disagreement with regulators over the acceptability of
the (cid:1)DA submission.
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In its 2016 Refuse to File letter and in its 2017 Complete Response Letter and its denial of our appeal to the Complete Response
Letter, the FDA referenced its prior refusal to file relative to the Phase 2b data and our early discussions with the FDA, reiterating
the views previously expressed.
If clinical trials of our products or our product candidates fail to demonstrate safety and efficacy to the satisfaction of the EMA,
the FDA or other regulators, or do not otherwise produce favorable results, we may experience delays in completing, or ultimately
be unable to complete, the development and commercialization of our products or product candidates.
In connection with seeking marketing authorization from regulatory authorities for the sale of any product candidate, we must
complete preclinical development and then conduct extensive clinical trials to demonstrate the safety and efficacy of our product
candidates in humans. Clinical and preclinical testing is expensive, difficult to design and implement, can take many years to
complete and is uncertain as to outcome. This is especially true for rare and/or complicated diseases. A failure of one or more
clinical or preclinical trials can occur at any stage of testing. Preclinical and clinical studies may reveal unfavorable product
candidate characteristics, including safety concerns, or may not demonstrate product candidate efficacy. In some instances, there
can be significant variability in safety or efficacy results between different clinical trials of the same product candidate due to
numerous factors, including changes in trial procedures set forth in protocols, differences in the size and type of the patient
populations, changes in and adherence to the clinical trial protocols and the rate of dropout among clinical trial participants. The
outcome of preclinical testing and early clinical trials may not be predictive of the success of later clinical trials, and interim results
of a clinical trial do not necessarily predict final results. Moreover, preclinical and clinical data are often susceptible to varying
interpretations and analyses, and many companies that have believed their product candidates performed satisfactorily in preclinical
studies and clinical trials have nonetheless failed to obtain marketing authorization of their products.
With respect to Translarna, the primary efficacy endpoint in the intent to treat, or ITT, population did not achieve statistical
significance in the Phase 2b (completed in 2009) or Phase 3 ACT DMD (completed in 2015) clinical trials of Translarna for the
treatment of nmDMD. For a review of recent developments that have had, and may continue to have, a material adverse effect on
our ability to commercialize Translarna for the treatment of nmDMD, please review the risk factor titled, “ACT DMD did not meet
its primary efficacy endpoint, and there is substantial risk that regulators will not agree with our interpretation of the results of
ACT DMD and the totality of clinical data from our trials in Translarna for the treatment of nmDMD, which would have a material
adverse effect on our business, financial performance and results of operations.”
If the FDA, the EMA and other regulators do not agree with our interpretation of the results of the clinical data from our trials,
and, when and if completed, Study 041 and related analyses, or otherwise do not view the results of these trials as favorable; if
we are required to conduct additional clinical trials or other testing of our products or product candidates that we develop beyond
those that we contemplate; if we are unable to successfully complete our clinical trials or other testing; if the results of these trials
or tests are not positive or are only modestly positive; or if there are safety concerns, we may, among other things:
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be unable to successfully maintain our marketing authorization in the EEA for Translarna for the treatment of nmDMD,
which is subject to annual review and renewal following reassessment of the benefit-risk balance of the authorization by
the EMA;
be unable to successfully maintain our marketing authorization in Brazil for Translarna for the treatment of nmDMD;
be delayed in or unable to obtain marketing approval in the United States for Translarna or any other product candidates,
including supplemental application approvals for any products that receive approval;
be delayed in obtaining additional marketing authorizations, or not obtain additional marketing authorizations at all, for
Translarna for the treatment of nmDMD;
be delayed in obtaining marketing authorizations, or not obtain marketing authorizations at all, for Translarna for other
indications, or for our other product candidates;
obtain approval for indications, uses or patient populations that are not as broad as intended or desired;
obtain approval with labeling that includes significant use or distribution restrictions or safety warnings, including boxed
warnings;
•
obtain approval with labeling that does not include claims that are necessary or desirable for the successful
commercialization of the product or product candidate;
•
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be subject to additional post-marketing requirements or restrictions, such as post-approval studies or REMS;
have the product removed from markets after obtaining applicable marketing authorizations; or
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not be permitted to sell Translarna under some or any reimbursed EAP programs.
If we or our collaborators experience any of a number of possible unforeseen events in connection with clinical trials related
to our products or our product candidates, maintenance of our existing marketing authorization for our products and any
additional potential marketing authorization or commercialization of our products or our product candidates could be delayed
or prevented.
We or our collaborators may experience numerous unforeseen events during, or as a result of, clinical trials that could delay or
prevent our ability to receive marketing authorization or commercialize our products or our product candidates, including:
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clinical trials of our products or our product candidates may produce negative or inconclusive results for the necessary
study endpoints, our studies may fail to reach the necessary level of statistical significance, and we may decide, or
regulators may require us, to conduct additional clinical trials or abandon product development programs;
there may be flaws in our clinical trials’ design that may not become apparent until the clinical trials are well advanced
or regulators may not agree with the design of our studies or our analysis of the resulting data;
the number of patients required for clinical trials of our product and product candidates may be larger than we anticipate,
enrollment in these clinical trials may be slower than we anticipate or participants may drop out of these clinical trials
or be lost to follow-up at a higher rate than we anticipate;
patients that enroll in our studies may misrepresent their eligibility or may otherwise not comply with the clinical trial
protocol, resulting in the need to drop the patients from the study, increase the needed enrollment size for the study or
extend the study’s duration;
• we may be unable to enroll a sufficient number of patients in our clinical trials to ensure adequate statistical power to
detect any statistically significant treatment effects;
• we may enroll patients at clinical trial sites in countries that are inexperienced with clinical trials in general, or with the
indication that is the subject of the trial;
• we may enroll patients at clinical trial sites in countries that have a different standard of care for patients in general, or
with respect to the indication that is the subject of the trial. Regulatory authorities, such as the FDA, may also not accept
data generated at international clinical trial sites;
•
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our third-party contractors may fail to comply with regulatory requirements or meet their contractual obligations to us
in a timely manner, or at all, or we may be required to engage in additional clinical trial site monitoring;
regulators, institutional review boards, institutional biosafety committees, or independent ethics committees may not
authorize us or our investigators to commence a clinical trial or conduct a clinical trial at a prospective trial site or may
require us to submit additional data, conduct additional studies or amend our investigational new drug application, or
I(cid:1)D, or comparable application or protocols prior to commencing a clinical trial;
• we may fail to reach an agreement with regulators, institutional review boards, institutional biosafety committees, or
independent ethics committees regarding the scope, design, or implementation of our clinical trials. For instance, the
FDA or comparable ex-U.S. regulatory authorities may require changes to our study design that make further study
impractical or not financially prudent;
• we may have delays in reaching or may fail to reach agreement on acceptable clinical trial contracts or clinical trial
protocols with prospective trial sites and contract research organizations;
• we may have delays in adding new investigators or clinical trial sites, or we may experience a withdrawal of clinical trial
sites;
• we may have to suspend or terminate clinical trials of our products or our product candidates for various reasons, including
a finding that the participants are being exposed to unacceptable health risks;
•
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regulators, institutional review boards, institutional biosafety committees, or independent ethics committees may require
that we or our investigators suspend or terminate clinical research for various reasons, including noncompliance with
regulatory requirements or a finding that the participants are being exposed to unacceptable health risks;
the cost of clinical trials of our products or our product candidates may be greater than we anticipate or we may have
insufficient funds for a clinical trial or to pay the substantial user fees required by the FDA upon the filing of a marketing
application;
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the supply or quality of our products or our product candidates or other materials necessary to conduct clinical trials of
our products or our product candidates may be insufficient or inadequate;
our products or our product candidates may have undesirable side effects or other unexpected characteristics, causing us
or our investigators, regulators, institutional review boards, institutional biosafety committees or independent ethics
committees to suspend or terminate the trials;
regulators may require us to perform additional or unanticipated clinical or preclinical trials, develop additional
manufacturing information, or make changes to our manufacturing process to obtain approval or we may be subject to
additional post-marketing testing, surveillance, or REMS requirements to maintain regulatory approval;
there may be changes in the applicable regulatory authorities’ approval policies or review, statutes, or regulations, which
may render our data insufficient to obtain marketing approval;
• we may decide that it is no longer in our business interest to continue a development program;
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there may be regulatory questions or disagreements regarding interpretations of data and results, or new information may
emerge regarding our product candidates;
the FDA or comparable ex-U.S. regulatory authorities may disagree with our study design, including endpoints, or our
interpretation of data from preclinical studies and clinical trials or find that a product candidate’s benefits do not outweigh
its safety risks;
the FDA or comparable regulatory authorities may disagree with our intended indications;
the FDA or comparable ex-U.S. regulatory authorities may fail to approve or subsequently find fault with the manufacturing
processes or our contract manufacturer’s manufacturing facility for clinical and future commercial supplies;
the data collected from clinical trials of our product candidates may not be sufficient to the satisfaction of the FDA or
comparable ex-U.S. regulatory authorities to support the submission of a marketing application, or other comparable
submission in ex-U.S. jurisdictions or to obtain regulatory approval in the United States or elsewhere;
the FDA or comparable regulatory authorities may take longer than we anticipate to make a decision on our product
candidates; or
• we may not be able to demonstrate that a product candidate provides an advantage over current standards of care or
current or future competitive therapies in development.
For example, the Phase 2 Moonfish study, which was evaluating the safety and efficacy of RG7800 under our SMA collaboration,
was terminated in December 2016 following a suspension and clinical hold in the first half of 2015 to investigate an eye finding
in a 39-week study in cynomolgus monkeys. The suspension and termination of Moonfish resulted in unanticipated delays in the
advancement of the SMA program.
Our product development costs will increase if we experience delays in testing or marketing authorizations, and we may not have
sufficient funding to complete the testing and approval process for any of our product candidates. We may be required to obtain
additional funds to complete clinical trials and prepare for possible commercialization of our products and product candidates.
We do not know whether any preclinical tests or clinical trials will begin as planned, will need to be restructured or will be completed
on schedule, or at all. Significant preclinical or clinical trial delays also could shorten any periods during which we may have the
exclusive right to commercialize our products or our product candidates and allow our competitors to bring products to market
before we do, or impair our ability to successfully commercialize our products or our product candidates, and so may harm our
business, results of operations and financial condition.
Our conclusions regarding the activity and potential efficacy of Translarna in nmDMD are primarily based on retrospective,
subgroup and meta-analyses of the results of our Phase 2b and ACT DMD clinical trials of Translarna for the treatment of
nmDMD. Other than with respect to certain of our meta-analyses, results of our analyses are expressed as nominal p-values,
which are generally considered less reliable indicators of efficacy than adjusted p-values. In addition, retrospective analyses
are generally considered less reliable than pre-specified analyses.
After determining that we did not achieve the primary efficacy endpoint with the pre-specified level of statistical significance in
our completed ACT DMD and Phase 2b clinical trials of Translarna for the treatment of nmDMD, we performed subgroup,
retrospective, and meta-analyses. We submitted these analyses to the FDA as part of our (cid:1)DA, taking the position that the totality
of clinical data from these trials support the clinical benefit of Translarna for the treatment of nmDMD. In addition, after determining
that the primary efficacy endpoint did not achieve statistical significance in ACT DMD or our Phase 2b clinical trial of Translarna
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for the treatment of nmDMD, we performed retrospective and subgroup analyses that we believe provide sufficient support for
concluding that Translarna was active and showed clinically meaningful improvements over placebo in these trials.
We believe that our reliance upon the additional analyses of the results of these trials was warranted, but the FDA typically does
not find a retrospective analysis performed after unblinding trial results to be persuasive because it can result in the introduction
of bias if the analysis is inappropriately tailored or influenced by knowledge of the data and actual results.
Some of our favorable statistical data from these trials also are based on nominal p-values that reflect only one particular comparison
when more than one comparison is possible. Typically, a trial result is interpreted as being statistically significant if the chance of
the same result occurring with the placebo is less than one in 20, resulting in a p-value of less than 0.05. (cid:1)ominal p-values cannot
be compared to the typical significance level (p-value less than 0.05) to determine statistical significance without adjusting for
the testing of multiple dose groups, end points or analyses of subgroups. Because of these limitations, regulatory authorities
typically give greater weight to results from pre-specified analyses and adjusted p-values and less weight to results from post-hoc,
retrospective analyses and nominal p-values. A p-value is considered nominal if it is the result of one particular comparison prior
to any pre-specified multiplicity adjustment, such as when two active treatments are compared to placebo or when two or more
subgroups are analyzed. For example, the p-values in ACT DMD for change from baseline at week 48 in the 6-minute walk test,
or 6MWT (which we also refer to as 6-minute walk distance, or 6MWD) and each secondary end point timed function test in the
pre-specified subgroup of patients with a baseline 300-400 meter 6MWD had p-values of less than 0.05. The FDA considered
these p-values to be nominal because of the sequential testing method we used.
On February 22, 2016, we received a Refuse to File, or RTF, letter from the FDA stating the FDA’s opinion that both the Phase
2b and Phase 3 ACT DMD trials were negative and did not provide substantial evidence of effectiveness and that our (cid:1)DA did
not contain adequate information regarding the abuse potential of Translarna. Additionally, the FDA stated that we had proposed
a post-hoc adjustment of ACT DMD that eliminates data from a majority of enrolled patients. Our reliance on nominal p-values
for some of our statistical data and our use of retrospective analyses had a negative impact on the FDA’s interpretation of the results
of our Phase 2b trial, ACT DMD and the totality of the data from our clinical trials. The FDA reiterated this view in the Complete
Response Letter that it sent to us in October 2017 and its denial of our appeal of that letter.
Our reliance on nominal p-values for some of our statistical data and our use of retrospective analyses has also had a negative
impact on the EMA’s evaluation of a prior application for continued marketing authorization for Translarna for the treatment of
nmDMD, including delays in timing of the CHMP’s opinion with respect to the annual renewal of our marketing authorization,
and could negatively impact regulatory determinations by regulators in other territories with respect to new or existing
authorizations.
An unfavorable view of our data and analyses by the FDA and EMA for Translarna has and could continue to negatively impact
our ability to obtain or maintain authorizations to market Translarna for the treatment of nmDMD. An inability to obtain new
marketing authorizations or maintain our current marketing authorization in the EEA would have a material adverse effect on our
revenue from Translarna and would materially harm our business, financial results and results of operations.
Because we are developing products and product candidates for the treatment of diseases in which there is little clinical
experience and, in some cases, using new endpoints or methodologies, there is increased risk that the outcome of our clinical
trials will not be favorable.
There are no marketed therapies approved to treat the underlying cause of nmDMD. In addition, there has been limited historical
clinical trial experience generally for the development of drugs to treat nmDMD and other diseases that we are studying or have
studied. As a result, the design and conduct of clinical trials for these diseases, particularly for drugs to address the underlying
nonsense mutations causing these diseases in some subsets of patients, is subject to increased risk.
For example, on March 2, 2017, we announced that the primary and secondary endpoints were not achieved in ACT CF, our Phase
3 clinical trial for Translarna in nmCF. As a result, we discontinued our clinical development of Translarna for nmCF at that time.
Prior to the Phase 2b clinical trial of Translarna for nmDMD, there was no precedent of an established trial design to evaluate the
efficacy of Translarna in nmDMD over a 48 week duration. In addition, clinical understanding of the methodologies used to analyze
the resulting data were also limited. The study design and enrollment criteria for ACT DMD were based on available natural history
data of the disease, including third-party data and results from our Phase 2b clinical trial. An evolving understanding in the DMD
community has led to a greater appreciation of the optimal window for the 6MWT in assessing physical function. We believe that
this factor may have led to the primary efficacy endpoint in the intent to treat population not achieving statistical significance in
ACT DMD.
We are faced with similar challenges in connection with the design of our studies of Translarna in nonsense mutation aniridia, and
nonsense mutation Dravet syndrome/CDKL5 and of Emflaza in limb-girdle 2I, and such similar challenges existed in our study
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of nmMPS I, which study we terminated in 2017, because there is also limited historical clinical trial experience for the development
of drugs to treat the underlying cause of these disorders.
If we experience delays or difficulties in the enrollment of patients in our clinical trials, our receipt of necessary regulatory
approvals could be delayed or prevented.
We may not be able to initiate or continue clinical trials for our product candidates, including clinical trials related to our gene
therapy, splicing, Bio-e and oncology programs as well as studies in our products for maintaining authorizations, including Study
041, label extensions and additional indications.
Each of the indications we are currently pursuing for our products and product candidates are characterized by relatively small
patient populations, which could result in slow enrollment of clinical trial participants. The feasibility of patient enrollment was
a critical factor discussed with the EMA in connection with the specific obligation to conduct Study 041, in particular due to factors
that increase the challenges of enrollment, such as the small nmDMD patient population, the patient eligibility criteria for the
mITT for Study 041, and the fact that Translarna is available to patients in the EEA and other limited territories pursuant to
commercial and EAP programs.
In addition, our competitors have ongoing clinical trials for product candidates that could be competitive with our product candidates.
As a result, potential clinical trial sites may elect to dedicate their limited resources to participation in our competitors’ clinical
trials and not ours, and patients who would otherwise be eligible for our clinical trials may instead enroll in clinical trials of our
competitors’ product candidates.
Patient enrollment is affected by other factors including:
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severity of the disease under investigation;
eligibility criteria for the study in question;
perceived benefits and risks of the product candidate under study;
efforts to facilitate timely enrollment in clinical trials;
patient referral practices of physicians;
the ability to monitor patients adequately during and after treatment; and
proximity and availability of clinical trial sites for prospective patients.
Enrollment delays in our clinical trials may result in increased development costs for our product candidates. Our inability to
enroll, timely or at all, a sufficient number of patients in our clinical trials for our gene therapy, splicing, Bio-e and oncology
programs as well as studies in our products for maintaining authorizations, including Study 041, label extensions and additional
indications, or any of our, or our collaboration partners’, other clinical trials would result in significant delays or may require us
to abandon one or more clinical trials altogether. As the conduct of Study 041 is a specific obligation to our marketing authorization
in the EEA for Translarna for the treatment of nmDMD, any such delay or inability to enroll sufficient patients could have a material
adverse effect on our ability to maintain our authorization in the EEA and, failure to maintain such authorization would have a
material adverse effect on our business, results of operations and financial performance. We previously experienced delays in
enrolling patients in certain countries for Study 041 and asked the EMA to extend the timeframe for submission of the results of
Study 041 by one year. Although the EMA granted our extension request, we cannot be sure that they will grant any further
extensions to our submission if we encounter additional delays.
For example, we amended the study design for our proof-of-concept study for Translarna for the treatment of nmMPS I to include
patients currently on enzyme replacement therapy, which contributed to delays in site initiation and patient accrual. Despite the
protocol amendment, we continued to encounter difficulties identifying qualified patients for this study and stopped the study due
to the lack of patients.
If serious adverse side effects are identified during the development or further development of any product candidate or for
any product for which we have or may obtain marketing approval, including Translarna and Emflaza, we may need to abandon
or limit our development and/or marketing of that product or product candidate.
Our products and product candidates are in clinical or preclinical development, or further development, and their risk of failure
is high. It is impossible to predict when or if any of our product candidates will prove effective or safe in humans or will receive
regulatory approval. If our products or our product candidates are associated with undesirable side effects or have characteristics
that are unexpected, regulatory authorities, institutional review boards, institutional biosafety committees, or independent ethics
committees may place our studies on clinical hold, withdraw or suspend study approvals, or require that we modify our protocols.
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We may also need to abandon their development or limit development to certain uses or subpopulations in which the undesirable
side effects or other characteristics are less prevalent, less severe or more acceptable from a benefit-risk perspective. Adverse
events or side effects may also result in regulatory authorities denying approval of any applications we may submit for marketing
approval, limitations on the indicated use of a product, the inclusion of warnings, contraindications, or precautions on the label of
any approved products, or significant conditions imposed on any approval, including the requirement of a REMS, costly post-
marketing studies or clinical trials and surveillance to monitor the safety of the product. Many compounds that initially showed
promise in clinical or earlier stage testing have later been found to cause side effects that prevented further development of the
compound.
For example, although we did not observe a pattern of liver enzyme elevations in our Phase 2 or Phase 3 clinical trials of Translarna,
we did observe modest elevations of liver enzymes in some subjects in one of our Phase 1 clinical trials. These elevated enzyme
levels did not require cessation of Translarna administration, and enzyme levels typically normalized after completion of the
treatment phase. We did not observe any increases in bilirubin, which can be associated with serious harm to the liver, in the Phase
1 clinical trial.
In addition, in Study 009, our first Phase 3 clinical trial of Translarna for the treatment of nmCF, five adverse events in the Translarna
arm of the trial that involved the renal system led to discontinuation. As compared to the placebo group, the Translarna treatment
arm also had a higher incidence of adverse events of creatinine elevations, which can be an indication of impaired kidney function.
In the Translarna treatment arm, more severe clinically meaningful creatinine elevations were reported in conjunction with cystic
fibrosis pulmonary exacerbations. These creatinine elevations were associated with concomitant treatment with antibiotics
associated with impaired kidney functions, such as aminoglycosides or vancomycin. This led to the subsequent prohibition of
concomitant use of Translarna and these antibiotics, which was successful in addressing this issue in the clinical trial.
In addition, we are obligated to perform certain FDA post-marketing requirements in connection with our marketing authorization
of Emflaza in the United States, including pre-clinical and clinical safety studies. If we or others identify previously unknown side
effects, whether pursuant to these post-marketing requirements, or otherwise, and in particular if such side-effects are severe, or
if known side effects are more frequent or severe than in the past then our marketing authorization for Emflaza may be restricted
or withdrawn, changes may be required to the product's label, sales may be adversely impacted, we may be required to undertake
additional studies or trials, and government investigations or litigation, including product liability claims, may be brought against
us. Additionally, if the safety warnings in our product labels are not followed, adverse medical situations in patients may arise,
resulting in negative publicity and potential lawsuits, even if our products worked as we described. Any of these occurrences would
limit or prevent us from commercializing our products, which would have a material adverse effect on our business, financial
results and operations.
Our product candidates, including our gene therapy product candidates, may be subject to marketing and distribution restrictions
that could limit our ability to successfully market and distribute those products, and limit the ability of physicians to prescribe
and administer such products.
Our product candidates, including our gene therapy product candidates, if approved, may be subject to restrictions on product
labeling, marketing, distribution, prescribing, and use, which could increase our cost to commercialize such products and decrease
our ability to generate product revenue. One such restriction may be risk evaluation and mitigation strategies, or REMS. A REMS
may be required to include various elements, such as a medication guide or patient package insert, a communication plan to educate
health care providers of the product’s risks, limitations on who may prescribe or dispense the product, or other measures that the
FDA deems necessary to assure the safe use of the product. Several gene therapy products that have been approved by FDA have
required substantial REMS. For example, Yescarta, which is a cell-based gene therapy approved by FDA in 2017 for adult patients
with certain types of large B-cell lymphoma who have not responded to or who have relapsed after at least two other kinds of
treatment, is subject to a substantial REMS program. The Yescarta REMS includes requirements for dispensing hospital and clinic
certification, training, adverse event reporting, documentation, and audits and monitoring conducted by the sponsor, among other
conditions. Similarly, also in 2017, the FDA approved Kymriah, a cell-based gene therapy for the treatment of patients up to 25
years of age with B-cell precursor ALL that is refractory or in second or later relapse. This indication was expanded in 2018 to
include adult patients with relapsed or refractory (r/r) large B-cell lymphoma after two or more lines of systemic therapy including
diffuse large B-cell lymphoma (DLBCL) not otherwise specified, high grade B-cell lymphoma and DLBCL arising from follicular
lymphoma. Like Yescarta, Kymriah was approved with a REMS that includes requirements for hospital and clinic certification,
training, adverse event reporting, documentation, and audits and monitoring conducted by the sponsor, among other conditions.
The Yescarta and Kymriah sponsors are responsible for implementing the REMS. REMS, such as these, can be expensive and
burdensome to implement, and burdensome for hospitals, clinics, and health care providers to comply with. Accordingly, should
any of our product candidates be subject to a REMS, it may materially harm our business.
Any of our products or any other product candidate that receives marketing authorization, if any, may fail to achieve the degree
of market acceptance by physicians, patients, third-party payors and others in the medical community necessary for commercial
success.
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Although Translarna is currently authorized by the EMA for marketing for the treatment of nmDMD, such marketing authorization
is subject to the specific obligation to conduct and submit the results of Study 041 to the EMA and is also subject to annual review
and renewal by the European Commission following reassessment of the benefit-risk balance of the authorization by the EMA.
Even if our marketing authorization in the EEA for Translarna for the treatment of nmDMD is maintained, or we are successful
in obtaining marketing authorization for Translarna for other indications or territories, such product may nonetheless fail to gain
sufficient market acceptance by physicians, patients, third-party payors and others in the medical community. In addition, Emflaza
for the treatment of DMD in the United States or any of our other products or product candidates that receive marketing authorization,
may fail to gain sufficient market acceptance by physicians, patients, third-party payors and others in the medical community.
Third-party payors may require prior authorizations or failure on another type of treatment before covering a particular drug,
particularly with respect to higher-priced drugs. Decreases in third-party reimbursement for a product or a decision by a third-
party payor to not cover a product could reduce physician usage of the product, including Emflaza or Translarna. If these products
do not achieve an adequate level of acceptance, we may not generate significant product revenues or any profits from operations.
The degree of market acceptance of our products or product candidates, if approved for commercial sale, will depend on a number
of factors, including:
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the efficacy and potential advantages compared to alternative treatments;
the prevalence and severity of any side effects;
the limitations or warnings contained in the product’s FDA-approved labeling
the claims we may make for a product, based on the approved label;
distribution and use restrictions imposed by the FDA with respect to such product candidates or to which we agree as
part of a REMS or voluntary risk management plan
the ability to offer our products or product candidates for sale at competitive prices;
convenience and ease of administration compared to alternative treatments;
the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies;
the strength of marketing and distribution support;
sufficient third-party coverage or reimbursement;
adverse publicity about our products or product candidates or favorable publicity about competitive products or product
candidates; and
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any restrictions on concomitant use of other medications.
In addition, because we are developing Translarna for the treatment of different indications, negative results in a clinical trial
evaluating the efficacy of Translarna for one indication, such as the results from our ACT CF trial for nmCF, could have a negative
impact on the perception of the efficacy of Translarna in a different indication, which could have an adverse effect on our
commercialization efforts and financial results.
Our ability to negotiate, secure and maintain third-party coverage and reimbursement may be affected by political, economic and
regulatory developments in the United States, the EU, Latin America and other jurisdictions. Governments continue to impose
cost containment measures, and third-party payors are increasingly challenging prices charged for medicines and examining their
cost effectiveness, in addition to their safety and efficacy. These and other similar developments could significantly limit the degree
of market acceptance of our products or any of our other product candidates that receive marketing authorization.
If we are unable to establish or maintain sales, marketing and distribution capabilities or enter into agreements with third
parties to market, sell and distribute our products or product candidates, we may not be successful in our continuing efforts to
commercialize our products or any other product candidate if and when they are approved.
Our ongoing commercial strategy for our products and any other product candidate that may receive marketing authorization
involves the development of a commercial infrastructure that spans multiple jurisdictions and is heavily dependent upon our ability
to continue to build an infrastructure that is capable of implementing our global commercial strategy. The establishment and
development of our commercial infrastructure will continue to be expensive and time consuming, and we may not be able to
develop our commercial organizations in all intended territories, including in the United States, in a timely manner or at all. Doing
so will require a high degree of coordination and compliance with laws and regulations in numerous territories, including in the
United States, each state, and other countries in which we do business, including restrictions on advertising practices, enforcement
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of intellectual property rights, restrictions on pricing or discounts, transparency laws and regulations, and unexpected changes in
regulatory requirements and tariffs. If we are unable to effectively coordinate such activities or comply with such laws and
regulations, our ability to commercialize our products or any other product candidates that may receive marketing authorization
in the United States, the EEA, Latin America and other jurisdictions will be adversely affected. If we are unable to establish and
maintain adequate sales, marketing and distribution capabilities, whether independently or with third parties, we may not be able
to generate product revenue consistent with our expectations and may not become profitable.
There are risks involved with establishing our own sales and marketing capabilities and entering into arrangements with third
parties to perform these services. For example, recruiting and training an internal commercial team is expensive and time consuming
and could delay commercialization efforts. If a commercial launch for any product or product candidate for which we recruit a
commercial team and establish marketing capabilities is delayed or does not occur for any reason, we would have prematurely or
unnecessarily incurred these commercialization expenses. This may be costly, and our investment would be lost if we cannot retain
or reposition such personnel.
The arrangements that we have entered into, or may enter into, with third parties to perform sales and marketing services will
generate lower product revenues or profitability of product revenues to us than if we were to market and sell any products that we
develop ourselves. In addition, we may not be successful in entering into arrangements with third parties to sell and market our
product candidates or may be unable to do so on terms that are favorable to us. We have little control over such third parties, and
any of them may fail to devote the necessary resources and attention to sell and market our products effectively.
If we do not establish sales and marketing capabilities successfully, either on our own or in collaboration with third parties, we
will not be successful in commercializing our products or product candidates.
Factors that may materially affect our efforts to commercialize our products include:
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our ability to recruit, train and retain adequate numbers of effective sales and marketing personnel;
our ability to monitor the legal and regulatory compliance of sales and marketing personnel;
an inability to secure adequate coverage and reimbursement by government and private health plans;
reduced realization on government sales from mandatory discounts, rebates and fees, and from price concessions to
private health plans and pharmacy benefit managers necessitated by competition for access to managed formularies;
the clinical indications for which the products are approved and the claims that we may make for the products;
limitations or warnings, including distribution or use restrictions, contained in the products’ approved labeling;
any distribution and use restrictions imposed by the FDA or to which we agree as part of a mandatory REMS or voluntary
risk management plan;
liability for sales or marketing personnel who fail to comply with the applicable legal and regulatory requirements;
our ability to implement third-party marketing and distribution relationships on favorable terms, or at all, in territories
where we do not pursue direct commercialization;
the ability of our commercial team to obtain access to or persuade adequate numbers of physicians to prescribe our
current or any future products;
the lack of complementary products to be offered by our commercial team, which may put us at a competitive
disadvantage relative to companies with more extensive product lines; and
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unforeseen costs and expenses associated with creating an independent commercial organization.
Any of these factors, individually or as a group, if not resolved in a favorable manner may have a material adverse effect on our
business and results of operations. Similar risks apply in those territories where Translarna is available on a reimbursed basis under
an EAP program.
A substantial portion of our commercial sales currently occurs in territories outside of the United States which subjects us to
additional business risks that could adversely affect our revenue and results of operations.
We commercialize Translarna, Tegsedi and Waylivra outside of the United States. We have operations in multiple European
countries, Latin America and other territories. We expect that we will continue to expand our international operations in the future,
including in emerging growth markets, pending successful completion of the applicable regulatory processes. International
operations inherently subject us to a number of risks and uncertainties, including:
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political, regulatory, compliance and economic developments that could restrict our ability to manufacture, market and
sell our products;
financial risks such as longer payment cycles, difficulty collecting accounts receivable and exposure to fluctuations in
foreign currency exchange rates;
difficulty in staffing and managing international operations;
potentially negative consequences from changes in or interpretations of tax laws;
changes in international medical reimbursement policies and programs;
unexpected changes in health care policies of ex-U.S. jurisdictions;
trade protection measures, including import or export licensing requirements and tariffs;
our ability to develop relationships with qualified local distributors and trading companies;
political and economic instability in particular ex-U.S. economies and markets, in particular in emerging markets, for
example in Brazil;
diminished protection of intellectual property in some countries outside of the United States;
differing labor regulations and business practices; and
regulatory and compliance risks that relate to maintaining accurate information and control over sales and distributors’
and service providers’ activities that may fall within the purview of the Foreign Corrupt Practices Act, UK Bribery Act
or similar local regulation.
For example, we face risks arising out of the potential uncertainty caused by United Kingdom’s exit from the EU on January 31,
2020, commonly referred to as Brexit. The United Kingdom’s exit from the EU is to be followed by an 11-month transition period
to allow the United Kingdom and the EU to finalize new trade, security, data, fishing and transport policies to shape their new
relationship. Uncertainty over the terms of the United Kingdom’s withdrawal from the EU could adversely affect European or
worldwide political, regulatory, economic or market conditions and could contribute to instability in global political institutions,
regulatory agencies and financial markets. Currency exchange rates in the pound sterling and the euro with respect to each other
and the U.S. dollar have already been adversely affected by Brexit and, in the event that such ex-U.S. exchange volatility were to
continue, it could cause volatility in our financial results. In addition, if the United Kingdom were to significantly alter its regulations
affecting the pharmaceutical industry, we could face significant new regulatory costs and challenges.
In addition, some countries in which a product candidate is not approved allow patients access to the product candidate through
other legal mechanisms, including court intervention or EAP programs, if the product is approved in another jurisdiction. The
price that is ultimately approved by governmental authorities in any country pursuant to commercial pricing and reimbursement
processes may be significantly lower than the price we are able to charge for sales under such legal mechanisms and we may
become obligated to repay such excess amount. For additional information, see also “Risks Related to the Regulation of our
Products and our Product Candidates”-“Commercialization of Translarna has been in, and is expected to continue to take place
in, countries that tend to impose strict price controls, which may adversely affect our revenues. Failure to obtain and maintain
acceptable pricing and reimbursement terms for Translarna for the treatment of nmDMD in the EEA and other countries where
Translarna is available would delay or prevent us from marketing our product in such regions, which would adversely affect our
anticipated revenue, growth and business.”
Additionally, some of the countries in which our products are available for sale are in emerging markets. Some countries within
emerging markets, including those in Latin America, may be especially vulnerable to periods of global or regional financial
instability or may have very limited resources to spend on. We also may be required to increase our reliance on third-party agents
within less developed markets. In addition, many emerging market countries have currencies that fluctuate substantially and if
such currencies devalue and we cannot offset the devaluations, our financial performance within such countries could be adversely
affected.
In addition, in some countries, including those in Latin America, orders for named patient sales may be for multiple months of
therapy, which can lead to an unevenness in orders which could result in significant fluctuations in quarterly net product sales.
Other factors may also contribute to fluctuations in quarterly net product sales including a product’s availability in any particular
territory, government actions, economic pressures, political unrest and other factors. (cid:1)et product sales are impacted by factors,
such as the timing of decisions by regulatory authorities, in particular the FDA and the EMA with respect to our ability to market
or sell Translarna for the treatment of nmDMD, and our ability to successfully negotiate favorable pricing and reimbursement
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processes on a timely basis in the countries in which we have or may obtain regulatory approval, including the United States, EEA
and other territories.
Any of these factors may, individually or as a group, have a material adverse effect on our business and results of operations.
As we continue to expand our existing international operations, we may encounter new risks.
We face substantial competition, which may result in others discovering, developing or commercializing products before or
more successfully than we do.
The development and commercialization of new drug products is highly competitive. We face competition with respect to our
current products and product candidates and any products we may seek to develop or commercialize in the future from major
pharmaceutical companies, specialty pharmaceutical companies, and biotechnology companies worldwide. Other gene therapy
companies may in the future decide to utilize existing technologies to address unmet needs that could potentially compete with
our product candidates.
There is currently no marketed therapy, other than Translarna in the EEA, which has received approval for the treatment of the
underlying cause of nmDMD. Sarepta recently received approval in the United States for two treatments (Exondys 51 (eteplirsen)
and Vyondys 53 (golodirsen) addressing the underlying cause of disease for different mutations in the DMD gene. Other
biopharmaceutical companies are developing treatments for the underlying cause of disease for different mutations in the DMD
gene, Sarepta (Casimersen (SRP-4045)), Daiichi Sankyo (DS-5141), (cid:1)ippon Shinyaku (Viltolarsen ((cid:1)S-065/(cid:1)C(cid:1)P-01) and
(cid:1)S-089/(cid:1)C(cid:1)P-02), and Astellas (AT-702). Other pharmaceutical companies are developing micro dystrophin gene therapies for
patients with DMD regardless of genotype, including Sarepta (SRP-9001), Pfizer (PF-06939926) and Solid Biosciences (SGT-001).
Diacomit (stiripentol) is marketed in the EU by Laboratoires Biocodex for the treatment of Dravet syndrome. In the United States,
GW Pharmaceuticals (EPIDIOLEX (cannabidiol)) is marketing products for the treatment of Dravet syndrome in the United States
and Zogenix (FI(cid:1)REPLA (ZX008, fenfluramine)) has a product candidate that has received a PDUFA date from FDA for March
2020. Aniridia therapeutic interventions, such as artificial iris implantation, are being developed by HumanOptics AG.
Our SMA collaboration with Roche and the SMA Foundation also faces competition. For example, in December 2016, the FDA
approved Spinraza (nusinersen), a drug developed by Ionis and marketed by Biogen, to treat SMA. In May 2019, the FDA approved
Zolgensma (onasemnogene abeparvovec), a gene therapy drug developed by AveXis, Inc. (acquired by (cid:1)ovartis in 2018) for the
treatment of SMA in patients under 2 years of age. The drug is currently undergoing regulatory review in Europe and Japan with
decisions expected in the first half of 2020. Other companies are also pursuing product candidates for the treatment of SMA,
including Kowa (sodrium valproate), Catalyst Pharmaceuticals (amifampridine), Scholar Rock (SRK-015) and Cytokinetics
(reldesemtiv).
Although the FDA has not approved a corticosteroid specifically for DMD in the United States other than Emflaza, we face
competition in the U.S. DMD market from prednisone/prednisolone, which, while not approved for DMD in the United States, is
generically available and has been prescribed off label for DMD patients. ReveraGen BioPharma is developing a glucocorticoid
antagonist (vamorolone) for DMD patients with anticipated (cid:1)DA filing in 2021.
Currently, no treatment options are available for the underlying cause of AADC deficiency, and care is limited to palliative options
with significant burden on caregivers. Additionally, we are not aware of any late-stage development product candidates for AADC
deficiency.
While there is currently no treatment options available for Friedrich ataxia, Voyager Therapeutics, Pfizer, (cid:1)ovartis, Stride Bio in
collaboration with Takeda, AavantiBio, and Fulcrom Therapeutics are also working on pre-clinical studies for a potential gene
therapy solution. Other drugs are being investigated for the treatment of Friedrich ataxia, including omaveloxolone which is being
developed by Reata Pharmaceuticals. Other gene therapy companies may in the future decide to utilize existing technologies to
address unmet needs that could potentially compete with our product candidates.
There are several pharmaceutical and biotechnology companies engaged in the development or commercialization of products
against targets that are also targets of Tegsedi and Waylivra. For example, if approved, Waylivra could face competition from drugs
like metreleptin. Metreleptin, produced by (cid:1)ovelion Therapeutics, Inc., is currently approved for use in generalized lipodystrophy
patients. Additionally, Tegsedi faces competition from drugs like Onpattro (patisiran), which was launched by Alnylam in the
United States in September 2018 and is under regulatory review in Brazil with a mid-2020 decision expected. Vyndaqel (tafamidis
meglumine) and Vyndamax (tafamidis) are commercialized in the United States, EU and some other countries in LATAM by
Pfizer. Other companies are also pursing product candidates for the treatment of ATTR Amyloidosis with polyneuropathy including
Alnylam (vutrisiran), Eidos Therapeutics (AG-10), Proclara Biosciences ((cid:1)PT-189), Prothena (PRK-004) and SOM Biotech
(tolcapone).
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Further, Tegsedi and Waylivra are delivered by injection, which may render them less attractive to patients than non-injectable
products offered by our current or future competitors. If Tegsedi or Waylivra cannot compete effectively with these and other
products with common or similar indications, we may not be able to generate substantial revenue from our product sales.
Our competitors may develop products that are more effective, safer, more convenient or less costly than any that we are marketing
or developing or that would render our products or product candidates obsolete or non-competitive. Our competitors may also
obtain marketing authorization for their products more rapidly than we may obtain approval for our products and product candidates,
which could result in our competitors establishing a strong market position before we are able to enter the market.
We believe that many competitors are attempting to develop therapeutics for the target indications of our products and product
candidates, including academic institutions, government agencies, public and private research organizations, large pharmaceutical
companies and smaller more focused companies.
Many of our competitors may have significantly greater financial resources and expertise in research and development,
manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approved products than
we do. Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being
concentrated among a smaller number of our competitors. Smaller and other early stage companies may also prove to be significant
competitors, particularly through collaborative arrangements with large and established companies. These third parties compete
with us in recruiting and retaining qualified scientific and management personnel, establishing clinical trial sites and patient
registration for clinical trials, as well as in acquiring technologies complementary to or necessary for our programs.
Our products or product candidates may become subject to unfavorable pricing regulations, third-party reimbursement practices
or healthcare reform initiatives, which would harm our business.
We may not obtain adequate coverage or reimbursement for our products or we may be required to sell our products at an
unsatisfactory price. In addition, obtaining pricing, coverage and reimbursement approvals can be a time consuming and expensive
process. Our business would be materially adversely affected if we do not receive these approvals on a timely basis.
The regulations and practices that govern marketing authorizations, pricing, coverage and reimbursement for new drug products
vary widely from country to country. Current and future legislation may significantly change the approval requirements in ways
that could involve additional costs and cause delays in obtaining approvals. Some countries, including almost all of the member
states of the EEA, require approval of the sale (list) price of a drug before it can be marketed. In many countries, the pricing review
period begins after marketing or product licensing approval is granted. In some ex-U.S. markets, including the European market,
prescription pharmaceutical pricing remains subject to continuing governmental control even after initial approval is granted. As
a result, we might obtain marketing authorization for a product in a particular country, but then be subject to price regulations, in
some countries at national as well as regional levels, that delay our commercial launch of the product, possibly for lengthy time
periods, and negatively impact the revenues we are able to generate from the sale of the product in that country. Adverse pricing
limitations may hinder our ability to recoup our investment in one or more products, including Emflaza and Translarna or other
product candidates, even following marketing authorization.
Our ability to successfully commercialize our products or product candidates that may receive marketing authorization will depend
in large part on the extent to which coverage and reimbursement for these products and related treatments will be available from
government health administration authorities, private health insurers, managed health care organizations and other third-party
payors and organizations. Government authorities and other third-party payors, such as private health insurers and managed health
care organizations, decide which medications they will pay for and establish reimbursement conditions and rates. A primary trend
in the EU and U.S. healthcare industries and elsewhere is cost containment. Government authorities, including the United States
government and state legislatures, and other third-party payors have attempted to control costs by limiting coverage and the amount
of reimbursement for particular medications. Prices at which our products are reimbursed can be subject to challenge, reduction
or denial by the government and other payers. Increasingly, third-party payors are requiring that drug companies provide them
with discounts off the products’ sale (list) prices and are challenging the prices manufacturers charge for medical products. We
cannot be sure that coverage will be available for any product or product candidate that we may commercialize and, if coverage
is available, the level of reimbursement is also uncertain.
Reimbursement levels may impact the demand for, or the price of, any product or product candidate for which we obtain marketing
authorization. Obtaining reimbursement for Emflaza and for Translarna has been and is expected to continue to be, particularly
difficult due to price considerations typically associated with drugs that are developed to treat conditions that affect a small
population of patients. In addition, third-party payors are likely to impose strict requirements for reimbursement of a higher priced
drug, such as prior authorization and the requirement to try other therapies first, or high co-payments which can result in patient
rejection. Decreases in third-party reimbursement for a product or a decision by a third-party payor to not cover a product could
reduce physician usage of the product, including Emflaza or Translarna. If reimbursement is not available or is available only on
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a limited basis, we may not be able to successfully commercialize any product or product candidate for which we have obtained
or may obtain marketing authorization, including Emflaza or Translarna.
There may be significant delays in obtaining coverage for newly approved drugs, and coverage may be more limited than the
drug’s approved indications as determined by the applicable regulatory authority. Moreover, eligibility for reimbursement does
not imply that any drug will be paid for in all cases or at a rate that covers our costs, including research, development, manufacture,
sale and distribution. Interim reimbursement levels for new drugs, if applicable, may also not be sufficient to cover our costs and
may not be made permanent, and programs intended to provide patient assistance until coverage is established can be very costly.
Reimbursement rates may vary according to the use of the drug and the clinical setting in which it is used, may be based on
reimbursement levels already set for lower cost drugs, and may be incorporated into existing payments for other services. Further,
coverage policies and third-party reimbursement rates may change at any time. Even if favorable coverage and reimbursement
status is attained for one or more products for which we receive regulatory approval, less favorable coverage policies and
reimbursement rates may be implemented in the future.
(cid:1)et prices for drugs may be reduced by mandatory discounts or rebates required by government healthcare programs or private
payors and by any future relaxation of laws, enforcement policies or administrative determinations that presently restrict the
importation of drugs into the United States from other countries where they may be sold at lower prices.
In the United States, third-party payors include federal health care programs, such as Medicare, Medicaid, TRICARE, and Veterans
Health Administration programs; managed care providers, private health insurers and other organizations. Several of the U.S.
federal health care programs require that drug manufacturers extend discounts or pay rebates to certain programs in order for their
products to be covered and reimbursed. For example, the Medicaid Drug Rebate Program requires pharmaceutical manufacturers
of covered outpatient drugs to enter into and have in effect a national rebate agreement with the federal government as a condition
for coverage of the manufacturer’s covered outpatient drug(s) by state Medicaid programs. The amount of the rebate for each
product is based on a statutory formula and may be subject to an additional discount if certain pricing increases more than inflation.
State Medicaid programs and Medicaid managed care plans can seek additional “supplemental” rebates from manufacturers in
connection with states’ establishment of preferred drug lists. A further requirement for Medicaid coverage is that the manufacturer
enter into a Federal Supply Schedule, or FSS, agreement with the Secretary for Veterans Affairs to extend discounted pricing to
the Veterans Health Administration.
Similarly, in order for a covered outpatient drug to receive federal reimbursement under the Medicare Part B and Medicaid programs
or to be sold directly to U.S. government agencies, the manufacturer must extend discounts on the covered outpatient drug to
entities that are enrolled and participating in the 340B drug pricing program, which is a federal program that requires manufacturers
to provide discounts to certain statutorily-defined safety-net providers. The 340B discount for each product is calculated based
on certain Medicaid Drug Rebate Program metrics that manufacturers are required to report to CMS.
Emflaza is also eligible for reimbursement under the Medicare Part D program. Under Part D, Medicare beneficiaries may enroll
in prescription drug plans offered by private entities, which will provide coverage of outpatient prescription drugs. Part D
prescription drug formularies are required to include drugs within each therapeutic category and class of covered Part D drugs,
though not necessarily all the drugs in each category or class. Any negotiated prices for our products covered by a Part D prescription
drug plan likely will be lower than the prices we might otherwise obtain. Further, CMS is proposing to relax Part D coverage
requirements to give plans more leverage in negotiating their formularies.
In addition, U.S. private health insurers often rely upon Medicare coverage policies and payment limitations in setting their own
coverage and reimbursement policies. Any such coverage or payment limitations may result in a similar reduction in payments
from non-governmental payors. Payment by private payors is also subject to payor-determined coverage and reimbursement
policies that vary considerably and are subject to change without notice. We expect that coverage and reimbursement of Emflaza
in the United States will vary from commercial payor to commercial payor. Many commercial payors, such as managed care plans,
manage access to prescription drugs partly to control costs to their plans, and may use drug formularies and medical policies to
limit their exposure. Exclusion from policies can directly reduce product usage in the payor’s patient population and may negatively
impact utilization in other payor plans, as well.
There has been recent negative publicity and increasing legislative and public scrutiny around pharmaceutical drug pricing in the
U.S., in particular with respect to orphan drugs and specifically with respect to Emflaza. Moreover, U.S. government authorities
and third-party payors are increasingly attempting to limit or regulate drug prices and reimbursement, often with particular focus
on orphan drugs. These dynamics may give rise to heightened attention and potential negative reactions to pricing decisions for
Emflaza and products for which we may receive regulatory approval in the future, possibly limiting our ability to generate revenue
and attain profitability.
Moreover, in 2017, the U.S. Congress modified and amended certain provisions of the 2010 U.S. healthcare reform legislation
(the Patient Protection and Affordable Care Act of 2010, as amended by the Health Care and Education Reconciliation Act of
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2010, known collectively as the Affordable Care Act), which could have an impact on coverage and reimbursement for healthcare
items and services covered by the federal and state healthcare programs as well as plans in the private health insurance market.
The so-called “individual mandate” was repealed as part of tax reform legislation adopted in December 2017. There are legal
challenges to the Affordable Care Act pending and the Trump Administration and the U.S. Congress may continue to seek to
modify, repeal, or otherwise invalidate all, or certain provisions of the Affordable Care Act. We cannot assure that the Affordable
Care Act, as currently enacted or as amended in the future, will not adversely affect our business and financial results and we
cannot predict how future federal or state legislative or administrative changes relating to healthcare reform will affect our business.
In the EU, reference pricing systems and other measures may lead to cost containment and reduced prices with respect to Translarna
for the treatment of nmDMD and other product candidates that might receive marketing authorization in the future. Our inability
to promptly obtain coverage and profitable payment rates from both government-funded and private payors for our product or any
of our product candidates that may receive marketing authorization, or a reduction in coverage for payment rates for our product
or any such product candidates, could have a material adverse effect on our business, results of operations and financial condition.
In addition, in the EU, an authorized trader, such as a wholesaler, can purchase a medicine in one EU member state and obtain a
license to import the product into another EU member state. This process is called “parallel distribution”. As a result, a purchaser
in one EU member state may seek to import Translarna from another EU member state where Translarna is sold at a lower price.
This could have a negative impact on our business, financial condition, results of operations and growth.
Similarly, sales of Emflaza in the United States could also be reduced if deflazacort is imported into the United States from lower-
priced markets, whether legally or illegally. For example, in the United States, prices for pharmaceuticals are generally higher
than in the bordering nations of Mexico and Canada. There have been proposals to legalize the import of pharmaceuticals from
outside the United States. If such legislation were enacted, our revenues from Emflaza could be reduced, and our business, results
of operations and financial condition could be materially adversely affected.
Risks Related to Our Financial Position and (cid:1)eed for Additional Capital
We have incurred significant losses since our inception and based on our current commercial, research and development plans,
we expect to continue to incur significant operating expenses for the foreseeable future. We may never generate profits from
operations or maintain profitability.
Since inception, we have incurred significant operating losses. As of December 31, 2019, we had an accumulated deficit of $1,190.5
million. We have historically financed our operations primarily through the issuance and sale of our common stock in public
offerings, our “at the market offerings” of our common stock, the private placements of our preferred stock, collaborations, bank
debt, convertible debt financings, and grants and clinical trial support from governmental and philanthropic organizations and
patient advocacy groups in the disease areas addressed by our product and product candidates. Since 2014, we have also relied
on revenues generated from net sales of Translarna for the treatment of nmDMD in territories outside of the United States, and in
May 2017, we began to recognize revenue generated from net sales of Emflaza for the treatment of DMD in the United States.
Based on our current commercial, research and development plans, we expect to continue to incur significant operating expenses
for the foreseeable future, which we anticipate will be partially offset by revenues generated from the sale of our products. We
expect to continue to generate operating losses through 2020 and, while we anticipate that operating losses generated in future
periods should decline versus prior periods, we may never generate profits from operations or maintain profitability. The net losses
we incur may fluctuate significantly from period to period.
On April 20, 2017, we acquired all rights to Emflaza. Upfront consideration for the acquisition was comprised of $75.0 million
in cash, funded through cash on hand, and 6,683,598 shares of our common stock. In addition, we expect to incur significant costs
in connection with liabilities we assumed as part of the acquisition, including the obligation to complete certain post-marketing
requirements in connection with the Emflaza marketing authorization.
On August 23, 2018, we completed our acquisition of Agilis. Upfront consideration was comprised of $49.2 million in cash
and 3,500,907 shares of our common stock. Agilis equityholders may become entitled to receive contingent payments from us
based on the achievement of certain development, regulatory and net sales milestones as well as based upon a percentage of net
sales of certain products. Additionally, we are required to pay $40.0 million of the development milestone payments upon the
passing of the second anniversary of the closing of the acquisition, August 23, 2020, regardless of whether the applicable milestones
have been achieved.
On October 25, 2019, we completed the acquisition of substantially all of the assets of BioElectron Technology Corporation, or
BioElectron. Upfront consideration was $10.0 million, funded with cash on hand, less (i) transaction expenses incurred by
BioElectron, (ii) the amount of outstanding indebtedness of BioElectron, including a $4.0 million loan advance to BioElectron
plus accrued and unpaid interest thereon and (iii) $1.5 million held in an escrow account to secure potential indemnification
obligations owed to us. BioElectron may become entitled to receive contingent milestone payments of up to $200.0 million (in
cash or in shares of our common stock, as we determine) from us based on the achievement of certain regulatory and net sales
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milestones. Additionally, BioElectron may also become entitled to receive contingent payments of a low single digit percentage
of net sales of certain products.
Our current ability to generate revenue from sales of Translarna is dependent upon our ability to maintain our marketing
authorization in the EEA of Translarna for the treatment of nmDMD in ambulatory patients aged two years and older and in Brazil
for the treatment of nmDMD in ambulatory patients aged five years and older. The marketing authorization in the EEA is subject
to annual review and renewal by the European Commission following reassessment by the EMA of the benefit-risk balance of the
authorization and is further subject to a specific obligation to conduct and report the results of Study 041, a multi-center, randomized,
double-blind, 18-month, placebo-controlled trial, followed by an 18-month open-label extension, according to an agreed protocol,
in order to confirm the efficacy and safety of Translarna. Enrolling, conducting and reporting a clinical trial is a time-consuming,
expensive and uncertain process that takes years to complete, and we expect that we will incur material costs related to the
implementation and conduct of Study 041. In addition, it is likely that we will enroll patients in Study 041 in countries where
Translarna for the treatment of nmDMD is currently available on a reimbursed basis, which could negatively impact growth in
our net product sales. We may experience unknown complications with Study 041 and may not achieve the pre-specified endpoint
with statistical significance, which would have a material adverse effect on our ability to maintain our marketing authorization in
the EEA.
If, in any annual renewal cycle, the EMA determines that the balance of benefits and risks of using Translarna for the treatment
of nmDMD has changed materially or that we have not or are unable to comply with the specific obligation to complete Study
041 or any other requirement that has been or may be placed on the marketing authorization, the European Commission could, at
the EMA’s recommendation, vary, suspend, withdraw or refuse to renew the marketing authorization for Translarna or impose
other specific obligations or restrictions, which would have a materially adverse effect on our business. We expect to incur significant
costs in connection with our efforts to maintain our marketing authorization in the EEA. If our marketing authorization in the EEA
is not renewed, or our product label is materially restricted, we would lose all, or a significant portion of, our ability to generate
revenue from sales of Translarna, whether pursuant to a commercial or a reimbursed early access program, or EAP program, and
throughout all territories. For additional information, see the risk factor under “Risks Related to Regulatory Approval of our
Products and our Product Candidates” titled, “Our marketing authorization in the EEA for Translarna for the treatment of nmDMD
is a “conditional marketing authorization” that requires annual review and renewal by the European Commission following
reassessment by the EMA of the benefit-risk balance of the authorization and is further conditioned upon our ability to satisfy the
specific obligation to conduct and report the results of Study 041 by the end of the third quarter of 2022, and, as such, there is
ongoing risk that we may be unable to maintain such authorization. If we are unable to obtain renewal of such marketing
authorization in any future renewal cycle, we could lose all, or a significant portion of, our ability to generate revenue from sales
of Translarna, whether pursuant to a commercial or an EAP program, which would have a material adverse effect on our business,
financial performance and results of operations."
We also expect that our efforts to advance Translarna for the treatment of nmDMD in the United States will be time-consuming
and may be expensive. For additional information, see the risk factor under “Risks Related to Development and Commercialization
of our Products and our Product Candidates” titled, “Delays or failures in obtaining regulatory approval in the United States, may
prevent us from commercializing Translarna for nmDMD in that territory and our ability to generate revenue will be materially
impaired. In the event that the FDA requires us to conduct additional clinical trials in nmDMD which, if successful, may enable
FDA review of an (cid:1)DA submission by us, we would expect to incur significant costs, which may have a material adverse effect
on our business and results of operations.”
We anticipate that our expenses will continue to increase in connection with our commercialization efforts in the United States,
the EEA, Latin America and other territories, including the expansion of our infrastructure and corresponding sales and marketing,
legal and regulatory, distribution and manufacturing and administrative and employee-based expenses. In addition to the foregoing,
we expect to continue to incur significant costs in connection with ongoing, planned and potential future clinical trials and studies
in our gene therapy, splicing, Bio-e and oncology programs as well as studies in our products for maintaining authorizations,
including Study 041, label extensions and additional indications. We have begun seeking and intend to continue to seek marketing
authorization for Translarna for the treatment of nmDMD in territories outside of the EEA and Brazil and we may also seek
marketing authorization for Translarna for other indications. In January 2020, we submitted an MAA to the EMA for the treatment
of AADC deficiency with PTC-AADC in the EEA. We expect to receive an opinion from the CHMP of the EMA regarding our
MAA submission by the end of 2020. In the second quarter of 2020, we plan to submit a request for marketing authorization for
PTC-AADC with the FDA. These efforts may significantly impact the timing and extent of our commercialization expenses.
In addition, the clinical and regulatory developments noted in this risk factor may exacerbate the risks related to our
commercialization efforts set forth under the heading “Risks Related to the Development and Commercialization of our Products
and our Product Candidates,” which could increase the costs associated with our commercial activities or have a negative impact
on our revenues. For additional information, see also “Risks Related to the Regulation of our Products and our Product Candidates”
“Commercialization of Translarna has been in, and is expected to continue to take place in, countries that tend to impose strict
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price controls, which may adversely affect our revenues. Failure to obtain and maintain acceptable pricing and reimbursement
terms for Translarna for the treatment of nmDMD in the EEA and other countries where Translarna is available would delay or
prevent us from marketing our product in such regions, which would adversely affect our anticipated revenue, growth and business.”
We may seek to continue to expand and diversify our product pipeline through opportunistically in-licensing or acquiring the
rights to products, product candidates or technologies and we may incur expenses, including with respect to transaction costs,
subsequent development costs or any upfront, milestone or other payments or other financial obligations associated with any such
transaction, which would increase our future capital requirements.
With respect to our outstanding 3.00% convertible senior notes due August 15, 2022, or the 2022 Convertible (cid:1)otes, cash interest
payments are payable on a semi-annual basis in arrears, which will require total funding of $4.5 million annually. With respect to
our outstanding 1.50% convertible senior notes due September 15, 2026, or the 2026 Convertible (cid:1)otes, cash interest payments
are payable on a semi-annual basis in arrears, which will require total funding of $4.3 million annually. Additionally, under the
terms of our credit and security agreement with MidCap Financial, cash interest payments are payable monthly in arrears. In
addition, Akcea is eligible to receive from us an additional milestone payment of $4.0 million upon receipt of regulatory approval
for Waylivra from A(cid:1)VISA.
We are also required to pay $40.0 million in development milestone payments upon the passing of the second of the closing of
the Agilis acquisition, August 23, 2020, regardless of whether the applicable milestones have been achieved.
In addition, our expenses will increase if and as we:
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seek to satisfy contractual and regulatory obligations we assumed in connection with our acquisitions and collaborations;
execute our commercial strategy for our products, including initial commercialization launches of our products, label
extensions or entering new markets;
are required to complete any additional clinical trials, non-clinical studies or CMC assessments or analyses in order to
advance Translarna for the treatment of nmDMD in the United States or elsewhere;
are required to take other steps, in addition to Study 041, to maintain our current marketing authorization in the EEA
and Brazil for Translarna for the treatment of nmDMD or to obtain further marketing authorizations for Translarna for
the treatment of nmDMD or other indications;
utilize the Hopewell Facility to begin manufacturing program materials for certain of our gene therapy product
candidates;
initiate or continue the research and development of our gene therapy, splicing, Bio-e and oncology programs as well
as studies in our products for maintaining authorizations, including Study 041, label extensions and additional
indications;
seek to discover and develop additional product candidates;
seek to expand and diversify our product pipeline through strategic transactions;
• maintain, expand and protect our intellectual property portfolio; and
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add operational, financial and management information systems and personnel, including personnel to support our
product development and commercialization efforts.
Our ability to generate profits from operations and become and remain profitable depends on our ability to successfully develop
and commercialize drugs that generate significant revenue. This will require us to be successful in a range of challenging activities,
including:
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commercializing and marketing all of our products and products candidates;
negotiating, securing, and maintaining adequate pricing, coverage and reimbursement terms, on a timely basis, with
third-party payors for our products and product candidates;
• maintaining the marketing authorization of Translarna for the treatment of nmDMD in the EEA, including successfully
obtaining annual renewals of the marketing authorization, fulfilling the specific obligation to conduct and report the
results of Study 041 to the EMA, and meeting any ongoing requirements related to the marketing authorization;
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advancing Translarna for the treatment of nmDMD in the United States, including, whether we will be required to
perform additional clinical trials, non-clinical studies or CMC assessments or analyses at significant cost which, if
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successful, may enable FDA review of an (cid:1)DA submission by us and, ultimately, may support approval of Translarna
for nmDMD in the United States;
• maintaining orphan exclusivity in the United States for Emflaza and successfully completing all post-marketing
requirements with respect to Emflaza and any other products;
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expanding the territories in which we are approved to market our products;
• minimizing the enrollment impact of Study 041 on commercialization efforts for Translarna for nmDMD;
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successfully advancing our other programs and collaborations, including our gene therapy, splicing, Bio-e and oncology
programs and developing Translarna for the treatment of additional indications;
• maintaining a global commercial infrastructure, including the sales, marketing and distribution capabilities to effectively
market and sell our products and product candidates throughout the world;
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implementing marketing and distribution relationships with third parties in territories where we do not pursue direct
commercialization;
identifying patients eligible for treatment with our products and product candidates;
obtaining approval to market Translarna for the treatment of other indications;
expanding the approved product label of Translarna for the treatment of nmDMD;
successfully developing or commercializing any product candidate or product that we may in-license or acquire;
protecting our rights to our intellectual property portfolio related to Translarna and other products and product
candidates; and
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contracting for the manufacture and distribution of commercial quantities of our products and product candidates.
We may never succeed in these activities and, even if we do, may never generate revenues that are significant enough to generate
profits from operations. Even if we do generate profits from operations, we may not be able to sustain or increase profitability on
a quarterly or annual basis. Our failure to generate profits from operations and remain profitable would decrease the value of our
company and could impair our ability to raise capital, expand our business, maintain our research and development efforts, diversify
our product offerings or continue our operations. A decline in the value of our company could also cause our stockholders to lose
all or part of their investment in our company.
We may need additional funding. If we are unable to raise capital when needed, we could be forced to delay, reduce or eliminate
our product development programs or commercialization efforts.
As noted in the prior risk factor, we expect to incur significant expenses related to our clinical, regulatory, commercial, legal,
research and development, and other business efforts. We believe that our cash flows from product sales, together with existing
cash and cash equivalents, including the net proceeds from our term loan facility with MidCap Financial, our Convertible (cid:1)otes
offerings, public offerings of common stock, marketable securities and research funding that we expect to receive under our
collaborations, will be sufficient to fund our operating expenses and capital expenditure requirements for at least the next twelve
months. We have based this estimate on assumptions that may prove to be wrong, and we could use our capital resources sooner
than we currently expect.
Our future capital requirements will depend on many factors, including:
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our ability to commercialize and market our products and product candidates;
our ability to negotiate, secure and maintain adequate pricing, coverage and reimbursement terms, on a timely basis,
with third-party payors for our products and product candidates;
our ability to maintain the marketing authorization in the EEA for Translarna for the treatment of nmDMD, including
whether the EMA determines on an annual basis that the benefit-risk balance of Translarna supports renewal of our
marketing authorization in the EEA, on the current approved label;
the costs, timing and outcome of Study 041;
the costs, timing and outcome of our efforts to advance Translarna for the treatment of nmDMD in the United States,
including, whether we will be required to perform additional clinical trials, non-clinical studies or CMC assessments
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or analyses at significant cost which, if successful, may enable FDA review of an (cid:1)DA submission by us and,
ultimately, may support approval of Translarna for nmDMD in the United States;
our ability to maintain orphan exclusivity in the United States for Emflaza and successfully completing all post-
marketing requirements with respect to Emflaza and any other products;
the progress, results and costs of our activities under our gene therapy, splicing, Bio-e and oncology programs as
well as studies in our products for maintaining authorizations, label extensions and additional indications;
the scope, costs and timing of our commercialization activities, including product sales, marketing, legal, regulatory,
distribution and manufacturing, for our products and for any of our other product candidates that may receive
marketing authorization or any additional indications or territories in which we receive authorization to market our
products;
our ability to utilize the Hopewell Facility to begin manufacturing program materials for certain of our gene therapy
product candidates;
the costs, timing and outcome of regulatory review of our other product candidates, including those in our gene
therapy, splicing, Bio-e and oncology programs, our approved products in other territories and Translarna for
additional indications;
our ability to satisfy our obligations under the terms of the Credit Agreement with MidCap Financial;
our ability to satisfy our obligations under the indentures governing our Convertible (cid:1)otes;
the timing and scope of growth in our employee base;
revenue received from commercial sales of or products or any of our other product candidates;
our ability to obtain additional and maintain existing reimbursed named patient and cohort EAP programs for our
products and product candidates on adequate terms, or at all;
the ability and willingness of patients and healthcare professionals to access our products and product candidates
through alternative means if pricing and reimbursement negotiations in the applicable territory do not have a positive
outcome;
the costs of preparing, filing and prosecuting patent applications, maintaining, and protecting our intellectual property
rights and defending against intellectual property-related claims;
the extent to which we acquire or invest in other businesses, products, product candidates, and technologies, including
the success of any acquisition, in-licensing or other strategic transaction we may pursue, and the costs of subsequent
development requirements and commercialization efforts, including with respect to our acquisition of Emflaza, our
acquisitions of Agilis and of BioElectron’s assets, and our licensing of Tegsedi and Waylivra; and
our ability to establish and maintain collaborations, including our collaborations with Roche and the SMA Foundation,
and our ability to obtain research funding and achieve milestones under these agreements.
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Conducting preclinical testing and clinical trials is a time-consuming, expensive and uncertain process that takes years to complete,
and we may never generate the necessary data or results required to obtain regulatory approval and achieve product sales for
certain product candidates or indications. In addition, our products and product candidates, if approved, may not achieve sustained
commercial success. Likewise, if we fail to maintain our marketing authorization or lose non-patent market exclusivity for our
products and product candidates we will be unable to commercialize and generate revenue from the sales of those products.
Accordingly, we may need to continue to rely on additional financing in connection with our continuing operations and to achieve
our business objectives. In addition, we may seek additional capital due to favorable market conditions or based on strategic
considerations, even if we believe that we have sufficient funds for our current or future operating plans. Additional financing
may not be available to us on acceptable terms or at all. If we are unable to raise capital when needed or on attractive terms, we
could be forced to delay, reduce or eliminate our research and development programs or our commercialization efforts.
Our indebtedness resulting from our credit and security agreement with MidCap Financial Trust could adversely affect our
financial condition or restrict our future operations.
On May 5, 2017, we entered into a credit and security agreement with Midcap Financial Trust, a Delaware statutory trust, or
MidCap Financial, as administrative agent and MidCap Financial and other certain institutions as lenders thereto, or the Credit
Agreement, that provides for a senior secured term loan facility of $60.0 million, of which $40.0 million was drawn by us on May
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5, 2017. Our ability to draw on the remaining $20.0 million under the senior secured term loan facility expired on December 31,
2018. The maturity date of the Credit Agreement is May 1, 2021, unless terminated earlier.
Borrowings under the Credit Agreement bear interest at a rate per annum equal to the London Interbank Offered Rate, or LIBOR,
(with a LIBOR floor rate of 1.00%) plus 6.15%. The Credit Agreement requires us to not have less than $100 million of net revenue
for the prior twelve months to be measured on the last day of each fiscal quarter beginning on December 31, 2017.
Additionally, subject to customary exceptions and exclusions, all obligations under the Credit Agreement are secured pursuant to
the terms of the Credit Agreement, a Pledge Agreement between us, certain of our subsidiaries, and Midcap Financial, or the
Pledge Agreement, and an Intellectual Property and Security Agreement between us and Midcap Financial, or the IP Security
Agreement, each dated May 5, 2017. Under the Credit Agreement, the Pledge Agreement, and the IP Security Agreement, we
provided to Midcap Financial and the other lenders (i) a perfected, first-priority security interest in all of our personal property,
(ii) a perfected, first-priority security interest in all of our intellectual property (except that this security interest will not be perfected
in intellectual property located outside the United States unless our cash position falls below a pre-specified threshold), and (iii)
a perfected, first-priority pledge of equity ownership interests directly and indirectly held by us in our wholly owned subsidiary,
PTC Therapeutics Holdings (Bermuda) Corp. Limited and certain of our U.S. subsidiaries.
A failure to comply with the conditions of our Credit Agreement could result in an event of default. An event of default under the
Credit Agreement includes, among other things, a failure to pay any amount due under the Credit Agreement as well as the
occurrence of events that could reasonably be expected to result in a material adverse effect, including if we were to fail to maintain
our marketing authorization for Translarna for the treatment of nmDMD in the EEA or if the FDA were to withdraw any of our
products from the market, including Emflaza for the treatment of DMD in the United States.
In the event of an acceleration of amounts due under our Credit Agreement as a result of an event of default, we may not have
sufficient funds or may be unable to arrange for additional financing to repay the term loans or to make any accelerated payments,
and the lenders could seek to enforce security interests in the collateral securing the term loans, which would have a material
adverse effect on our business, financial condition and results of operations.
In addition, our indebtedness under the Credit Agreement could have significant adverse consequences, including, among other
things:
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requiring us to dedicate a substantial portion of cash and cash equivalents and marketable securities to the payment of
interest on, and principal of, the term loans, which will reduce the amounts available to fund working capital, capital
expenditures, product development efforts and other general corporate purposes;
obligating us to negative covenants restricting our activities, including limitations on dispositions, mergers or acquisitions,
encumbering our intellectual property, incurring indebtedness or liens, paying dividends, making investments and
engaging in certain other business transactions;
limiting our flexibility in planning for, or reacting to, changes in our business and our industry;
placing us at a competitive disadvantage compared to our competitors who have less debt or competitors with comparable
debt at more favorable interest rates; and
limiting our ability to borrow additional amounts for working capital, capital expenditures, research and development
efforts, acquisitions, debt service requirements, execution of our business strategy and other purposes.
Any of these factors could materially and adversely affect our business, financial condition and results of operations.
We may engage in strategic transactions to acquire assets, businesses, or rights to products, product candidates or technologies
or form collaborations or make investments in other companies or technologies that could harm our operating results, dilute
our stockholders’ ownership, increase our debt, or cause us to incur significant expense.
As part of our business strategy, we may engage in additional strategic transactions to expand and diversify our product pipeline,
including through the acquisition of assets, businesses, or rights to products, product candidates or technologies or through strategic
alliances or collaborations, similar to our acquisitions of Agilis, Emflaza and BioElectron’s assets and our Collaboration and
License Agreement with Akcea, or the Akcea Agreement. We may not identify suitable strategic transactions, or complete such
transactions in a timely manner, on a cost-effective basis, or at all. Moreover, we may devote resources to potential opportunities
that are never completed or we may incorrectly judge the value or worth of such opportunities. Even if we successfully execute
a strategic transaction, we may not be able to realize the anticipated benefits of such transaction, may incur additional debt or
assume unknown or contingent liabilities in connection therewith, and may experience losses related to our investments in such
transactions. Integration of an acquired company or assets into our existing business may not be successful and may disrupt ongoing
operations, require the hiring of additional personnel and the implementation of additional internal systems and infrastructure,
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and require management resources that would otherwise focus on developing our existing business. Even if we are able to achieve
the long-term benefits of a strategic transaction, our expenses and short-term costs may increase materially and adversely affect
our liquidity. Any of the foregoing could have a detrimental effect on our business, results of operations and financial condition.
In addition, future strategic transactions may entail numerous operational, financial and legal risks, including:
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incurrence of substantial debt, dilutive issuances of securities or depletion of cash to pay for acquisitions;
exposure to known and unknown liabilities, including possible intellectual property infringement claims, violations of
laws, tax liabilities and commercial disputes;
higher than expected acquisition and integration costs;
difficulty in integrating operations and personnel of any acquired business;
increased amortization expenses or, in the event that we write-down the value of acquired assets, impairment losses;
impairment of relationships with key suppliers or customers of any acquired business due to changes in management and
ownership;
inability to retain personnel, customers, distributors, vendors and other business partners integral to an in-licensed or
acquired product, product candidate or technology;
potential failure of the due diligence processes to identify significant problems, liabilities or other shortcomings or
challenges;
entry into indications or markets in which we have no or limited direct prior development or commercial experience and
where competitors in such markets have stronger market positions; and
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other challenges associated with managing an increasingly diversified business.
For example, on August 23, 2018, we completed the acquisition of Agilis pursuant to the Merger Agreement. Pursuant to the
Merger Agreement, we paid upfront consideration comprised of $49.2 million in cash and 3,500,907 shares of our common stock.
In addition, pursuant to the Merger Agreement, Agilis equityholders will be entitled to receive contingent payments from us based
on (i) the achievement of certain development milestones up to an aggregate maximum amount of $60.0 million, (ii) the
achievement of certain regulatory approval milestones together with a milestone payment following the receipt of a priority review
voucher up to an aggregate maximum amount of $535.0 million, (iii) the achievement of certain net sales milestones up to an
aggregate maximum amount of $150.0 million, and (iv) a percentage of annual net sales of Friedreich ataxia and Angelman
Syndrome products during specified terms, ranging from 2-6%. Under the Merger Agreement, we are required to pay $40.0 million
of the development milestone payments no later than August 23, 2020, regardless of whether the applicable milestones have been
achieved. There is no guarantee that we will be able to make these milestone payments through cash on hand and expected cash
flows and we may be required to raise additional capital in order to fund these payments.
Following completion of the acquisition, we became responsible for Agilis’s liabilities and obligations, including with respect to
certain agreements, financial, regulatory and compliance matters, in addition to the expenses we expect to incur based on our
current commercial, regulatory, research and development plans for PTC-AADC and the other assets acquired from Agilis. These
expenses and obligations will result in additional cost and investment by us and, if we have underestimated the amount of these
costs and investments or if we fail to satisfy any such obligations, we may not realize the anticipated benefits of the transaction.
Further, it is possible that there may be undisclosed, contingent or other liabilities or problems that may arise in the future, the
existence and/or magnitude of which we were previously unaware. Any such liabilities or problems could have an adverse effect
on our business, financial condition or results of operations.
If we are unable to successfully manage any strategic transaction in which we may engage, our ability to develop new products
and continue to expand and diversify our product pipeline may be limited.
Raising additional capital may cause dilution to our stockholders, restrict our operations or require us to relinquish rights to
our technologies or product candidates.
Until such time, if ever, as we can generate enough product revenues to cover our expenses, we expect to supplement our cash
needs through a combination of equity offerings; debt financings; collaborations; strategic alliances; grants and clinical trial support
from governmental and philanthropic organizations and patient advocacy groups in the disease areas addressed by our product
candidates; and marketing, distribution or licensing arrangements.
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To the extent that we raise additional capital through the sale of equity or convertible debt securities, our shareholders’ ownership
interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the
rights of our common stockholders. Debt financing, if available, may involve agreements that include covenants limiting or
restricting our ability to take specific actions, such as incurring additional debt, entering into agreements involving licenses to our
intellectual property, making capital expenditures or declaring dividends.
If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with
third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product
candidates; or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or
debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future
commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and
market ourselves.
Our ability to use our net operating losses and certain other tax attributes to offset potential taxable income and related income
taxes that would otherwise be due is subject to limitation under the provisions of Sections 382 and 383 of the Internal Revenue
Code as a result of ownership changes of the Company and could be subject to further annual limitations under such provisions.
In addition, we may not generate sufficient future taxable income to use our net operating losses and certain other tax attributes.
If a corporation undergoes an “ownership change” within the meaning of Sections 382 and 383 of the Internal Revenue Code of
1986, as amended, or Sections 382 and 383, the corporation’s ability to utilize any net operating losses, or (cid:1)OLs, and certain tax
credits and other tax attributes generated before such an ownership change, is limited. We believe that we have in the past experienced
ownership changes within the meaning of Sections 382 and 383 that have resulted in limitations under Sections 382 and 383 (and
similar state provisions) on the use of our (cid:1)OLs and other tax attributes.
Sections 382 and 383 are extremely complex provisions with respect to which there are many uncertainties, and we have not
requested a ruling from the United States Internal Revenue Service, or IRS, to confirm our analysis of the ownership change
limitations related to the (cid:1)OLs and other tax attributes generated by us. Therefore, we have not established whether the IRS would
agree with our analysis regarding the application of Section 382 and 383. Our public offerings of common stock in April 2018,
January 2019 (including the shares issued in February 2019 upon exercise by the underwriter of its option to purchase additional
shares) and September 2019, the common stock issued in our “at the marketing offerings” and the common stock issued to Agilis
as a result of being acquired by us in August 2018 may put us closer to another ownership change for purposes of Sections 382
and 383. We continue to fully evaluate the impact of a limitation on the use of our (cid:1)OLs and other tax attributes under Sections
382 and 383.
Moreover, our ability to use these (cid:1)OLs to offset potential future taxable income and related income taxes that would otherwise
be due is dependent upon our generation of future taxable income. Our (cid:1)OLs generated prior to 2018 will eventually expire if
they are not used to offset future taxable income. In addition, under the 2017 Tax Cuts and Jobs Act, or the 2017 Tax Act, enacted
on December 22, 2017, the deductibility of federal net operating losses incurred in 2018 and in future years generally is limited
to 80% of taxable income for each taxable year, although such losses may be carried forward indefinitely. Therefore, we cannot
predict with certainty when, or whether the Company will generate sufficient taxable income to use all of our (cid:1)OLs.
Changes in our effective income tax rates and the 2017 Tax Act and future changes to U.S. and non-U.S. tax laws could
adversely affect our results of operations.
We are subject to income taxes in the Unites States and various ex-U.S. jurisdictions. Taxes will be incurred as income is earned
in these different jurisdictions. Various factors may have favorable or unfavorable effects on our effective income tax rate. These
factors include, but are not limited to, interpretations of existing tax laws, changes in tax laws and rates, the accounting for stock
options and other share-based compensation, changes in accounting standards, future levels of research and development spending,
changes in the mix and level of pre-tax earnings by taxing jurisdiction, the outcome of examinations by the IRS and other
jurisdictions, the accuracy of our estimates for unrecognized tax benefits, the realization of deferred tax assets, or by changes to
our ownership or capital structure. The impact on our income tax provision resulting from the above-mentioned factors and others
may be significant and could adversely affect our results of operations.
Changes in tax laws or regulations, including further regulatory developments arising from U.S. tax reform legislation as well as
multi-jurisdictional changes enacted in response to the action items provided by the Organization for Economic Cooperation and
Development (OECD), will increase tax uncertainty and the amount of tax we pay.
Additionally, in the United States, the 2017 Tax Act was enacted on December 22, 2017, making significant changes to the U.S.
corporate income tax system. These changes include a federal statutory rate reduction from 35% to 21%, the elimination or
reduction of certain domestic deductions and credits and limitations on the deductibility of interest expense and executive
compensation. The 2017 Tax Act also transitions international taxation from a worldwide system to a modified territorial system
and includes base erosion prevention measures on non-U.S. earnings, which has the effect of subjecting certain earnings of our
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ex-U.S. subsidiaries to U.S. taxation as global intangible low-taxed income (GILTI). These changes became effective in January
2018. The U.S. Department of Treasury has broad authority to issue regulations and interpretative guidance that may significantly
impact how the law is applied. The effect of the 2017 Tax Act will differ across the states. Many states have enacted new legislation
in response to the federal tax reform law. As a result of the reduction in the U.S. corporate income tax rate, we revalued our ending
net deferred tax assets as of December 31, 2017. In the fourth quarter of 2018, we completed our analysis to determine the effect
of the Tax Act and recorded no further adjustments.
Although we monitor actual and potential changes to the tax laws in the United States and other jurisdictions, it is very difficult
to assess to what extent these changes may impact the way in which we conduct our business or our effective tax rate due to the
unpredictability and interdependency of these changes. Changes in tax laws and related regulations and practices could have a
material adverse effect on our business operations, cash flows, effective tax rate, financial position and results of operations.
Risks Related to Regulatory Approval of our Products and our Product Candidates
Our marketing authorization in the EEA for Translarna for the treatment of nmDMD is a “conditional marketing authorization”
that requires annual review and renewal by the European Commission following reassessment by the EMA of the benefit-risk
balance of the authorization and is further conditioned upon our ability to satisfy the specific obligation to conduct and report
the results of Study 041 by the end of the third quarter of 2022, and, as such, there is ongoing risk that we may be unable to
maintain such authorization. If we are unable to obtain renewal of such marketing authorization in any future renewal cycle,
we could lose all, or a significant portion of, our ability to generate revenue from sales of Translarna, whether pursuant to a
commercial or an EAP program, which would have a material adverse effect on our business, financial performance and
results of operations.
Conditional marketing authorizations based on incomplete clinical data, including our marketing authorization for Translarna for
the treatment of nmDMD, may be granted in the EEA for a limited number of listed medicinal products for human use, including
products designated as orphan medicinal products under EU law, if (1) the EMA determines that the benefit-risk balance of the
product is positive, (2) it is likely that the applicant will be in a position to provide the required comprehensive clinical trial data,
(3) unmet medical needs will be fulfilled and (4) the benefit to public health of the immediate availability on the market of the
medicinal product outweighs the risk inherent in the fact that additional data are still required. Specific obligations or conditions,
including with respect to the completion of ongoing or new studies, and with respect to the collection of pharmacovigilance data,
may be specified in the conditional marketing authorization. Conditional marketing authorizations are only valid for one year, and
must be renewed annually by the European Commission after an assessment by the EMA of the ongoing positive benefit-risk
balance in favor of continued authorization and the need for additional or modified conditions.
We received initial marketing authorization for Translarna for the treatment of nmDMD in ambulatory patients aged five years
and older from the European Commission in August 2014 as a “conditional marketing authorization.” In July 2018, the European
Commission approved a label-extension request to our marketing authorization for Translarna in the EEA to include patients from
two to up to five years of age. The marketing authorization is subject to annual review and renewal by the European Commission
following reassessment by the EMA of the benefit-risk balance of the authorization and is further conditioned upon our satisfaction
of the specific obligation to conduct and submit the results of Study 041 by the end of the third quarter of 2022 to the EMA. We
expect that as part of the annual EMA assessment, the EMA will consider the ongoing status of Study 041. We are also required
to implement measures, including pharmacovigilance plans, which are detailed in the risk management plan.
Our marketing authorization was previously conditioned upon our submission to the EMA of the final efficacy and safety report
from ACT DMD during 2015. Although we have fulfilled the condition to submit the ACT DMD report to the EMA, that trial did
not meet the primary efficacy endpoint of change from baseline at week 48 in distance walked in the 6-minute walk test. The EMA
and European Commission did not approve our request for full marketing authorization of Translarna for the treatment of nmDMD
and, instead, approved the renewal of our conditional marketing authorization with the specific obligation to confirm the efficacy
and safety of Translarna for the treatment of nmDMD in ambulatory patients aged 5 years or older via Study 041.
Enrolling, conducting and reporting a clinical trial is a time-consuming, expensive and uncertain process that takes years to
complete, and we expect that we will incur material costs related to the implementation and conduct of Study 041. We expect that
conducting a placebo-controlled trial in nmDMD of this size will be challenging and it is probable that we will enroll patients in
territories where Translarna has already become available on a reimbursed basis. We may enroll patients in countries with a different
standard of care for nmDMD patients or at clinical trial sites that are inexperienced with clinical trials in general, or specifically
with nmDMD trials. In addition, we may experience unknown complications with Study 041 and may not achieve the pre-specified
endpoint with statistical significance, which would have a materially adverse effect on our ability to maintain our marketing
authorization in the EEA.
If we fail to satisfy our obligations under the marketing authorization, or if it is determined in any annual renewal cycle that the
balance of benefits and risks of using Translarna has changed materially, the European Commission could, at the EMA’s
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recommendation, vary, suspend, withdraw or refuse to renew the marketing authorization for Translarna. The EMA may also
impose other new conditions to our marketing authorization (in addition to Study 041), and may make other recommendations,
including new label restrictions. In the event that we do secure annual renewal of the marketing authorization for any given annual
renewal cycle, the EMA could nevertheless later determine that we have not complied, or are unable to comply, with any conditions
that have been or may be placed on the marketing authorization, including those related to Study 041, which could result in the
withdrawal of our marketing authorization or other outcome that would have a materially adverse effect on our business, results
of operations and financial condition.
If our marketing authorization in the EEA is not renewed, or our product label is materially restricted, we would lose all, or a
significant portion of, our ability to generate revenue from sales of Translarna, whether pursuant to a commercial or an EAP
program and throughout all territories, which would have a material adverse effect on our business, results of operations and
financial condition.
If we are not able to comply with applicable laws and regulations for our products or product candidates, we will not be able
to obtain or maintain product approvals and commercialize our product or product candidates, and our ability to generate
revenue will be materially impaired.
Our products and product candidates, and the activities associated with their development and commercialization, including their
design, testing, manufacture, safety, efficacy, recordkeeping, labeling, storage, approval, advertising, promotion, sale and
distribution, are subject to comprehensive regulation by the FDA and EMA (and/or by EEA member state authorities) and by
comparable authorities in other countries, including A(cid:1)VISA where we have received marketing authorization for Translarna for
the treatment of nmDMD in ambulatory patients aged five years and older in Brazil and Tegsedi for the treatment of stage 1 or
stage 2 polyneuropathy in adult patients with hATTR amyloidosis in Brazil. Failure to obtain, maintain or renew marketing
authorization for any of our products or product candidates, as applicable, will prevent us from commercializing such product or
product candidate.
As noted in the foregoing risk factors, we may not maintain the approvals we have received or receive further necessary approvals
from the FDA, the EMA, A(cid:1)VISA or other regulators to further commercialize any of our products or to commercialize any
product candidate in any market. The approval procedures vary among countries, can involve additional testing, and the time for
approval may materially differ. Approval by the FDA does not ensure approval by regulatory authorities in other countries or
jurisdictions, and approval by one regulatory authority outside the United States does not ensure approval by regulatory authorities
in other countries or jurisdictions or by the FDA. However, the failure to obtain approval in one jurisdiction may compromise our
ability to obtain approval elsewhere. In addition, there is substantial risk that regulators in the applicable territories will not agree
with our interpretation of the results of ACT DMD and the totality of clinical data from our trials, which would have a material
adverse effect on our ability to generate revenue, or may prevent us from generating any revenue, from the sales of Translarna for
the treatment of nmDMD in those territories.
Securing marketing authorization requires the timely preparation and submission of extensive preclinical and clinical data and
supporting information to regulatory authorities for each therapeutic indication to establish the product candidate’s safety and
efficacy. In response to changes in the regulatory environment or requests from regulators, we may elect, or be obliged, to postpone
a regulatory submission to include additional analyses, including those intended to strengthen our submission or facilitate regulator
review, which could cause delays in getting our products to market and substantially increase our costs. Securing marketing
authorization also requires the submission of information about the product manufacturing process to, and inspection of
manufacturing facilities by, the regulatory authorities. Changes to manufacturers, product candidate formulation, manufacturing
processes and other product candidate attributes, such as the method of delivery, during product candidate development may also
require additional studies to demonstrate the comparability of the product candidate using prior processes, formulation, or
manufacturers, or with the prior attributes, to the product candidate using new the processes, formulation, or manufacturers, or
with the new attributes.
Regulatory authorities may determine that any of our products or product candidates are not effective or are only moderately
effective, or have undesirable or unintended side effects, toxicities, safety profiles or other characteristics that preclude us from
obtaining marketing authorization or that prevent or limit commercial use.
The process of obtaining marketing authorizations is expensive, may take many years, if approval is obtained at all, and can vary
substantially based upon a variety of factors, including the type, complexity and novelty of the product candidates involved.
Changes in marketing authorization policies during the development period, changes in or the enactment of additional statutes or
regulations, or changes in regulatory review for each submitted product application, may cause delays in the approval or rejection
of an application. Regulatory authorities have substantial discretion in the approval process and may refuse to accept any application
or may decide that our data are insufficient for approval and require additional preclinical, clinical or other studies. In addition,
varying interpretations of the data obtained from preclinical and clinical testing could delay, limit or prevent marketing authorization
of a product candidate. Any marketing authorization we ultimately obtain may be limited or subject to restrictions or post-approval
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commitments that render the approved product not commercially viable. For example, the marketing authorization granted on a
conditional basis by the EMA in the EEA for Translarna is limited to ambulatory nmDMD patients aged two years and older who
have been identified through genetic testing and is subject to the specific obligation to conduct Study 041 and annual reassessment
by the EMA of the benefit-risk analysis. Additionally, we are obligated to complete certain post-marketing requirements in
connection with the FDA's approval of Emflaza, including pre-clinical and clinical safety studies.
In addition, marketing authorizations in countries outside the United States do not ensure pricing approvals in those countries or
in any other countries, and marketing authorizations and pricing approvals do not ensure that reimbursement will be obtained.
We may not be able to obtain orphan drug exclusivity for our products or product candidates in either the United States or the
EU. If our competitors are able to obtain orphan drug designations for their products in the United States and those products
are determined by the FDA to be the “same drug” as our products or product candidate(s) under applicable FDA standards,
we may not be able to obtain approval for a significant period of time. Similarly, if our competitors are able to obtain orphan
drug designations for their products in the EU and those products can be classified as a “similar medicinal product” within
the meaning of EU law, we may not be able to obtain approval by the applicable regulatory authority for a significant period
of time.
Regulatory authorities in some jurisdictions, including the EU and the United States, may designate drugs for relatively small
patient populations as orphan drugs. We have obtained orphan drug designations from the EMA and from the FDA for PTC-AADC
for the treatment of AADC and for Translarna for the treatment of nmDMD, Becker muscular dystrophy (in the EU), and nonsense
mutation aniridia. The FDA has also granted an orphan drug designation to risdiplam, PTC-FA, PTC-AS, PTC299 and PTC596.
We may also seek orphan drug exclusivity for other product candidates, if we believe that the product candidate may qualify. We,
however, may not be able to obtain orphan drug designation in the future for any of our other product candidates. Obtaining orphan
drug exclusivity, both in the EU and in the United States, may be important to a product candidate’s future success.
In the EU, if an orphan designated product subsequently receives the first marketing authorization for the indication for which it
has received such a designation, the product is entitled to 10 years of market exclusivity, which, subject to certain exceptions,
precludes the EMA from accepting another marketing application for a similar medicinal product, even if the new marketing
application relies on independently generated data submitted as part of a full marketing authorization application dossier. The EU
exclusivity period can be reduced to six years, at the end of the fifth year, if a drug no longer meets the criteria for orphan drug
designation, including if the drug is sufficiently profitable so that market exclusivity is no longer justified. In addition, a competing
similar medicinal product may in limited circumstances be authorized prior to the expiration of the market exclusivity period,
including if it is shown to be safer, more effective or otherwise clinically superior to the orphan product. In this context, a “similar
medicinal product” is a medicinal product containing a similar active substance or substances as contained in a currently authorized
orphan medicinal product, and which is intended for the same therapeutic indication. Product candidates can also lose orphan
designation, and the related benefits, prior to obtaining a marketing authorization if it is demonstrated that the orphan designation
criteria are no longer met.
In the United States, if a product with an orphan drug designation subsequently receives the first marketing authorization for the
indication for which it has such designation, the product is entitled to seven years of market exclusivity which precludes the FDA
from approving another marketing application for the “same drug” for the same indication for that time period. When determining
whether a drug is the “same drug” as an orphan designated product, the FDA looks to the products’ molecular features and use.
The specific sameness criteria, however, varies based on whether the product is composed of small or large molecules and if the
product is a gene therapy. Moreover, for gene therapies, the sameness criteria is currently evolving, is subject to change, and
depends on a number of factors, including the expressed transgene, the vector, and other product or product candidate features.
Accordingly, whether any of our products or product candidates will be deemed to be the same as another product or product
candidate is uncertain.
Obtaining orphan drug designation, however, does not guarantee that we will be able to receive ultimate marketing approval.
Orphan drug designation neither shortens the development time or regulatory review time of a product candidate nor gives the
product candidate any advantage in the regulatory review or approval process. Moreover, the FDA may grant orphan drug
designation to multiple products that are considered to be the “same drug” for the same indication. If a competitor obtains an
orphan drug designation for and approval of a product with orphan drug exclusivity for the same indication as one of our product
candidates before we do and if the competitor’s product is the same drug, in the United States or a similar medicinal product, in
the EU, as ours, we could be excluded from the market for a period of time.
We also may not be able to maintain any orphan drug designations or exclusivities. For instance, orphan drug designations may
be revoked if the FDA finds that the request for designation contained an untrue statement of material fact or omitted material
information, or if the FDA finds that the product candidate was not eligible for designation at the time of the submission of the
request. Even if we are able to receive and maintain orphan drug designations, we may ultimately not receive any period of
regulatory exclusivity if our product candidates are approved. For instance, we may not receive orphan product regulatory
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exclusivity if the indication for which we receive FDA approval is broader than the orphan drug designation. Orphan exclusivity
may also be lost for the same reasons that designation may be lost. Orphan exclusivity may further be lost if we are unable to
assure a sufficient quantity of the product to meet the needs of patients with the rare disease or condition.
Further, even if we do receive orphan drug exclusivity upon approval of a product candidate, this exclusivity is not absolute. For
example, if a competitive product that is the same drug or a similar medicinal product as Translarna or another product candidate
that has been granted orphan drug exclusivity is shown to be “clinically superior” to our product candidate as determined by the
FDA or EMA, respectively, any orphan drug exclusivity we have obtained will not block the approval of such competitive product.
Orphan exclusivity also would not block FDA from approving a drug that is the same as our product candidates for different
indications or products that are different from ours for the same indication. Moreover, marketing exclusivity would not prevent
a provider from prescribing or using another drug off-label and third-party payors may reimburse for products off-label even if
not indicated for the orphan condition.
The respective orphan designation and exclusivity frameworks in the United States and in the EU are subject to change, and any
such changes may affect our ability to obtain, or the impact of obtaining, EU or United States orphan designations in the future.
We rely on non-patent market exclusivity periods under the Hatch-Waxman Act and the Orphan Drug Act to commercialize
Emflaza for the approved indication in the United States and failure to maintain either exclusivity period would have a material
adverse effect on our ability to commercialize Emflaza, which in turn would have a material adverse effect on our business,
financial statements and results of operations.
As we presently have no patent rights to protect the approved use of Emflaza, we rely on non-patent market exclusivity periods
under the Orphan Drug Act and the Hatch-Waxman Act to commercialize Emflaza in the United States.
As noted in the foregoing risk factor, generally, if a product with an orphan drug designation subsequently receives the first
marketing authorization for the indication for which it has such designation, the product is entitled to a period of market exclusivity,
which, subject to certain exceptions, precludes the FDA from approving another marketing application for the same drug for the
same indication for that time period. As previously discussed, however, the protection provided by orphan drug exclusivity is
limited and orphan drug exclusivity may be withdrawn.
Emflaza has a seven-year exclusive marketing period in the United States for the approved orphan indication, which commenced
on February 9, 2017 (the date of FDA approval), under the Orphan Drug Act as well as a concurrent five-year exclusive marketing
period in the United States for the active ingredient in Emflaza under the provisions of the Hatch-Waxman Act. The FDA awarded
an orphan drug designation to Emflaza for the treatment of patients with DMD and later approved Emflaza as the first corticosteroid
approved in the United States for the treatment of patients with DMD, granting Emflaza orphan drug exclusivity for this disease
as of the date of approval.
Under the Orphan Drug Act, during the seven-year exclusivity period, the FDA may not approve any other applications to market
any drug considered the “same drug” as the drug with the orphan drug exclusivity for the same rare disease or condition, except
in limited circumstances, such as if the second applicant demonstrates the clinical superiority of its product to the product with
orphan drug exclusivity through a demonstration of superior safety, superior efficacy, or a major contribution to patient care. In
addition, if a company seeks orphan drug designation for a drug considered the “same drug” as a drug previously approved for
the orphan indication at issue, the FDA will not designate the “same drug” as an orphan drug unless the company articulates a
plausible hypothesis of the clinical superiority of its drug to the approved drug, and, following such designation, if the previously
approved drug has unexpired orphan drug exclusivity, the FDA will not approve the subsequent drug unless the sponsor demonstrates
clinical superiority over the previously approved drug prior to approval. As a result, in the event that a competitive product that
is the “same drug” as Emflaza is shown to be “clinically superior” to Emflaza as determined by the FDA, our orphan drug exclusivity
will not block the approval of such competitive product. In addition, orphan drug exclusivity does not prevent the FDA from
approving a different drug for the same disease or condition, or the same drug for a different disease or condition.
In addition, we can lose any periods of granted orphan drug exclusivity under certain circumstances, such as if the FDA finds that
the request for designation contained an untrue statement of material fact or omitted material information, or if the FDA finds that
the product candidate was not eligible for designation at the time of the submission of the request. Orphan exclusivity may further
be lost if we are unable to assure the availability of sufficient quantities of Emflaza to meet the needs of patients.
Under the Hatch-Waxman Act, a five-year period of exclusivity is granted to (cid:1)DAs for products, such as Emflaza, containing
active moieties never previously approved by the FDA either alone or in combination with another drug substance. The active
moiety is the molecule or ion, excluding certain appended portions and other noncovalent derivatives, responsible for the
physiological or pharmacological action of the drug substance. During the five-year exclusivity period, third parties may not
submit certain types of applications to the FDA, except that such applications may be submitted after four years if they contain a
certification of patent invalidity or non-infringement with respect to any patents of the exclusivity holder covering the drug product
that are listed in FDA’s list of Approved Drug Products with Therapeutic Equivalence Evaluations, commonly referred to as the
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Orange Book. The two types of applications prevented by Hatch-Waxman exclusivity are 505(b)(2) applications and abbreviated
new drug applications, or A(cid:1)DAs. A 505(b)(2) application allows the FDA to rely for approval of an (cid:1)DA on data not developed
by or for the applicant such as published literature or the FDA’s finding of safety and effectiveness of a previously approved drug,
and for which the applicant has not obtained a right of reference or use. An A(cid:1)DA is an application that contains information to
show that the proposed product is identical in active ingredient, dosage form, strength, route of administration, labeling, and
conditions of use, among other things to a previously approved application (known as the reference listed drug). Certain differences,
however, between the reference listed drug and A(cid:1)DA product may be permitted pursuant to a suitability petition. Certain labeling
differences may also be permitted if information in the reference listed drug’s label is protected by patent or exclusivities. A(cid:1)DAs
do not generally contain clinical studies as required in full (cid:1)DAs but are required to contain information establishing bioequivalence
to the reference listed drug, allowing the FDA to use this bioequivalence information to rely on the prior finding of safety and
efficacy for the reference listed drug. Accordingly, we may face competition from 505(b)(2) and A(cid:1)DA products sooner than
anticipated.
Exclusivity under the Hatch-Waxman Act does not prevent the submission, filing and approval of a full (cid:1)DA containing full
reports of investigations of safety and effectiveness either owned by the applicant or to which the applicant has obtained a right
of reference. Moreover, Hatch-Waxman Act exclusivity does not prevent physicians from prescribing and third-party payors from
reimbursing products off-label for the same use as any of our products. It is also possible that we may not receive any anticipated
periods of regulatory exclusivity for our product candidates that are not yet approved. As a result, it is possible that we will not
realize the full period of market exclusivity under the Hatch-Waxman Act.
Further, each of the Orphan Drug Act and the Hatch-Waxman Act is subject to change, and any such changes may affect our ability
to maintain the respective market exclusivity period under those laws. Any reduction or limitation to the marketing exclusivity
periods for Emflaza would materially limit our ability to commercialize the product, which in turn would have a material adverse
effect on our business, financial statements and results of operations.
All pharmaceutical products for which marketing authorization has been granted, including our products, are subject to
extensive and rigorous governmental regulation and could be subject to restrictions or withdrawal from the market. We may
also be subject to penalties if we fail to comply with regulatory requirements or if we experience unanticipated problems with
our products, when and if any of them are approved, as well as our product candidates during development.
We, our products and product candidates, our operations, our facilities, our suppliers and our contract manufacturers, distributors,
contract research organizations, clinical trial sites and contract testing laboratories are subject to extensive regulation by
governmental authorities in the EEA, the United States, and other territories, with regulations differing from country to country.
We are not permitted to market our product candidates in the EEA, the United States, or other territories until we have received
requisite regulatory approvals. In order to receive and maintain such approvals, and to be compliant with regulatory authority
requirements, we and our third-party service providers must comply on a continuous basis with a broad array of regulations and
requirements. Depending on the stage of product development and whether a product is approved these requirements may relate
to establishment registration and product listing, the payment of user fees, manufacturing processes, risk management measures,
quality and pharmacovigilance systems (including reporting of manufacturing deviations and adverse events), pre- and post-
approval clinical and pre-clinical data, labeling, packaging, advertising, marketing and promotional activities (including product
sampling), record keeping, distribution, storage, and import and export of pharmaceutical products. Any regulatory approval of
any of our products or product candidates, once obtained, may be withdrawn. For example, our marketing authorization for
Translarna for the treatment of nmDMD in the EEA is subject to annual review and renewal by the European Commission following
reassessment by the EMA of the benefit-risk balance of the authorization, as well as the specific obligation to conduct and report
the results of Study 041. After approving a drug, the FDA may withdraw product approval if compliance with regulatory standards
is not maintained or if safety problems occur after the product reaches the market. Requirements for additional clinical trials and
studies to confirm safety and effectiveness may be imposed as a condition of marketing approval. In addition, the FDA requires
surveillance programs to monitor approved products that have been commercialized, as well as REMS, and the agency has the
power to require changes in labeling or to prevent further marketing and distribution of a product. We are obligated to perform
certain FDA post-marketing requirements in connection with our marketing authorization for Emflaza in the United States, including
pre-clinical and clinical safety studies, and there is no guarantee that the post-marketing trial and studies will not result in changes
to Emflaza’s labeling or that they will support the continued approval of Emflaza in the United States. Commencement of the
post-marketing trial and studies is pending feedback from the FDA. Additionally, our marketing authorizations for Translarna and
Tegsedi in Brazil are subject to renewal every five years. There is no guarantee that we will be able to complete our post-marketing
obligations in accordance with the established timetables. Failure to complete the required studies in accordance with the established
timetables or failure to provide the requisite periodic reports on the status of post-marketing studies in the absence of good cause
could result in an enforcement action. Accordingly, we and others with whom we work must continue to expend time, money, and
effort in all areas of regulatory compliance, including manufacturing and distribution.
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For additional information with respect to the risks related to renewal of our marketing authorization in the EEA, see the risk
factor titled “Our marketing authorization in the EEA for Translarna for the treatment of nmDMD is a “conditional marketing
authorization” that requires annual review and renewal by the European Commission following reassessment by the EMA of the
benefit-risk balance of the authorization and is further conditioned upon our ability to satisfy the specific obligation to conduct
and report the results of Study 041 by the end of the third quarter of 2022, and, as such, there is ongoing risk that we may be
unable to maintain such authorization. If we are unable to obtain renewal of such marketing authorization in any future renewal
cycle, we could lose all, or a significant portion of, our ability to generate revenue from sales of Translarna, whether pursuant to
a commercial or an EAP program, which would have a material adverse effect on our business, financial performance and results
of operations.”
We are required to submit safety and other post-market information and reports, implement pharmacovigilance plans, and comply
with cGMP requirements related to manufacturing including, quality control, quality assurance and complaints and corresponding
maintenance of records and documents, requirements regarding the distribution of samples to healthcare professionals and
recordkeeping, among other things, in connection with the marketing authorizations described above and any future marketing
authorizations we may receive. Application holders must further notify the FDA, and depending on the nature of the change, obtain
FDA pre-approval for product and manufacturing changes.
Regulatory authorities, including the EMA and local regulatory authorities in EEA member states, subject a marketed product, its
manufacturer and the manufacturing facilities to ongoing review and periodic inspections and the EMA is responsible for
coordinating inspections, undertaken by the competent authorities of applicable member states, of our manufacturing facilities to
assess whether our manufacturing, and other procedures, comply with cGMP. Similar regulatory and inspection requirements
apply in other jurisdictions including those imposed by the FDA in the United States. The FDA will typically inspect a manufacturer,
including contract manufacturer organizations and clinical research sites, following acceptance of an (cid:1)DA or BLA, which can
delay FDA approval, especially if unsatisfactory inspection results are observed. Following approval, product sponsors and their
contractors are subject to periodic unannounced FDA inspections to monitor and ensure compliance with FDA’s regulatory
requirements, including cGMPs. If an FDA inspection were to occur and compliance issues at our facilities or at the facilities of
our contract manufacturers or research organizations were identified, it could also result in disruption of production or distribution
of a product or product candidate, disruption, cancellation, or suspension of a study, or require substantial resources to correct.
Even if marketing authorization of a product candidate is granted, the approval may be subject to limitations on the indicated uses
for which the product may be marketed, the product may have labeling that includes significant restrictions, warnings, including
black box warnings, and contraindications, the regulatory authorities may not approve label claims necessary for successful product
marketing, or the approval may be subject to significant conditions of approval, including the requirement of a REMS. A regulatory
authority also may impose requirements for costly post-marketing studies or clinical trials and surveillance to monitor the safety
or efficacy of the product. In addition, the competent authorities of each EU member state and the FDA closely regulate the post-
approval marketing and promotion of drugs to ensure drugs are marketed only for the approved indications and in accordance
with the provisions of the approved labeling and regulatory requirements. Such regulatory authorities can impose stringent
restrictions on our communications regarding off-label use and if we do not comply with the laws governing promotion of approved
drugs, we may be subject to enforcement action for off-label promotion. For example, violations of the FDCA relating to the
promotion of prescription drugs may lead to civil and criminal penalties, investigations alleging violations of federal and state
health care fraud and abuse laws, as well as state consumer protection laws.
In addition, later discovery of previously unknown adverse events or other problems with our products, manufacturers or
manufacturing processes, or failure to comply with regulatory requirements, both before and after product approval, may yield
various results which could negatively affect our business, including:
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restrictions on such products, manufacturers or manufacturing processes;
changes to or restrictions on the labeling or marketing of a product;
• modifications to promotional pieces;
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issuance of corrective information;
clinical holds or termination of clinical trials;
changes in the way a product is administered;
liability for harm caused to patients or subjects;
adverse publicity, reputational harm, or the product becoming less competitive;
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regulatory authority issuance of safety alerts, Dear Healthcare Provider letters, press releases, or other communications
containing warnings or other safety information about the product;
restrictions on product distribution or use;
requirements to implement a REMS;
requirements to conduct post-marketing studies or clinical trials;
• warning, cyber or untitled letters;
• withdrawal of the products from the market or marketing suspensions;
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refusal to approve pending applications or supplements to approved applications that we submit;
recall of products;
fines, restitution or disgorgement of profits or revenues;
suspension or withdrawal of marketing authorizations;
refusal to permit the import or export of our products;
product seizure or detention;
injunctions;
the imposition of civil or criminal penalties; or
FDA debarment, suspension and debarment from government contracts, and refusal of orders under existing government
contracts, exclusion from federal healthcare programs, consent decrees, or corporate integrity agreements.
(cid:1)on-compliance with regulatory requirements regarding safety monitoring or pharmacovigilance, and with requirements related
to the development of products for the pediatric population, can also result in significant financial penalties. Similarly, failure to
comply with regulatory requirements regarding the protection of personal information can also lead to significant penalties and
sanctions.
(cid:1)ot only will we be responsible for our own conduct, but we will also be responsible for the conduct of our employees, independent
contractors, consultants, commercial partners, manufacturers, investigators, and contract research organizations. To the extent
that any of these third parties engage in intentional, reckless, negligent, or unintentional failures to comply applicable legal and
regulatory requirements, we may be subject to regulatory enforcement action, legal actions and liability, and serious harm to our
reputation. Moreover, it is possible for a whistleblower to pursue a False Claims Act case against us as a result of such third party
conduct, even if the government considers the claim unmeritorious and declines to intervene, which could require us to incur costs
defending against such a claim.
Any of the above events could prevent us from achieving or maintaining market acceptance of the particular product candidate,
if approved, or could substantially increase the costs and expenses of developing and commercializing such product, which in turn
could delay or prevent us from generating significant revenues from its sale. Any of these events could further have other material
and adverse effects on our operations and business and could adversely impact our stock price and could significantly harm our
business, financial condition, results of operations, and prospects.
We are also subject to laws and license and registration requirements covering the distribution of marketed products. If we fail to
comply with any of these requirements, we may be subject to action by regulatory agencies, which could negatively affect our
business. Regulatory agencies may also change existing requirements or adopt new requirements or policies. We may be slow to
adapt or may not be able to adapt to these changes or new requirements. Any new requirements could further prevent, limit or
delay regulatory approval of product candidates, could limit marketability of approved products, or could impose additional
burdensome and costly regulatory obligations.
Commercialization of Translarna has been in, and is expected to continue to take place in, countries that tend to impose strict
price controls, which may adversely affect our revenues. Failure to obtain and maintain acceptable pricing and reimbursement
terms for Translarna for the treatment of nmDMD in the EEA and other countries where Translarna is available would delay
or prevent us from marketing our product in such regions, which would adversely affect our business, results of operations,
and financial condition.
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In some countries, particularly the member states of the EEA, the pricing of prescription pharmaceuticals is subject to strict
governmental control. Each country in the EEA has its own pricing and reimbursement regulations and may have other regulations
related to the marketing and sale of pharmaceutical products in the country. We generally will not be able to commence commercial
sales of Translarna for the treatment of nmDMD pursuant to the marketing authorization granted by the European Commission
in any particular member state of the EEA until we conclude the applicable pricing and reimbursement negotiations and comply
with any licensing, employment or related regulatory requirements in that country. In some countries we may be required to conduct
additional clinical trials or other studies of our product, including trials that compare the cost-effectiveness of our product to other
available therapies in order to obtain reimbursement or pricing approval. We may not be able to conclude pricing and reimbursement
negotiations or comply with additional regulatory requirements in the countries in which we seek to commercialize Translarna on
a timely basis, or at all.
The pricing and reimbursement process varies from country to country and can take a substantial amount of time from initiation
to complete. Pricing negotiations may continue after reimbursement has been obtained. We cannot predict the timing of Translarna’s
commercial launch in countries where we are awaiting pricing and reimbursement guidelines. While we have submitted pricing
and reimbursement dossiers with respect to Translarna for the treatment of nmDMD in many EEA countries, we have only received
both pricing and reimbursement approval on terms that are acceptable to us in a limited number of countries.
The price that is approved by governmental authorities in any country pursuant to commercial pricing and reimbursement processes
may be significantly lower than the price we are able to charge for sales under our reimbursed EAP programs and various forms
of national “market access agreements” may need to be entered into to achieve reimbursement. In some instances, reimbursement
may be subject to challenge, reduction or denial by the government and other payors.
For example, in France, EAP and commercial sales of a product can begin while pricing and reimbursement rates are under
discussion with the applicable government health programs. In the event that the negotiated price of the product is lower than the
amount reimbursed for sales made prior to the conclusion of price negotiations, we may become obligated to repay such excess
amount to the applicable government health program. We will make such retroactive reimbursement, if any, following the conclusion
of price negotiations with the applicable government health authority.
Further, based on unsustainable economics imposed by the arbitration board in Germany upon the conclusion of an arbitration
process in 2016 with us and the German Federal Association of the Statutory Health Insurances, we delisted Translarna from the
German pharmacy ordering system, effective April 1, 2016. While some patients and healthcare professionals in Germany have
been able to access Translarna through a reimbursed importation pathway possible under German law, there can be no assurance
that other patients or healthcare professionals in Germany will be successful doing so or, if initially successful, that any or all will
continue to be successful. We were required to reimburse payors in Germany the difference between the commercial price of
Translarna and the price established by the arbitration board in Germany for sales made in Germany after December 2015, other
than sales made pursuant to the reimbursed importation pathway.
Political, economic and regulatory developments may further complicate pricing and reimbursement negotiations and there can
be considerable pressure by governments and other stakeholders on prices and reimbursement levels, including as part of cost
containment measures. For example, these factors influenced the length of our pricing and reimbursement negotiations in England,
which took place between mid-2014 to mid-2016, and culminated in a five-year managed access agreement between us, (cid:1)ational
Health Services England, the (cid:1)ational Institute for Health and Care Excellence, or (cid:1)ICE, (cid:1)orthStar clinical network and the
patient organizations Muscular Dystrophy UK and Action Duchenne. The managed access agreement establishes the clinical details
surrounding the use of Translarna, including the terms and conditions of a confidential financial arrangement and the collection
of further data on the efficacy of Translarna for the treatment of nmDMD with (cid:1)ICE guidance to be reviewed again at the end of
the five-year period, before future funding decisions are taken.
In addition, adverse clinical and regulatory developments may exacerbate these risks, including the developments noted in the
foregoing risk factor titled, “ACT DMD did not meet its primary efficacy endpoint, and there is substantial risk that regulators
will not agree with our interpretation of the results of ACT DMD and the totality of clinical data from our trials in Translarna for
the treatment of nmDMD, which would have a material adverse effect on our business, financial performance and results of
operations.”
Reference pricing used by various EU member states and parallel distribution, or arbitrage between low-priced and high-priced
member states, can further reduce prices and revenues. Publication of discounts by third-party payors or authorities may lead to
further pressure on prices or reimbursement levels within the country of publication and other countries.
If we fail to successfully secure and maintain pricing and reimbursement coverage for Translarna or are significantly delayed in
doing so or if burdensome conditions are imposed by private payers, government authorities or other third-party payors on such
reimbursement, planned launches in the affected countries will be delayed and our business, results of operations and financial
condition could be adversely affected.
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Our relationships with customers, healthcare providers and professionals, patients, patient organizations, and third-party
payors are or will be subject to applicable anti-kickback, fraud and abuse, transparency and other healthcare laws and
regulations, which could expose us to criminal sanctions, civil penalties, contractual damages, reputational harm and
diminished profits and future earnings.
Healthcare providers, physicians and third-party payors play a primary role in the recommendation and prescription of any products
or product candidates, including Translarna and Emflaza, for which we have obtained or may obtain marketing approval. Our
arrangements with customers, healthcare providers and professionals and third-party payors may expose us to broadly applicable
fraud and abuse, transparency and other healthcare laws and regulations that may constrain the business or financial arrangements
and relationships through which we market, sell and distribute our products for which we obtain marketing authorization.
Failure to maintain a comprehensive and effective compliance program, and to integrate the operations of any acquired businesses
into a combined comprehensive and effective compliance program on a timely basis, could subject us to a range of regulatory
actions that could adversely affect our ability to commercialize our products and could harm or prevent sales of the affected
products, or could substantially increase the costs and expenses of commercializing and marketing our products.
Restrictions and reporting requirements under applicable U.S. federal and state healthcare laws and regulations, and equivalent
laws and regulations in the EU and other countries in which we operate, include, and are not limited to, the following:
• Anti-corruption and anti-bribery laws and regulations, such as the U.S. Foreign Corrupt Practices Act, or FCPA, the
UK Bribery Act of 2010, or Bribery Act, and similar statutes which have been adopted, or may be adopted in the future,
by other countries in which we operate and with which we are or may be required to comply.
• Anti-kickback laws and regulations, including those applicable in the United States, the United Kingdom and other
countries where we operate, which generally prohibit, among other things, persons from knowingly and willfully
soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward
either the referral of an individual for, or the purchase, order or recommendation of, any good or service, for which
payment may be made under government funded healthcare programs. The U.S. federal statute imposes criminal
penalties and has been broadly interpreted to apply to manufacturer arrangements with prescribers, purchasers and
formulary managers, among others and many states have enacted equivalent state laws that apply not only to government
payors but to commercial payors as well.
•
•
False claim laws and regulations, including the U.S. False Claims Act and similar state laws, which may permit civil
whistleblower or qui tam actions and may impose civil liability and criminal penalties on individuals and entities who
submit, or cause to be submitted, false or fraudulent claims for payment to the government. Federal enforcement
agencies have also showed increased interest in pharmaceutical companies' product and patient assistance programs,
including reimbursement and co-pay support services, and a number of investigations into these programs have resulted
in significant civil and criminal settlements.
Federal price reporting laws, including the Medicaid drug rebate statute, which requires manufacturers of covered
outpatient drugs to calculate and submit complex pricing information that is used as the basis for reimbursement of
certain drugs by, and payment of rebates to, the Medicaid program; the Medicare Prescription Drug, Improvement and
Modernization Act of 2003, or Medicare Modernization Act, which requires manufacturers to calculate and report a
drug’s Average Sales Price used to reimburse providers for physician-administered drugs under Medicare Part B; and
the Veterans Health Care Act of 1992, which requires, manufacturers of covered drugs (including all drugs approved
under an (cid:1)DA) to calculate and report a Federal Ceiling Price and offer their covered drugs for sale at no more than
that price to the Department of Veterans Affairs, the Department of Defense, and other agencies. The Veterans Health
Care Act also requires manufacturers to enter into pricing agreements with the Department of Health and Human
Services to charge no more than a different ceiling price (derived from the Medicaid rebate percentage) to covered
entities participating in the 340B drug discount program. Failure to accurately report drug pricing or provide the
mandatory discounts may subject the manufacturer to specific civil monetary penalties. Failure to comply with the
Veterans Health Care Act also jeopardizes payment by Medicaid for the manufacturer’s drugs. Certain states have also
enacted drug price transparency laws that require reporting of pricing information.
• Laws and regulations related to the privacy, security and transmission of individually identifiable health information,
including the U.S. Health Insurance Portability and Accountability Act of 1996, or HIPAA, as amended by the Health
Information Technology for Economic and Clinical Health Act of 2009, or HITECH, and similar state laws, such as
the California Consumer Privacy Act. For example, HIPAA, as amended by HITECH, along with its implementing
regulations, which impose obligations, including mandatory contractual terms, with respect to safeguarding the privacy,
security and transmission of protected health information, and may impose criminal and civil liability for violations
of these obligations. In addition, international data protection laws including the European General Data Protection
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Regulation, and supplementary member state, United Kingdom, European Economic Area, and Swiss legislation may
apply to some or all of the clinical or other protected data obtained, transmitted, or stored from those territories. These
laws require specific, freely given and fully informed consent to be obtained from patients or clinical study participants.
There are also other requirements for lawful processing, including transparency obligations, data minimization
requirements, and compliance with individuals’ stringent rights to access their personal data and to otherwise control
the processing of their personal data. There are data breach notification obligations, to supervisory authorities and to
individuals, where there are high risks to them arising from the data breach. These laws impose high regulatory fines
in the event of breach of processing requirements of up to 4% of global annual turnover or EUR 20 million (whichever
is the higher amount). Further certain privacy laws and genetic testing laws may apply directly to our operations and/
or those of our collaborators and may impose restrictions on our use and dissemination of individuals’ health information.
• HIPAA also imposes liability, including criminal liability, for, among other actions, knowingly and willfully executing,
or attempting to execute, a scheme to defraud or to obtain, by means of false or fraudulent pretenses, representations
or promises, any of the money or property owned by, or under the custody or control of, a healthcare benefit program,
regardless of whether the payor is public or private, in connection with the delivery or payment for health care benefits,
knowingly and willfully embezzling or stealing from a health care benefit program, willfully obstructing a criminal
investigation of a health care offense and knowingly and willfully falsifying, concealing, or covering up by any trick
or device a material fact or making any materially false statements in connection with the delivery of, or payment for,
healthcare benefits, items, or services relating to healthcare matters. (cid:1)otably, the Affordable Care Act amended the
intent requirement of certain of these criminal statutes under HIPAA so that a person or entity no longer needs to have
actual knowledge of the statute, or the specific intent to violate it, to have committed a violation.
• Laws and regulations governing the advertising and promotion of medicinal products, interactions with physicians and
patients, misleading and comparative advertising and unfair commercial practices. For example, legislation adopted
by individual EU member states that may apply to the advertising and promotion of medicinal products require that
promotional materials and advertising in relation to medicinal products comply with the product’s Summary of Product
Characteristics, or SmPC, as approved by the competent authorities. The SmPC is the document that provides
information to physicians concerning the safe and effective use of the medicinal product. Promotion of indications not
covered by the SmPC is specifically prohibited.
• Laws and regulations regulating off-label promotion of medicinal products, which is prohibited in the EU. The applicable
laws at EU level and in the individual EU member states also prohibit the direct-to-consumer advertising of prescription-
only medicinal products. Violations of the rules governing the promotion of medicinal products in the EU could be
penalized by administrative measures, fines and imprisonment. These laws may further limit or restrict the advertising
and promotion of our products to the general public and may also impose limitations on our promotional activities with
health care professionals.
• Laws and regulations in the United States, including the FDCA and other laws and regulations, that prohibit us from
promoting any of our FDA approved products for off-label uses and that require compliance with FDA’s advertising
and promotional requirements. For example, the FDA requires that all product advertising and promotion be consistent
with the FDA approved label, be truthful and non-misleading, be adequately substantiated, and have fair balance
between product benefit claims and risks, among other requirements. This means, for example, that we cannot make
claims about the use of our marketed products or their relative benefits compared to other treatments outside of their
FDA approved indications and label and without adequate comparative studies, and we would not be able to discuss
or provide information on off-label uses or safety benefits of such products in a promotional context. While physicians
may choose to prescribe products for uses that are not described in the product’s labeling and for uses that differ from
those tested in clinical studies and approved by the regulatory authorities, we are prohibited from marketing and
promoting the products for indications and uses that are not specifically approved by the FDA. Should the FDA or
other regulatory authorities determine that our activities constituted the promotion of off-label use or a violation of its
other promotional and marketing standards, we could face significant enforcement action and substantial penalties,
including, but not limited to action to prevent us from distributing those products for the off-label use and could impose
fines and penalties on us and our executives, and such a determination could also trigger civil or criminal liability under
other applicable laws in the United States.
• Laws and regulations requiring that we disclose publicly payments made to physicians, including in certain EU member
states and the United States. For example, in the United States, under the federal Physician Payments Sunshine Act
requirements, manufacturers of drugs, devices, biologics and medical supplies must report information related to
payments and other transfers of value made to or at the request of covered recipients, such as physicians and teaching
hospitals, as well as physician ownership and investment interests in such manufacturers. A number of U.S. states and
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other countries have enacted their own transparency requirements that obligate manufacturers to report different types
of spending related to physicians, certain hospitals, and other covered recipients.
In addition, interactions between pharmaceutical companies and physicians are also governed by industry self-regulation codes
of conduct and physicians’ codes of professional conduct. In the United States, some state laws require pharmaceutical companies
to comply with these industry and physician codes and the relevant compliance guidance promulgated by the federal government.
The provision of benefits or advantages to physicians to induce or encourage the prescription, recommendation, endorsement,
purchase, supply, order or use of medicinal products is prohibited in the EU. The provision of benefits or advantages to physicians
is also governed by the national laws of the EU member states, as well as codes of conduct issued by self-regulatory industry
bodies. Moreover, agreements with physicians must often be the subject of prior notification and approval by the physician’s
employer, their competent professional organization, and the competent authorities of the individual EU member states. These
requirements are provided in the national laws, industry codes, or professional codes of conduct, applicable in the EU member
states.
Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws, regulations,
transparency requirements and self-regulatory codes have and will continue to involve substantial costs. We cannot guarantee that
we, our employees, our consultants, our third-party contractors, or the physicians or other providers or entities with whom we
expect to do business, are or will be in compliance with all federal, state and ex-U.S. regulations and codes. It is possible that
governmental authorities could conclude that our business practices may not comply with current or future statutes, regulations
or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be in
violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil,
criminal and administrative penalties, damages, fines, exclusion from government funded healthcare programs, such as Medicare
and Medicaid, reputational harm, and the curtailment or restructuring of our operations. Exclusion, suspension and debarment
from government funded healthcare programs would adversely affect, perhaps materially, our ability to commercialize, sell or
distribute any drug. Even if we were not determined to have violated these laws, government investigations into these issues
typically require the expenditure of significant resources and generate negative publicity, which could also have an adverse effect
on our business, financial condition and results of operations.
Legislative and regulatory changes affecting the pharmaceutical industry or the healthcare system more broadly may increase
the difficulty and cost for us to obtain or maintain marketing authorization of and commercialize our products and product
candidates and affect the coverage and reimbursement we may obtain.
Our industry is highly regulated and changes in law may adversely impact our business, operations, or financial results. In the
United States and some ex-U.S. jurisdictions, there have been a number of legislative and regulatory changes and proposed changes
regarding the healthcare system that could prevent or delay marketing authorization of Translarna or any of our other product
candidates, restrict or regulate post-approval activities and affect our ability to profitably sell any products or product candidates,
including Translarna and Emflaza, for which we have obtained, or may obtain, marketing authorization.
Certain provisions of enacted or proposed legislative changes may negatively impact coverage and reimbursement of healthcare
items and services. For example, in the United States, the Medicare Modernization Act changed the way Medicare covers and
pays for pharmaceutical products. Cost reduction initiatives and other provisions of this legislation could decrease the coverage
and reimbursement that we receive for any approved products. While the Medicare Modernization Act applies only to drug benefits
for Medicare beneficiaries, private payors often follow Medicare coverage policy and payment limitations in setting their own
policies. Therefore, any restrictions to coverage or reductions in reimbursement that result from the Medicare Modernization Act
may result in a similar coverage restriction or reimbursement reduction from private payors. In addition, private payors may
implement coverage restrictions or payment reductions independently from federal programs such as Medicare.
Similarly, in the United States, the Affordable Care Act contains provisions that may reduce the profitability of drug products.
However, the current Presidential Administration and U.S. Congress have expressed a desire to modify, repeal or otherwise
invalidate all, or certain provisions of, the Affordable Care Act, and there are pending lawsuits challenging the Affordable Care
Act, which has contributed to the uncertainty of the ongoing implementation and impact of the Affordable Care Act and also
underscores the potential for additional reform going forward. We cannot assure that the Affordable Care Act, as currently enacted
or as amended in the future, will not adversely affect our business and financial results.
Promulgated and proposed regulatory changes could also affect coverage or reimbursement of our products and in 2016, CMS
issued a final rule regarding the Medicaid drug rebate program, which among other things, revises the manner in which the “average
manufacturer price” is to be calculated by manufacturers participating in the program and implements certain amendments to the
Medicaid rebate statute created under the ACA. More recently, Congress amended the Medicaid statute, effective October 1, 2019,
to exclude prices paid by secondary manufacturers for an authorized generic drug (but not a product approved under the BLA
process) from the (cid:1)DA holder’s AMP for the brand, thereby increasing the rebate amount and the 340B price for the brand.
Similarly, 340B program guidance regulations on civil monetary penalties for statutory violations, which was finalized in early
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2017, went into effect January 1, 2019. In October 2018, CMS issued an advance notice of proposed rulemaking paving the way
for a proposed rule in 2019 that would significantly reduce the price of drugs paid by Medicare Part B by basing reimbursement
on the average prices among other industrialized countries,
We anticipate that the U.S. Congress, administrative agencies, state legislatures and the private sector will continue to consider
and may adopt healthcare policies intended to curb rising healthcare costs. These cost containment measures may include:
controls on government funded reimbursement for drugs;
caps or mandatory discounts under certain government sponsored programs;
controls on healthcare providers;
challenges to the pricing of drugs or limits on prohibitions on reimbursement or specific products through other
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means;
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reform of drug importation laws and policies;
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healthcare for a fixed cost per person; and
expansion of use of managed care systems in which the healthcare providers contract to provide comprehensive
•
requirements or restrictions related to direct-to-consumer advertising or drug marketing practices.
We are unable to predict what additional legislation, regulations or policies, if any, relating to the healthcare industry or third-
party coverage and reimbursement may be enacted in the future or what effect such legislation, regulations or policies would have
on our business. Any cost containment measures, including those listed above, or other healthcare system reforms that are adopted,
could significantly decrease the available coverage and the price we might establish for our products, which would have an adverse
effect on our net revenues and operating results.
In the EU, similar political, economic and regulatory developments may affect our ability to profitably commercialize Translarna
and our product candidates. In addition to continuing pressure on prices and cost containment measures, legislative developments
at the EU or member state level may result in significant additional requirements or obstacles that may increase our operating
costs. We cannot predict how future changes relating to healthcare reform in the EU, the United States, or other territories, will
affect our business.
Legislative and regulatory proposals have also been made to expand post-approval requirements, limit regulatory exclusivity
periods or the applicability of such exclusivity periods, restrict sales and promotional activities for pharmaceutical products and
to otherwise encourage competition in the market and bring down drug prices, including proposals related to drug importation.
We cannot be sure whether additional legislative or regulatory changes will be enacted in any territory in which we are authorized,
or become authorized, to market Translarna, Emflaza, or any of our other product candidates, or whether applicable regulations,
guidance or interpretations will be changed, or what the impact of such changes on the marketing authorizations of our products
or product candidates, if any, may be. In addition, increased scrutiny by the U.S. Congress of the FDA’s approval process or by
comparable ex-U.S. bodies overseeing regulatory authorities in other territories may significantly delay or prevent marketing
authorization, as well as subject us to more stringent product labeling and post-marketing testing and other requirements. We
cannot predict how future changes relating to pre- and post-marketing approval and requirements will affect our business.
Risks Related to Our Business
We may expend our limited resources to pursue a particular product, product candidate or indication and fail to capitalize on
product candidates or indications that may be more profitable or for which there is a greater likelihood of success.
Because we have limited financial and managerial resources, we focus on products, research programs and product candidates for
specific indications. As a result, we may forgo or delay pursuit of opportunities with other product candidates or for other indications
that later prove to have greater commercial potential.
For example, in connection with our acquisition of Agilis, we paid upfront consideration comprised of $49.2 million in cash and
3,500,907 shares of our common stock. Agilis equityholders may become entitled to receive contingent payments from us based
on the achievement of certain development, regulatory and net sales milestones as well as based upon a percentage of net sales
of certain products. Additionally, we are required to pay $40.0 million of the development milestone payments upon the passing
of the second anniversary of the closing of the acquisition, August 23, 2020, regardless of whether the applicable milestones have
been achieved. We may never realize the anticipated benefits of the acquisition of Agilis and by investing our limited resources
in this product, we may be required to forgo or delay other opportunities.
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In addition, we initiated separate Phase 2 clinical trials of Translarna for the treatment of hemophilia in 2009 and the metabolic
disorder methylmalomic acidemia in 2010, but then suspended these clinical trials to focus on the development of Translarna for
nmDMD and nmCF when we found variability in the assays used in these trials and preliminary data from these trials did not
indicate definitive evidence of activity. We also initiated a Phase 2 clinical trial of Translarna for treatment of mucopolysaccharidosis
type I caused by nonsense mutation in 2015, but in the third quarter of 2017 we stopped enrollment and began to wind down this
study due to difficulties identifying qualified patients. In March 2017, we discontinued our clinical development of Translarna for
nmCF based on the negative outcome of a Phase 3 clinical trial. Our resource allocation decisions may cause us to fail to capitalize
on viable commercial products or profitable market opportunities. Our spending on current and future research and development
programs and product candidates for specific indications may not yield any commercially viable products.
Until our acquisition of a gene therapy platform, historically, we have based our research and development efforts on small-
molecule drugs that target post-transcriptional control processes. (cid:1)otwithstanding our large investments to date and anticipated
future expenditures in proprietary technologies for both small-molecule and gene therapy drug discovery, to date we have only
been granted marketing authorization in the EEA to treat nmDMD under a restricted label that is subject to the specific obligation
to conduct Study 041 as well as annual renewal and reassessment requirements, marketing authorization in Brazil for the treatment
of nmDMD in ambulatory patients aged five years and older and marketing authorization in Brazil for the treatment of stage 1 or
stage 2 polyneuropathy in adult patients with hATTR amyloidosis. We may never realize a return on investment. We may not be
able to successfully renew or satisfy the ongoing requirements of our current marketing authorization for nmDMD in the EEA
and we may never successfully develop any other marketable drugs or indications using our scientific approach. As a result of
pursuing the development of product candidates using our proprietary technologies, we may fail to develop product candidates
or address indications based on other scientific approaches that may offer greater commercial potential or for which there is a
greater likelihood of success. Research programs to identify new product candidates require substantial technical, financial and
human resources. These research programs may initially show promise in identifying potential product candidates, yet fail to yield
product candidates for clinical development.
If we do not accurately evaluate the commercial potential or target market for a particular product candidate, we may relinquish
valuable rights to that product candidate through collaboration, licensing or other royalty arrangements in cases in which it would
have been more advantageous for us to retain sole development and commercialization rights to such product candidate.
We contract with third parties for the manufacture and distribution of our products and our product candidates, which may
increase the risk that we will not have sufficient quantities of our products or product candidates, such quantities may not meet
the applicable regulatory quality standards, or such quantities at an acceptable cost, which could delay, prevent or impair our
commercialization or development efforts. For certain of our product candidates, we may also directly engage in manufacturing,
which will require significant expenditures and compliance with FDA’s manufacturing requirements.
We have limited personnel with experience in drug manufacturing and currently rely on third parties to manufacture our products
and certain product candidates on a clinical or commercial scale. We currently rely on third parties for supply of the active
pharmaceutical ingredients used in all of our products and product candidates. We outsource all manufacturing, packaging, labeling
and distribution of our products and product candidates to third parties, including our commercial supply of Translarna and Emflaza.
We are, however, taking steps to increase our manufacturing capabilities for our gene therapy platform, although we currently rely
on third-party manufacturers to be capable of providing sufficient quantities of our program materials to meet anticipated clinical
trial and commercial scale demands. Once we commence our own gene therapy manufacturing, we will be required to directly
comply with the applicable regulatory authorities’ manufacturing requirements and will be subject to inspection. Utilizing our
own manufacturing will require a significant investment and we may never be successful in developing our own manufacturing
capacity, especially given the complexities of gene therapy manufacturing. For additional information, see the risk factor under
“Risks Related to Our Gene Therapy Platform” titled, “We have no experience manufacturing gene therapy products on our own
and could encounter problems and delays in establishing our biologics manufacturing facility that could adversely affect our
business.”
Currently, and even once we begin to engage in manufacturing ourselves, we do not and will not directly control manufacturing
for most of our products and product candidates and we are dependent on and will continue to be dependent on, our contract
manufacturers for compliance with cGMP or good distribution practice, or GDP, or similar regulatory requirements outside the
EU and the United States for manufacture of both active drug substances and finished drug products. Should we or our contract
manufacturers fail to comply with these requirements, we and they could face significant regulatory and commercial consequences.
For example, the FDA regularly inspects manufacturing and other drug/biologic facilities. Our manufacturers and manufacturing
facilities must also be approved by the FDA pursuant to inspections that will be conducted after we submit our marketing applications
to the agency and will be subject to continuing FDA and other regulatory authority inspections should we receive marketing
approval. If we or our contract manufacturers cannot successfully manufacture material that conforms to our specifications and
the strict regulatory requirements of the EU member state regulatory authorities, FDA, or other ex-U.S. regulatory agencies, we
or they will not be able to secure and/or maintain regulatory approval for the manufacturing facilities, and we would not be able
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to secure and/or maintain, or may be delayed in securing regulatory approval of marketing applications or supplements for the
applicable products or product candidates. In addition, we or third-party manufacturers or distributors may not be able to comply
with cGMP or good distribution practice, or GDP, or similar regulatory requirements outside the EU and the United States. Our
failure, or the failure of our third-party manufacturers or distributors, over whom we have no direct control, to comply with
applicable regulations could result in sanctions being imposed on us, including fines, injunctions, civil penalties, delays, suspension
or withdrawal of approvals, clinical holds or termination of clinical studies, warning or untitled letters, regulatory communications
warning the public about safety issues with a product, import or export refusals, license revocation, seizures, detentions, or recalls
of product candidates or product, operating restrictions, criminal prosecutions or debarment, suits under the civil False Claims
act, corporate integrity agreements, or consent decrees any of which could significantly and adversely affect supplies of our
products or product candidates and our business, results of operations and financial condition could be materially adversely affected.
In addition, we have no direct control over the ability of our contract manufacturers to maintain adequate quality control, quality
assurance and qualified personnel. Furthermore, all of our contract manufacturers are engaged with other companies to supply
and/or manufacture materials or products for such companies, which exposes our manufacturers to regulatory risks for the
production of such other materials and products. As a result, failure to meet the regulatory requirements for the production of
those materials and products may generally affect the regulatory status of our contract manufacturers’ facilities. If the FDA, EU
member state regulatory authorities or a comparable ex-U.S. regulatory agency do not approve these or our facilities for the
manufacture of our product candidates or if it withdraws its approval in the future, we may need to find alternative manufacturing
facilities, which would negatively impact our ability to develop, obtain regulatory approval for or market our products or product
candidates, if approved. There is also no guarantee that we would be able to find alternative manufacturing facilities or enter into
agreements with alternative manufacturers on favorable terms. There may be limited manufacturers who would have the ability
to manufacture our products and product candidates, especially our gene therapy product candidates. Moreover, any alternative
manufacturers would need to be approved by FDA, which approval is not guaranteed. We, accordingly, may not be able to make
alternative manufacturing arrangements, which could adversely affect our products, product candidates, and our business, results
of operations and financial condition.
We currently rely on a single source for the production of some of our raw materials and we obtain our supply of the drug substance
for Translarna from two third-party manufacturers and the drug substance for our oncology program through another third-party
manufacturer. We engage two separate manufacturers to provide bulk drug product for Translarna. We have a relationship with
three manufacturers that are capable of providing fill and finish services for our finished commercial and clinical Translarna
product, although we are still in the process of finalizing arrangements with one of these manufacturers with respect to commercial
product services.
We do not currently have any agreements with third-party manufacturers for the long-term commercial supply of Translarna or
any of our product candidates, although we may seek to establish such arrangements in the future. In the event that we are unable
to procure supply from a validated manufacturer, we would seek to identify and qualify replacement suppliers, however this process
would likely delay our ability to supply Translarna to patients or advance our clinical trials. We may be unable to conclude
agreements for commercial or clinical supply of Translarna with third-party manufacturers, or we may be unable to do so on
acceptable terms.
We currently have a contract with a pharmacy and hospital distributor in the EU that distributes Translarna for clinical programs
and limited commercial and EAP programs. We have engaged with third-party logistic providers, or 3PLs, which distribute
Translarna for the majority of our commercial and EAP programs on our behalf. We intend to engage additional distributors if and
when, if ever, we become authorized to make Translarna available for purchase in such additional geographies.
We obtain our supply of the drug substance for Emflaza through a third-party manufacturer that is currently the only third-party
manufacturer qualified to provide Emflaza drug substance. All of our drug product manufacturing, processing and packaging needs
for Emflaza tablet and suspension product are fulfilled through two different exclusive supply agreements that we assumed in
connection with our acquisition of Emflaza. We expect to fulfill all of our requirements for Emflaza tablets as well as secondary
packaging of pre-filled Emflaza oral suspension bottles pursuant to one of these agreements, which has an initial term of five
years. We expect to fulfill all of our requirements for Emflaza suspension product pursuant to the other agreement. Through the
seventh year anniversary of FDA approval of Emflaza, we are obligated to pay to the manufacturer of the Emflaza suspension
product royalty payments, on a quarterly basis, based on a percentage (ranging from low to middle-low double digits) of, or a
fixed payment with respect to, our annual net sales of suspension product in the United States, subject to reduction in accordance
with the terms of the agreement. The royalty payments for the suspension product are subject to a minimum aggregate annual
payment ranging from €0.5 million to €1.5 million per year.
If our drug substance provider or either of our drug product manufacturers becomes unable to provide drug substance or manufacture
Emflaza product in sufficient quantities to meet projected demand, future sales could be adversely affected, which in turn could
have a detrimental impact on our ability to maintain our marketing authorization in the United States and on our ability to
commercialize Emflaza, which in turn would have a material adverse effect on our business, financial results and results of
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operations. Further, as we presently have no patent rights to protect the approved use of Emflaza, we expect to rely upon market
exclusivity periods available to us under the Orphan Drug Act and Hatch-Waxman Act to commercialize Emflaza for DMD in the
United States. As the holder of orphan exclusivity, we are required to assure the availability of sufficient quantities of Emflaza to
meet the needs of patients. Failure to do so could result in loss of the drug's orphan exclusivity in the United States, which would
have a material adverse effect on our ability to generate revenue from sales of Emflaza.
We utilize third parties for the commercial distribution of Emflaza, including a 3PL to warehouse Emflaza as well as a specialty
pharmacy to sell and distribute Emflaza to patients. The specialty pharmacy provides us with third-party call center services to
provide patient support and financial services, prescription intake and distribution, reimbursement adjudication, and ongoing
compliance support. If we are unable to effectively manage this distribution process, the continuance of our commercial launch and
sales of Emflaza may be delayed or compromised.
Even if we are able to establish and maintain arrangements with third-party manufacturers and distributors, reliance on such service
providers as well as the use of specialty pharmacies and a call center entails additional risks, including:
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reliance on the third party for regulatory compliance and quality assurance;
the possible breach of the manufacturing agreement by the third party;
the possible misappropriation of our proprietary information, including our trade secrets and know-how;
the possibility of commercial supplies of our products not being distributed to commercial vendors or end users in a
timely manner, resulting in lost sales;
the possibility of clinical supplies not being delivered to clinical sites on time, leading to clinical trial interruptions;
the possibility of third-party resources not being devoted in the manner necessary to satisfy our requirements within
the expected time frame;
the possibility of third parties not providing us with accurate or timely information regarding their inventories, the
number of patients who are using our products, or serious adverse events and/or product complaints regarding our
products;
the possibility of third parties being unable to satisfy their financial obligations to us or to others; and
the possible termination or nonrenewal of a critical agreement by the third party at a time that is costly or inconvenient
to us.
Many additional factors could cause production or distribution interruptions with the manufacture and distribution of any of our
products and product candidates, including human error, natural disasters, labor disputes, acts of terrorism or war, equipment
malfunctions, contamination, or raw material shortages.
Our products and product candidates and any other products that we may develop may compete with other product candidates and
products for access to manufacturing facilities. There are a limited number of manufacturers that operate under cGMP regulations
and that might be capable of manufacturing for us. In addition, changes in cGMP regulations could negatively impact our ability
or the ability of our contract manufacturers to complete the manufacturing process of our products and our product candidates in
a compliant manner on the schedule we require for commercial and clinical trial use, respectively.
If we or the third parties that we engage to manufacture product for our commercial sales, preclinical tests and clinical trials should,
prior to the time that we have validated alternative providers, cease to continue to do so for any reason, we likely would experience
delays in our ability to supply Translarna or Emflaza to patients or in our ability to advance our clinical trials while we identify
and qualify replacement suppliers and we may be unable to obtain replacement supplies on terms that are favorable to us. In
addition, if we are not able to obtain adequate supplies of our products or product candidates or the drug substances used to
manufacture them, we will lose commercial sales revenue and it will be more difficult for us to develop our product candidates
and compete effectively.
We or our contract manufacturers may also encounter other impediments or difficulties that could adversely affect our products,
product candidates, and our business, results of operations and financial condition. For example, we or our manufacturers may
experience shortages in raw materials and components, not be able to scale up manufacturing capacities to support more advanced
clinical trials or product commercialization, may not be able to qualify or validate facilities, equipment, and processes, or may
not be able to obtain or develop the necessary technological capabilities, either through knowledge transfer or independent
development. To the extent that any contract manufacturers develop proprietary manufacturing processes or procedures, should
we need to change manufacturers, we may not be able to transfer such know-how to a new manufacturer. In such a case, the new
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manufacturer would need to invest substantial time, money, and effort to develop its own processes and procedures, which would
require FDA approval.
Third parties might illegally distribute and sell counterfeit or unfit versions of our products that do not meet our rigorous
manufacturing and testing standards. A patient who receives a counterfeit or unfit drug may be at risk for a number of dangerous
health consequences. Our reputation and business could suffer harm as a result of counterfeit or unfit drugs sold under our brand
name. In addition, thefts of inventory at warehouses, plants or while in-transit, which are not properly stored and which are sold
through unauthorized channels, could adversely impact patient safety, our reputation and our business.
Our current and anticipated future dependence upon others for the manufacture and distribution of Translarna, Emflaza and certain
of our product candidates may adversely affect our business, financial condition, results of operations and limit our ability to grow
including our ability to develop product candidates and commercialize our products that receive regulatory approval on a timely
and competitive basis.
We rely on third parties to conduct our preclinical and clinical trials, and those third parties may not perform satisfactorily,
including failing to meet deadlines for the completion of such trials.
We do not independently conduct preclinical or clinical trials for our products or product candidates. We rely on third parties, such
as contract research organizations, clinical data management organizations, medical institutions and clinical investigators, to
perform this function. While we have agreements governing the activities of such third parties, we have limited influence and
control over their actual performance and activities. For instance, our third-party service providers are not our employees, and
except for remedies available to us under our agreements with such third parties we cannot control whether or not they devote
sufficient time and resources to our ongoing clinical, non-clinical, and preclinical programs. If these third parties do not successfully
carry out their contractual duties, meet expected deadlines or conduct our preclinical studies or clinical trials in accordance with
regulatory requirements or our stated protocols, if they need to be replaced or if the quality or accuracy of the data they obtain is
compromised due to the failure to adhere to our protocols, regulatory requirements or for other reasons, our trials may be repeated,
extended, delayed, or terminated, we may not be able to obtain, or may be delayed in obtaining, marketing approvals for our
product candidates, we may not be able to, or may be delayed in our efforts to, successfully commercialize our product candidates,
or we or they may be subject to regulatory enforcement actions. As a result, our results of operations and the commercial prospects
for our product candidates would be harmed, our costs could increase and our ability to generate revenues could be delayed. To
the extent we are unable to successfully identify and manage the performance of third-party service providers in the future, our
business may be materially and adversely affected. Further, any of these third parties may terminate their engagements with us at
any time. If we need to enter into alternative arrangements, it would delay our product development activities.
Our reliance on these third parties for clinical development activities reduces our control over these activities but does not relieve
us of our responsibilities. For example, we remain responsible for ensuring that each of our clinical trials is conducted in accordance
with the general investigational plan and protocols for the trial. Moreover, the FDA requires us to comply with standards, commonly
referred to as GCP for conducting, recording and reporting the results of clinical trials to assure that data and reported results are
credible and accurate and that the rights, integrity and confidentiality of trial participants are protected. We also are required to
register ongoing clinical trials and post the results of completed clinical trials on a government-sponsored database,
ClinicalTrials.gov, within certain timeframes. Failure to do so can result in fines, adverse publicity and civil and criminal sanctions.
In addition, we will be required to report certain financial interests of our third-party investigators if these relationships exceed
certain financial thresholds or meet other criteria. The FDA or comparable ex-U.S. regulatory authorities may question the integrity
of the data from those clinical trials conducted by investigators who may have conflicts of interest. We must further ensure that
our preclinical trials are conducted in accordance with good laboratory practices, or GLPs, as appropriate. Regulatory authorities
enforce these requirements through periodic inspections of trial sponsors, clinical and preclinical investigators, and trial sites.
Similar GCP and transparency requirements apply in the EU. Failure to comply with the applicable regulatory requirements,
including with respect to clinical trials conducted outside the EU and United States, can also lead regulatory authorities to refuse
to accept into account clinical trial data submitted as part of a marketing application, as well as other regulatory consequences, as
further described above
For example, in the first half of 2013 inspectors acting at the request of the EMA conducted GCP inspections of selected clinical
sites from our completed Phase 2b clinical trial of Translarna for the treatment of nmDMD and our clinical trial site relating to
our then pending marketing authorization application for approval of Translarna for the treatment of nmDMD. Following these
inspections, we received inspection reports containing a combination of critical and major findings. These findings related to
waivers we granted to admit patients to our Phase 2b clinical trial of Translarna for the treatment of nmDMD in advance of formal
approval of protocol amendments that would have established their eligibility for the trial, as well as our oversight of our trial
sites and the completeness or sufficiency of clinical trial documentation. In response to these findings, we described to the EMA
the enhanced internal procedures and controls we have implemented, and the internal quality assurance department we have
established, since the conclusion of our Phase 2b clinical trial of Translarna for the treatment of nmDMD. In addition, we proposed
corrective action plans to address the inspectors’ specific findings. If we do not meet our commitment to the corrective actions
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we proposed to the EMA, we may face additional consequences, including rejection of data or other direct action by national
regulatory authorities, which could require us to conduct additional clinical trials or other supportive studies to maintain our
marketing authorization in the EEA for Translarna for the treatment of nmDMD or to obtain full approval from the EMA.
Furthermore, third parties that we rely on for our clinical development activities may also have relationships with other entities,
some of which may be our competitors. If these third parties do not successfully carry out their contractual duties, meet expected
deadlines or conduct our clinical trials in accordance with regulatory requirements or our stated protocols, we will not be able to
obtain, or may be delayed in obtaining, marketing authorizations for our product candidates and will not be able to, or may be
delayed in our efforts to, successfully commercialize our product candidates. Our product development costs will increase if we
experience delays in testing or obtaining marketing authorizations.
We also rely on other third parties to store and distribute drug supplies for our clinical trials. Any performance failure on the part
of our distributors could delay clinical development or marketing authorizations of our products or product candidates or
commercialization of our products, producing additional losses and depriving us of potential product revenue.
We may rely on third parties to perform many essential services for any products that we commercialize, including services
related to warehousing and inventory control, distribution, government price reporting, customer service, accounts receivable
management, cash collection, and pharmacovigilance and adverse event reporting. If these third parties fail to perform as
expected or to comply with legal and regulatory requirements, our ability to commercialize our product candidates will be
significantly impacted and we may be subject to regulatory sanctions.
We may retain third-party service providers to perform a variety of functions related to the sale and distribution of our product
candidates, key aspects of which will be out of our direct control. These service providers may provide key services related to
warehousing and inventory control, distribution, customer service, accounts receivable management, and cash collection. If we
retain a service provider, we would substantially rely on it as well as other third-party providers that perform services for us,
including entrusting our inventories of products to their care and handling. If these third-party service providers fail to comply
with applicable laws and regulations, fail to meet expected deadlines, or otherwise do not carry out their contractual duties to us,
or encounter physical or natural damage at their facilities, our ability to deliver product to meet commercial demand would be
significantly impaired and we may be subject to regulatory enforcement action.
In addition, we may engage third parties to perform various other services for us relating to pharmacovigilance and adverse event
reporting, safety database management, fulfillment of requests for medical information regarding our product candidates and
related services. If the quality or accuracy of the data maintained by these service providers is insufficient, or these third parties
otherwise fail to comply with regulatory requirements, we could be subject to regulatory sanctions.
Additionally, we may contract with a third party to calculate and report pricing information mandated by various government
programs. If a third party fails to timely report or adjust prices as required, or errors in calculating government pricing information
from transactional data in our financial records, it could impact our discount and rebate liability, and potentially subject us to
regulatory sanctions or False Claims Act lawsuits.
We currently depend, and expect to continue to depend, on collaborations with third parties for the development and
commercialization of some of our product candidates. If those collaborations are not successful, we may not be able to capitalize
on the market potential of these product candidates.
For each of our product candidates, we plan to evaluate the merits of retaining commercialization rights for ourselves or entering
into selective collaboration arrangements with leading pharmaceutical or biotechnology companies, such as our collaborations
with Roche and the SMA Foundation, for our spinal muscular atrophy program. We have entered into arrangements with certain
third parties to market or distribute Translarna for the treatment of nmDMD in certain countries and, as we continue to implement
our commercialization plans for Translarna, we anticipate that we will engage additional third parties to perform these functions
for us in other countries. We generally plan to seek collaborators for the development and commercialization of product candidates
that have high anticipated development costs, are directed at indications for which a potential collaborator has a particular expertise,
or involve markets that require a large sales and marketing organization to serve effectively. Our likely collaborators for any
marketing, distribution, development, licensing or broader collaboration arrangements may include: large and mid-size
pharmaceutical companies, regional and national pharmaceutical companies and/or biotechnology companies.
We will have limited control over the amount and timing of resources that our collaborators dedicate to the development or
commercialization of our product candidates and our collaborators will be subject to the same product development and
commercialization risks that we are subject to. Our ability to generate revenues from these arrangements will depend on our
collaborators’ desire and ability to successfully perform the functions assigned to them in these arrangements. In particular, the
successful development of a product candidate from our spinal muscular atrophy program will depend on the success of our
collaborations with the SMA Foundation and Roche, including whether Roche continues clinical development of risdiplam or
pursues clinical development of any other compounds identified under the collaborations.
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Collaborations involving our product candidates, including our collaborations with the SMA Foundation and Roche, pose the
following risks to us:
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collaborators have significant discretion in determining the efforts and resources that they will apply to these
collaborations;
collaborators may not pursue development and commercialization of our product candidates or may elect not to continue
or renew development or commercialization programs, based on clinical trial results, changes in the collaborators’
strategic focus or available funding, or external factors such as an acquisition that diverts resources or creates competing
priorities;
collaborators may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinical trial or
abandon a product candidate, repeat or conduct new clinical trials or require a new formulation of a product candidate
for clinical testing;
collaborators could independently develop, or develop with third parties, products that replace or compete directly or
indirectly with our products or product candidates if the collaborators believe that competitive products are more likely
to be successfully developed or can be commercialized under terms that are more economically attractive than ours;
collaborators may fail to comply with the applicable regulatory requirements, subjecting them or us to potential
regulatory enforcement action;
a collaborator with marketing and distribution rights to one or more products may not commit sufficient resources to
the marketing and distribution of such product or products;
collaborators may not properly maintain or defend our intellectual property rights or may use our proprietary information
in such a way as to invite litigation that could jeopardize or invalidate our intellectual property or proprietary information
or expose us to potential litigation;
collaborators may infringe the intellectual property rights of third parties, which may expose us to litigation and potential
liability;
disputes may arise between the collaborator and us as to the ownership of intellectual property arising during the
collaboration;
• we may grant exclusive rights for our products or product candidates to our collaborators, which would prevent us
from collaborating with others, or from using our products or product candidates ourselves;
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disputes may arise between the collaborators and us that result in the delay or termination of the collaboration, which
may include ending research, development or commercialization activities for our products or product candidates or
that result in costly litigation or arbitration that diverts management attention and resources; and
collaborations may be terminated and, if terminated, may result in a need for additional capital to pursue further
development or commercialization of the applicable product candidates.
Collaboration agreements may not lead to development or commercialization of product candidates in the most efficient manner
or at all. If a collaborator of ours were to be involved in a business combination, the continued pursuit and emphasis on our product
development or commercialization program could be delayed, diminished or terminated.
We face risks related to health epidemics and other widespread outbreaks of contagious disease, which could significantly
disrupt our operations and impact our operating results.
Significant outbreaks of contagious diseases, and other adverse public health developments, could have a material impact on our
business operations and operating results. In December 2019, a strain of novel coronavirus, COVID-19, causing respiratory illness
emerged in the city of Wuhan in the Hubei province of China. The Chinese government has taken certain emergency measures to
combat the spread of the virus, including implementation of travel bans and closure of factories and businesses. Since that time,
multiple other countries throughout the world have been affected by the spread of the virus. We continue to monitor the global
spread of COVID-19 and have put in place and will continue to put in place measures as appropriate and necessary for our business.
Any prolonged deviations from normal daily operations could negatively impact our business.
Additionally, we have clinical trial sites and significant suppliers and manufacturing located in countries that have been affected
by COVID-19 that may be disrupted. For example, the majority of patients that are currently enrolled in Study 041 are located in
countries that have been directly affected by the virus, which may cause delays in the completion of the study and have a material
adverse effect on our ability to maintain our authorization for Translarna in the EEA. Failure to maintain such authorization would
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have a material adverse effect on our business, results of operations and financial performance. While the full impact of this
outbreak is unknown at this time, we are closely monitoring the rapid developments in countries that have become exposed to the
virus and continually assessing the potential impact on our business. Any prolonged disruption of our clinical trials, suppliers or
contract manufacturers, closures of facilities, such as clinical trial sites, suppliers, manufacturers and distributors, including single
source suppliers, and delaying regulatory approvals or the commercialization of any current or future products.
Our business and operations would suffer in the event of computer system failures, cyber-attacks or a deficiency in our, or our
collaborators’ or third-party vendors’, cyber-security.
We collect, store and transmit large amounts of confidential information, including personal information, operational and financial
transactions and records, clinical trial data and information relating to intellectual property, on internal information systems and
through the information systems of collaborators and third-party vendors with whom we contract. Despite our implementation of
security measures, these information systems are vulnerable to damage from computer viruses, malware, natural disasters, terrorism,
war, telecommunication and electrical failures, cyber-attacks or cyber-intrusions over the Internet or other mechanisms, attachments
to emails, persons inside our organization, or persons with access to systems inside our organization. (cid:1)o such security measures
can eliminate the possibility of the information systems' improper functioning or the improper access or disclosure of confidential
or personally identifiable information such as in the event of cyber-attacks. The risk of a security breach or disruption, particularly
through cyber-attacks or cyber-intrusion, including by computer hackers, criminals, ex-U.S. governments, and cyber terrorists,
has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have
increased. Additionally, outside parties may attempt to fraudulently induce employees, collaborators, or other third-party vendors
to disclose sensitive information or take other actions, including making fraudulent payments or downloading malware, by using
“spoofing” and “phishing” emails or other types of attacks. If such an event were to occur and cause interruptions in our operations,
it could result in a material disruption of our clinical and commercialization activities and business operations, in addition to
possibly requiring substantial expenditures of resources to remedy. For example, the loss of clinical trial data from completed or
ongoing or planned clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to
recover or reproduce the data. To the extent that any disruption or security breach was to result in a loss of or damage to our data
or applications, or inappropriate disclosure of confidential or proprietary information, we could incur material legal claims and
liability, damage to our reputation, suffer loss or harm to our intellectual property rights, face significant financial exposure,
including incurring significant costs to remediate possible injury to the affected parties and the further research, development and
commercial efforts of our products and product candidates could be delayed.
Product liability lawsuits against us could cause us to incur substantial liabilities and to limit clinical trials or commercialization
of any current or future products.
We face an inherent risk of product liability exposure related to the commercialization of our products and any product candidate
that we may market or commercialize, and in connection with the human clinical trials testing of our products and product
candidates. If we cannot successfully defend ourselves against claims that our product candidates or products caused injuries, we
will incur substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in:
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decreased demand for our products or any product candidates that we may develop;
injury to our reputation and significant negative media attention;
the inability to continue current clinical trials or begin planned clinical trials;
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significant costs to defend the related claims/litigation;
increased insurance costs, or an inability to maintain appropriate insurance coverage;
substantial monetary awards to trial participants, patients and/or their families;
loss of revenue;
the inability to commercialize or to continue commercializing any products or product candidates;
initiation of investigations and enforcement actions by regulators; and
the withdrawal of products from the market, product recalls, or the cessation of development or regulatory disapproval
of product candidates or withdrawal of approvals, as well as labeling, marketing, or promotional restrictions.
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We have product liability insurance that covers our commercial sales, sales pursuant to reimbursed EAP programs and clinical
trials up to a $25.0 million annual aggregate limit, and subject to a per claim deductible. Our insurance limits may not be adequate
to cover all liabilities and defense costs that we may incur. We may need to further increase our insurance coverage as we
commercialize our products, or as and when we begin commercializing any other product candidate that receives marketing
authorization. The cost of insurance coverage is highly variable, based on a wide range of factors. We may not be able to maintain
insurance coverage at a reasonable cost or in an amount adequate to satisfy any liability or defense costs that may arise.
If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties
or incur costs that could have a material adverse effect on the success of our business.
We are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures
and the handling, use, storage, treatment and disposal of hazardous materials and wastes. Our operations currently, and may in
the future, involve the use of hazardous and flammable materials, including chemicals and medical and biological materials, and
produce hazardous waste products. Even if we contract with third parties for the disposal of these materials and wastes, we cannot
eliminate the risk of contamination or injury from these materials. In the event of contamination or injury resulting from our use
of hazardous materials or disposal of hazardous wastes, we could be held liable for any resulting damages, and any liability could
exceed our resources.
Although we maintain workers’ compensation insurance to cover us for costs and expenses, we may incur due to injuries to our
employees resulting from the use of hazardous materials, this insurance may not provide adequate coverage against potential
liabilities. We also maintain liability insurance for some of these risks, but our liability policy excludes pollution and has an
aggregate coverage limit of $11.0 million.
In addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws and
regulations. These current or future laws and regulations may impair our research, development or manufacturing and distribution
efforts. Failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions.
Our future success depends on our ability to retain our chief executive officer and other key executives and to attract, retain
and motivate qualified personnel.
We are highly dependent on Dr. Stuart W. Peltz, our co-founder and Chief Executive Officer, and the other principal members of
our executive, commercial and scientific teams. Although we have formal employment agreements with each of our executive
officers, these agreements do not prevent our executives from terminating their employment with us at any time. We do not maintain
“key person” insurance on any of our executive officers. The loss of the services of any of these persons might impede the
achievement of our research, development and commercialization objectives.
Recruiting and retaining qualified scientific, clinical, manufacturing and sales and marketing personnel will also be critical to our
success. Additionally, because the field of gene therapies is new, we might face a shortage of skilled individuals with substantial
gene therapy experience. As a result, competition for skilled personnel, including in gene therapy research and vector manufacturing,
is intense and the turnover rate can be high. We may not be able to attract and retain these personnel on acceptable terms given
the competition among numerous pharmaceutical and biotechnology companies for similar personnel. We also experience
competition for the hiring of scientific and clinical personnel from universities and research institutions. In addition, we rely on
consultants and advisors, including scientific and clinical advisors, to assist us in formulating our research and development and
commercialization strategy. Our consultants and advisors may be employed by employers other than us and may have commitments
under consulting or advisory contracts with other entities that may limit their availability to us.
We are in the process of expanding our development, regulatory, and sales and marketing capabilities, and as a result, we may
encounter difficulties in managing our growth, which could disrupt our operations.
In connection with our commercialization plans and business strategy, including our continued commercialization of Translarna
and Emflaza, our ongoing commercial launch of Tegsedi, and, if approved, PTC-AADC and Waylivra and other product candidates,
we have experienced and may to continue to experience significant growth in our employee base for sales, marketing, operational,
managerial, financial, human resources, drug development, quality, regulatory and medical affairs and other areas. This growth
has imposed and will continue to impose significant added responsibilities on members of management, including the need to
recruit, hire, retain, motivate and integrate additional employees, including employees who joined us in connection with any of
our acquisitions or other strategic transactions. Also, our management may have to divert a disproportionate amount of its attention
away from our day-to-day activities and devote a substantial amount of time to managing these growth activities, including any
applicable integration. To manage our recent and anticipated future growth, we must continue to implement and improve our
managerial, operational and financial systems, expand our facilities and continue to recruit and train additional qualified personnel.
Due to our limited financial resources and the limited experience of our management team in managing a company with such
growth, we may not be able to effectively manage the expansion of our operations or recruit and train additional qualified personnel.
In addition, we may need to adjust the size of our workforce as a result of changes to our expectations for our business, which can
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result in diversion of management attention, disruptions to our business, and related expenses. For example, following our receipt
of the Refuse to File letter from the FDA in 2016, we implemented a reorganization of our operations in March 2016 that resulted
in a one-time charge for the related work-force reduction. The physical expansion of our operations may lead to significant costs
and may divert our management and business development resources. Any inability to manage growth could delay the execution
of our business plans or disrupt our operations.
Risks Related to our Intellectual Property
If we are unable to obtain and maintain patent protection for our technology and products, or if the scope of the patent protection
is not sufficiently broad, our competitors could develop and commercialize technology and products similar or identical to ours,
and our ability to successfully commercialize our technology and products may be adversely affected.
Our success depends in large part on our ability to obtain and maintain patent protection or other intellectual property rights in
the United States and other countries with respect to our proprietary technology and products. One primary way that we seek to
protect our proprietary position is by filing patent applications in the United States and in certain ex-U.S. jurisdictions related to
our novel technologies, product and product candidates that are important to our business. This process is expensive and time-
consuming, and we may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in
a timely manner. It is also possible that we will fail to identify patentable aspects of our research and development output before
it is too late to obtain patent protection. Moreover, if we license technology or product candidates from third parties in the future,
these license agreements may not permit us to control the preparation, filing and prosecution of patent applications, or to maintain
or enforce the patents, covering this intellectual property. These agreements could also give our licensors the right to enforce the
licensed patents without our involvement, or to decide not to enforce the patents at all. Therefore, in these circumstances, these
patents and applications may not be prosecuted and enforced in a manner consistent with the best interests of our business.
The patent position of biotechnology and pharmaceutical companies generally is highly uncertain, involves complex legal and
factual questions and has in recent years been the subject of much litigation. As a result, the issuance, scope, validity, enforceability
and commercial value of our patent rights are highly uncertain. Our pending and future patent applications may not result in patents
being issued which protect our technology or products, in whole or in part, or which effectively prevent others from commercializing
competitive technologies and products. Changes in either the patent laws or interpretation of the patent laws in the United States
and other countries may diminish the value of our patents or narrow the scope of our patent protection.
The laws of ex-U.S. countries may not protect our rights to the same extent as the laws of the United States. For example, patent
law in many countries restricts the patentability of methods of treatment of the human body more than U.S. law does. In addition,
we may not pursue or obtain or be able to pursue or obtain patent protection in all major markets. Assuming the other requirements
for patentability are met, currently, the first to file a patent application is generally entitled to the patent. However, prior to March 16,
2013, in the United States, the first to invent was entitled to the patent. Publications of discoveries in the scientific literature often
lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published
until 18 months after filing, or in some cases not at all. Therefore, we cannot know with certainty whether we were the first to
make the inventions claimed in our patents or pending patent applications, or that we were the first to file for patent protection of
such inventions. In addition, the Leahy-Smith America Invents Act of 2011, or the Act, which reformed certain patent laws in the
U.S., may create additional uncertainty. The significant changes engendered by the Act include switching from a “first-to-invent”
system to a “first-to-file” system, and the implementation of new procedures that permit competitors to challenge our patents in
the USPTO after grant, including inter partes review and post grant review.
Moreover, we may be subject to a third party anonymously submitting prior art to a patent office or may become involved in
addressing patentability objections based on third-party submission of references, or may become involved in oppositions,
derivation proceedings, reexamination, inter partes review, post grant review, interference proceedings or other patent office
proceedings or litigation, in the United States or elsewhere, challenging our patent rights or the patent rights of others. An adverse
determination in any such submission, proceeding or litigation could reduce the scope of, or invalidate, our patent rights, allow
third parties to commercialize our technology or products and compete directly with us, without payment to us, or result in our
inability to manufacture or commercialize products without infringing third-party patent rights. In addition, if the breadth or
strength of protection provided by our patents and patent applications is threatened, it could dissuade companies from collaborating
with us to license, develop or commercialize our product or current or future product candidates.
Even if our patent applications issue as patents, they may not issue in a form that will provide us with any meaningful protection,
prevent competitors from competing with us or otherwise provide us with any competitive advantage. Our competitors may be
able to circumvent our owned or licensed patents by developing similar or alternative technologies or products in a non-infringing
manner. In addition, other companies may attempt to circumvent any regulatory data protection or market exclusivity that we
obtain under applicable legislation, which may require us to allocate significant resources to prevent such circumvention. Legal
and regulatory developments in the EU and elsewhere may also result in clinical trial data and other information, that would
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ordinarily be treated as trade secret, submitted as part of a marketing authorization application becoming publicly available. The
EMA Policy on publication of clinical data and other such information, as well as the current application of EU freedom of
information regulations, could impact our proprietary information (comprising both clinical and non-clinical data and other
information) that would normally be maintained by a regulatory body as commercially confidential. Such developments could
enable other companies to circumvent our intellectual property rights and use our clinical trial data or other information to obtain
marketing authorizations in the EU and in other jurisdictions where we have not been able to obtain any intellectual property or
regulatory protection, resulting in loss of market share. Such developments may also require us to allocate significant resources
or engage in litigation to prevent other companies from circumventing or violating our intellectual property rights. Our attempts
to prevent third parties from circumventing our intellectual property and other rights may ultimately be unsuccessful. We may
also fail to take the required actions or pay the necessary fees to maintain our patents.
For example, during 2015, we were notified by the EMA that it had received from another pharmaceutical company a request
under Regulation (EC) (cid:1)o 1049/2001 seeking access to aspects of our marketing authorization for Translarna for the treatment
of nmDMD. Following the decision of the EMA to release such documentation with only minimal redactions we initiated litigation
before the General Court of the EU to prevent disclosure of this information. In the first quarter of 2018, the Court ruled in favor
of the EMA, allowing the EMA to release the documentation. We appealed the General Court’s decision to the CJEU but the CJEU
dismissed our appeal in January 2020 and released the information to the requester.
An issued patent may be challenged as to its inventorship, scope, validity or enforceability, and our owned and licensed patents
may be challenged on such a basis in the courts or patent offices in the United States and abroad. Such challenges may result in
loss of exclusivity or freedom to operate or in patent claims being narrowed, invalidated or held unenforceable, in whole or in
part, which could limit our ability to stop others from using or commercializing similar or identical technology and products, or
limit the duration of the patent protection of our technology and products. Given the amount of time required for the development,
testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after
such candidates are commercialized. As a result, our patent portfolio may not provide us with sufficient rights to exclude others
from commercializing products similar or identical to ours.
We may become involved in lawsuits to protect or enforce our patents or other intellectual property, which could be expensive,
time consuming and unsuccessful.
Competitors may infringe our patents, trademarks, copyrights, trade secrets or other intellectual property. To counter infringement
or unauthorized use, we may be required to file a lawsuit and claims for damages, which can be expensive and time consuming.
Any claims we assert against perceived infringers could provoke these parties to assert counterclaims against us alleging that we
infringe their intellectual property or defenses, such that they do not infringe our intellectual property or that our intellectual
property is invalid or unenforceable. In addition, in a patent infringement proceeding, a court may decide that a patent of ours is
invalid or unenforceable, in whole or in part, construe the patent’s claims narrowly or may refuse to stop the other party from
using the technology at issue on the grounds that our patents do not cover the technology in question.
Third parties may initiate legal proceedings alleging that our patents are invalid and unenforceable or that we are infringing
their intellectual property rights, the outcome of which would be uncertain and could have a material adverse effect on the
success of our business.
Our commercial success depends upon our ability and the ability of our collaborators to develop, manufacture, market and sell
our products and our product candidates and use our proprietary technologies without infringing the intellectual property and other
proprietary rights of third parties. There is considerable intellectual property litigation in the biotechnology and pharmaceutical
industries, and we may become party to, or threatened with, future adversarial proceedings or litigation regarding intellectual
property rights with respect to our products and technology, including interference or derivation proceeding, inter partes review
or post-grant review proceedings before the U.S. Patent and Trademark Office. The risks of being involved in such litigation and
proceedings may also increase as our product candidates are disclosed while approaching commercialization, and as we gain
greater visibility as a public company. Third parties may assert infringement claims against us based on existing or future intellectual
property rights. We may not be aware of all such intellectual property rights potentially relating to our product and our product
candidates. Since patent applications in the United States and other jurisdictions are typically not published until 18 months after
filing, or in some cases not at all, with new publications occurring continuously, there may be patents or patent applications relating
to our product or our product candidates that we are unaware of. There may also be pending or future patent applications that, if
issued, would block us from commercializing Translarna, Emflaza, PTC-AADC, Tegsedi. Waylivra or risdiplam. Thus, we do not
know with certainty whether Translarna, Emflaza, PTC-AADC, Tegsedi, Waylivra, risdiplam or any of our other product candidates,
or our commercialization thereof, would or would not infringe any third party’s intellectual property.
If we are found to infringe a third party’s intellectual property rights, or in order to avoid or settle litigation, we could be required
to obtain a license to continue developing and marketing our products and technology. However, we may not be able to obtain
any required license on commercially reasonable terms or at all. Even if we were able to obtain a license, it could be non-exclusive,
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thereby giving our competitors access to the same technologies licensed to us, and could require us to make substantial payments.
We could be forced, including by court order, to cease commercializing an alleged infringing technology or product. In addition,
we could be found liable for monetary damages, including treble damages and attorney’s fees if we are found to have willfully
infringed a patent or other intellectual property right. A finding of infringement could prevent us from commercializing our product
or our product candidates or force us to cease some of our business operations, which could materially harm our business. Claims
that we have misappropriated the confidential information or trade secrets of third parties could have a similar negative impact
on our business.
For example, it is possible that one or more third parties might bring a patent infringement or other legal proceeding against us
regarding Translarna or Emflaza. In order to successfully challenge the validity of any issued U.S. patent that may allegedly include
ataluren or deflazacort within the scope of a granted claim, we would need to overcome that patent’s presumption of validity in
district court or prove unpatentability by a preponderance of the evidence before the USPTO. There is no assurance that a court
or the USPTO would find these claims to be invalid or unpatentable, respectively. In addition, we believe that the public notice
given by our testing of ataluren in clinical trials for the purpose of seeking FDA approval would be a valid defense against any
infringement claims in the United States prior to commercialization based on the availability of any statutory research exemptions.
However, there can be no assurance that our interpretation of the exemption would be upheld.
We may be subject to claims by third parties asserting that we or our employees have misappropriated their intellectual property,
or claiming ownership of what we regard as our own intellectual property.
Many of our employees were previously employed at universities or other biotechnology or pharmaceutical companies, including
our competitors or potential competitors. Although we try to ensure that our employees do not use the proprietary information or
know-how of others in their work for us, we may be subject to claims that we or these employees have used or disclosed intellectual
property, including trade secrets or other proprietary information, of any such employee’s former employer. Litigation may be
necessary to defend against these claims.
In addition, while we typically require our employees and contractors who may be involved in the development of intellectual
property to execute agreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement
with each party who in fact develops intellectual property that we regard as our own. Our and their assignment agreements may
not be self-executing or may be breached, and we may be forced to bring claims against third parties, or defend claims they may
bring against us, to determine the ownership of what we regard as our intellectual property.
If we fail in prosecuting or defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual
property rights or personnel. Even if we are successful in prosecuting or defending against such claims, litigation could result in
substantial costs and be a distraction to management.
Intellectual property litigation could cause us to spend substantial resources and could distract our personnel from their normal
responsibilities.
Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to incur
significant expenses, and could distract our technical and management personnel from their normal responsibilities. In addition,
there could be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities
analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common
stock. Such litigation or proceedings could substantially increase our operating losses and reduce the resources available for
development, sales, marketing or distribution activities. We may not have sufficient financial or other resources to adequately
conduct such litigation or proceedings. Some of our competitors may be able to sustain the costs of such litigation or proceedings
more effectively than we can because of their greater financial resources. Uncertainties resulting from the initiation and continuation
of patent litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace.
Without patent protection, our marketed products may face generic competition.
Certain of the products we market have no or limited patent protection and, as a result, potential competitors face fewer regulatory
barriers in introducing competing products. Without patent protection or other regulatory exclusivity, we may not be able to exclude
others from, among other things, selling or importing similar products in any jurisdiction. In some instances, we may rely on trade
secrets and other unpatented proprietary information to protect our commercial position with respect to such products, although
we may be unable to provide adequate protection for our commercial position via these means. In other instances, we may need
to rely on regulatory exclusivity to protect our commercial position.
Furthermore, generic competition against a branded product often results in decreases in the prices at which the branded product
can be sold, particularly when there is more than one generic product available in the marketplace. Third-party companies could
also develop products that are similar, but not identical, to our marketed products, such as an alternative formulation of our product
or an alternative formulation combined with a different delivery technology, and seek approval in the United States by referencing
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our products and relying, to some degree, on the FDA’s finding that our products are safe and effective in their approved indications.
In addition, legislation enacted in the United States allows for, and in a few instances, in the absence of specific instructions from
the prescribing physician, mandates the dispensing of generic products rather than branded products where a generic version is
available.
On February 9, 2017, the FDA approved the corticosteroid Emflaza (deflazacort) for the treatment of patients 5 years and older
with DMD. Although approved for other indications outside of the United States, this was the first approval for deflazacort in the
United States and the first approval in the United States for the use of a corticosteroid to treat DMD.
We rely on regulatory exclusivity for Emflaza and currently have no issued patents that could prevent a third-party company from
seeking to introduce a generic Emflaza formulation in the United States for the treatment of DMD or another indication, and we
may never be able to obtain such patent protection. Such third-party companies may also obtain patents covering a new deflazacort
formulation or method of use, and attempt to assert such patents against us.
If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.
In addition to seeking patents and regulatory exclusivity for some of our technology and products, we also rely on trade secrets,
including unpatented know-how, technology and other proprietary information, to maintain our competitive position. More
particularly, we may rely on trade secrets and other unpatented proprietary information to protect our competitive position related
to our products and product candidates, especially when patent protection is not obtainable. We seek to protect these trade secrets,
in part, by entering into non-disclosure and confidentiality agreements with parties who have access to them, such as our employees,
corporate collaborators, outside scientific collaborators, contract manufacturers, consultants, advisors, partners and other third
parties. We also enter into confidentiality and invention or patent assignment agreements with our employees and consultants.
However, we cannot guarantee that we have executed these agreements with each party that may have or have had access to our
trade secrets or that the agreements we have executed will provide adequate protection. Any party with whom we have executed
such an agreement may breach that agreement and disclose our proprietary information, including our trade secrets, and we may
not be able to obtain adequate remedies for such breaches. Enforcing a claim that a party illegally disclosed or misappropriated a
trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, some courts inside and
outside the United States are less willing or unwilling to protect trade secrets. If any of our trade secrets were to be lawfully
obtained or independently developed by a competitor, we would have no right to prevent them, or those to whom they communicate
it, from using that technology or information to compete with us. If any of our trade secrets were to be obtained or independently
developed by a competitor, our competitive position would be harmed. If our employees, corporate collaborators, outside scientific
collaborators, contract manufacturers, employees, consultants, advisors, partners and other third parties develop new inventions
or processes related to Translarna or Emflaza independently, or jointly with us, that may be applicable to our products under
development, disputes may arise about ownership or proprietary rights to those inventions and processes. Enforcing a claim that
a third party illegally obtained and is using any of our inventions or trade secrets is expensive and time-consuming, and the outcome
is unpredictable. In addition, courts outside of the United States are sometimes less willing to protect trade secrets. Moreover, our
competitors may independently develop equivalent knowledge, methods and know-how.
We have not yet registered our trademarks in all of our potential markets, and failure to secure those registrations could
adversely affect our business.
Our trademark applications may be refused registration, and our registered trademarks may not be maintained or may be found
to be unenforceable. During trademark examination proceedings, our trademark applications may be rejected. Although we are
given an opportunity to respond to those rejections, we may not be able to overcome them. In addition, in the U.S. Patent and
Trademark Office and Trademark Offices in many ex-U.S. jurisdictions, third parties are given an opportunity to oppose pending
trademark applications or to seek cancellation of registered trademarks. Opposition or cancellation proceedings may be filed
against our trademarks, and our trademarks may not survive such proceedings. In addition, if we do not secure registrations for
our trademarks, we may encounter difficulty enforcing our trademark rights against third parties in the jurisdictions where we do
not have registered rights.
If we are not able to obtain adequate trademark protection or regulatory approval for our brand names, we may be required
to re-brand affected products, which could cause delays in getting such products to market and substantially increase our costs.
To protect our rights in any trademark we intend to use for our products or product candidates, we may seek to register such
trademarks. Trademark registration is territory-specific and we must apply for trademark registration in the United States as well
as any other country where we intend to commercialize our product or product candidates. Failure to obtain trademark registrations
may place our use of the trademarks at risk or make them subject to legal challenges, which could force us to choose alternative
names for our product or product candidates. In addition, the FDA, and other regulatory authorities outside the United States,
conduct an independent review of proposed product names for pharmaceuticals, including an evaluation of the potential for
confusion with other pharmaceutical product names for medications, which could result in medication errors in prescribing,
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dispensing and consumption. These regulatory authorities may also object to a proposed product name if they believe the name
inappropriately makes or implies a therapeutic claim. If the FDA or other regulatory authorities outside the United States object
to any of our proposed product names, we may be required to adopt alternative names for our product or product candidates. If
we adopt alternative names, either because of our inability to obtain a trademark registration or because of objections from regulatory
authorities, we would lose the benefit of our existing trademark applications and the rights attached thereto. Consequently, we
may be required to expend significant additional resources in an effort to adopt a new product name that would be registrable
under applicable trademark laws, not infringe the existing rights of third parties and be acceptable to the FDA and other regulatory
authorities, which could cause delays in getting our products to market and substantially increase our costs. Furthermore, we may
not be able to build a successful brand identity for a new trademark in a timely manner or at all, which would limit our ability to
commercialize our product or our product candidates.
Our rights to develop and commercialize PTC-AADC and our other potential gene therapy product candidates are subject, in
part, to the terms and conditions of licenses granted to us by others.
We depend upon the intellectual property rights granted to us under licenses from third parties that are important or necessary to
the development of PTC-AADC for the treatment of AADC deficiency and our other potential gene therapy product candidates.
In particular, we have in-licensed certain intellectual property rights and know-how from the (cid:1)TU relevant to PTC-AADC for
the treatment of AADC deficiency. Any termination of these licenses could result in the loss of significant or all rights licensed
to us and could harm or prevent our ability to commercialize PTC-AADC for the treatment of AADC deficiency and our other
potential gene therapy product candidates. Each of our existing gene therapy licensing agreements are exclusive but are limited
to particular fields, such as AADC deficiency and are subject to certain retained rights. In addition, absent an amendment or
additional agreement, we may not have the right to use intellectual property in-licensed for one of our programs for use in another
program.
Our current gene therapy license agreements, including our agreement with (cid:1)TU pursuant to which we have in-licensed certain
intellectual property rights and know-how relevant to PTC-AADC for the treatment of AADC deficiency, or the License
Agreement, impose various obligations, including certain payment obligations, including contingent payments to be made upon
reaching certain development and regulatory milestones. If we fail to satisfy our obligations, the licensor may have the right to
terminate the agreement. Disputes may arise between us and any of our licensors regarding intellectual property subject to such
agreements and other issues. Such disputes over intellectual property that we have licensed or the terms of our license agreements,
including with respect to PTC-AADC for the treatment of AADC deficiency, may prevent or impair our ability to maintain our
current arrangements on acceptable terms, or at all, or may impair the value of the arrangement to us. Any such dispute could have
a material adverse effect on our business and our ability to realize the anticipated benefits of our acquisition of Agilis. If we cannot
maintain a necessary license agreement, including with respect to PTC-AADC for the treatment of AADC deficiency, or if the
agreement is terminated, we may be unable to successfully develop and commercialize the affected product candidates.
If we fail to comply with our obligations in our intellectual property licenses and funding arrangements with third parties, we
could lose rights that are important to our business.
We are a party to a number of license agreements and expect to enter into additional licenses in the future. Our existing licenses
impose, and we expect that future licenses will impose, various diligence, milestone payment, royalty, insurance and other
obligations on us. If we fail to comply with these obligations, the licensor may have the right to terminate the license, in which
event we might not be able to market any product that is covered by these agreements, which could materially adversely affect
the value of the product candidate being developed under such license agreement. Termination of these license agreements or
reduction or elimination of our licensed rights may result in our having to negotiate new or reinstated licenses with less favorable
terms, or cause us to lose rights in important intellectual property or technology.
We have also received grant funding for some of our development programs from philanthropic organizations and patient advocacy
groups pursuant to agreements that impose development and commercialization diligence obligations on us. If we fail to comply
with these obligations, the applicable organization could require us to grant to the organization exclusive rights under certain of
our intellectual property, which could materially adversely affect the value to us of product candidates covered by that intellectual
property even if we are entitled to a share of any consideration received by such organization in connection with any subsequent
development or commercialization of the product candidates.
Some of our patented technology was developed with U.S. federal government funding. When new technologies are developed
with U.S. government funding, the government obtains certain rights in any resulting patents, including a nonexclusive license
authorizing the government to use the invention for non-commercial purposes. These rights may permit the government to disclose
our confidential information to third parties and to exercise “march-in” rights to use or allow third parties to use our patented
technology. The government can exercise its march-in rights if it determines that action is necessary because we fail to achieve
practical application of the U.S. government-funded technology, because action is necessary to alleviate health or safety needs,
to meet requirements of federal regulations or to give preference to U.S. industry. In addition, U.S. government-funded inventions
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must be reported to the government and U.S. government funding must be disclosed in any resulting patent applications.
Furthermore, our rights in such inventions are subject to government license rights and certain restrictions on manufacturing
products outside the United States.
Risks Related to our Common Stock
Servicing the Convertible (cid:1)otes requires a significant amount of cash. We may not have sufficient cash flow from our business
to make payments on our debt, and we may not have the ability to raise the funds necessary to settle conversions of, or to
repurchase, the Convertible (cid:1)otes upon a fundamental change, which could adversely affect our business, financial condition
and results of operations.
In August 2015, we incurred indebtedness in the amount of $150.0 million in aggregate principal with additional accrued interest
under the 2022 Convertible (cid:1)otes, for which interest is payable semi-annually in arrears on February 15 and August 15 of each
year, beginning on February 15, 2016. In September 2019, we incurred indebtedness in the amount of $287.5 million in aggregate
principal with additional accrued interest under the 2026 Convertible (cid:1)otes, for which interest is payable semi-annually in arrears
on March 15 and September 15 of each year, beginning on March 15, 2020. Our ability to make scheduled payments of the principal
of, to pay interest on or to refinance the Convertible (cid:1)otes depends on our future performance, which is subject to economic,
financial, competitive and other factors beyond our control. Our business may not generate cash flow from operations in the future
sufficient to service our debt, including the Convertible (cid:1)otes. If we are unable to generate cash flow, we may be required to adopt
one or more alternatives, such as selling assets, restructuring debt or obtaining additional equity capital on terms that may be
unfavorable to us or highly dilutive. Our ability to refinance our indebtedness will depend on the capital markets and our financial
condition at the time we seek to refinance such indebtedness. We may not be able to engage in any of these activities or engage
in these activities on desirable terms, which could result in a default on our debt obligations.
In addition, upon conversion of the Convertible (cid:1)otes unless we elect to deliver solely shares of our common stock to settle such
conversion (other than paying cash in lieu of delivering any fractional shares), we will be required to make cash payments in
respect of the Convertible (cid:1)otes being converted. However, we may not have enough available cash or be able to obtain financing
at the time we are required to repurchase Convertible (cid:1)otes, to pay the Convertible (cid:1)otes at maturity or to pay cash upon conversions
of Convertible (cid:1)otes. In addition, our ability to repurchase Convertible (cid:1)otes or to pay cash upon conversions of Convertible
(cid:1)otes may be limited by law, by regulatory authority or by agreements governing our future indebtedness. Our failure to repurchase
Convertible (cid:1)otes at a time when the repurchase is required by the applicable indenture, to make interest payments on the
Convertible (cid:1)otes when due under the applicable indenture or to pay any cash payable on future conversions of the Convertible
(cid:1)otes as required by the applicable indenture would constitute a default under each indenture governing the Convertible (cid:1)otes
and our credit and security agreement with MidCap Financial. An event of default under the applicable indenture governing the
Convertible (cid:1)otes or the fundamental change itself could also lead to a default under agreements governing our future indebtedness.
If the repayment of any such related indebtedness were to be accelerated after any applicable notice or grace periods, we may not
have sufficient funds to repay the indebtedness, repurchase the Convertible (cid:1)otes, make interest payments on the Convertible
(cid:1)otes or make cash payments upon conversions of the Convertible (cid:1)otes.
In addition, even if holders of the Convertible (cid:1)otes do not elect to convert their Convertible (cid:1)otes, we could be required under
applicable accounting rules to reclassify all or a portion of the outstanding principal of the Convertible (cid:1)otes as a current rather
than long-term liability, which would result in a material reduction of our net working capital. Any of these factors could materially
and adversely affect our business, financial condition and results of operations.
Provisions in our corporate charter documents and under Delaware law could make an acquisition of us, which may be
beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current
management.
Provisions in our corporate charter and our bylaws may discourage, delay or prevent a merger, acquisition or other change in
control of us that stockholders may consider favorable, including transactions in which our stockholders might otherwise receive
a premium for their shares. These provisions could also limit the price that investors might be willing to pay in the future for shares
of our common stock, thereby depressing the market price of our common stock. In addition, because our board of directors is
responsible for appointing our management team, these provisions may frustrate or prevent any attempts by our stockholders to
replace or remove our current management by making it more difficult for stockholders to replace members of our board of
directors. Among other things, these provisions:
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provide for a classified board of directors such that not all members of the board are elected at one time;
allow the authorized number of our directors to be changed only by resolution of our board of directors;
limit the manner in which stockholders can remove directors from the board;
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establish advance notice requirements for stockholder proposals that can be acted on at stockholder meetings and
nominations to our board of directors;
require that stockholder actions must be effected at a duly called stockholder meeting and prohibit actions by our
stockholders by written consent;
limit who may call stockholder meetings;
authorize our board of directors to issue preferred stock without stockholder approval, which could be used to institute
a “poison pill” that would work to dilute the stock ownership of a potential hostile acquirer, effectively preventing
acquisitions that have not been approved by our board of directors; and
require the approval of the holders of at least 75% of the votes that all our stockholders would be entitled to cast to
amend or repeal certain provisions of our charter or bylaws.
Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General
Corporation Law, which prohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining
with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding
voting stock, unless the merger or combination is approved in a prescribed manner.
The price of our common stock may be volatile and fluctuate substantially, which could result in substantial losses for purchasers
of our common stock and lawsuits against us and our officers and directors.
Our stock price has been and will likely continue to be volatile. The stock market in general and the market for smaller pharmaceutical
and biotechnology companies in particular have experienced extreme volatility that has often been unrelated to the operating
performance of particular companies. As a result of this volatility, our stockholders may not be able to sell their common stock at
or above the price at which they purchased it. The market price for our common stock may be influenced by many factors, including:
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expectations with respect to our gene therapy platform, including any potential regulatory submissions and potential
approvals, including those related to PTC-AADC;
the development and regulatory status of risdiplam and our SMA program with Roche and the SMA Foundation;
any developments related to our ability or inability to execute our commercialization strategy for any of our products;
our ability to resolve the matters set forth in the FDA's denial of our appeal to the Complete Response Letter we received
from the FDA in connection with our (cid:1)DA for Translarna for the treatment of nmDMD, and our ability to perform
additional clinical trials, non-clinical studies or CMC assessments or analyses at significant cost;
our ability to maintain our marketing authorization for Translarna for the treatment of nmDMD in Brazil and in the
EEA, which is subject to the specific obligation to conduct Study 041 and is also subject to annual review and renewal
by the European Commission following reassessment of the benefit-risk balance of the authorization by the EMA;
any developments related to Study 041, including with respect to design, timing, conduct, and enrollment, and
developments with respect to any clinical or non-clinical trial required by other regulatory agencies, including the FDA
for Translarna for the treatment of nmDMD;
results of clinical trials of any other product candidate that we develop;
announcements by us or our competitors of significant acquisitions, licenses, strategic collaborations, joint ventures,
collaborations or capital commitments;
negative publicity around our products or product candidates;
other developments concerning our regulatory submissions;
• whether regulators in other territories agree with our interpretation of the results of ACT DMD;
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the success of competitive products or technologies;
results of clinical trials of product candidates of our competitors;
regulatory or legal developments in the United States and other countries;
developments or disputes concerning patent applications, issued patents or other proprietary rights;
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our ability to realize the benefits of our acquisitions or other business combinations;
the recruitment or departure of key personnel;
the loss of distributors, suppliers or manufacturers;
the level of expenses related to any of our products, product candidates or clinical development programs;
actual or anticipated changes in estimates as to financial results, development timelines or recommendations by
securities analysts;
variations in our financial results or those of companies that are perceived to be similar to us;
announcements with respect to litigation;
changes in the structure of healthcare payment systems;
• market conditions in the pharmaceutical and biotechnology sectors;
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general economic, industry and market conditions; and
the other factors described in this “Risk Factors” section.
Companies that have experienced volatility in the market price of their stock have frequently been the subject of securities class
action and shareholder derivative litigation. For example, in 2018 we settled a securities class action lawsuit initiated against us
and certain of our current and former executive officers during 2016, as well as derivative lawsuits brought against us, as a nominal
defendant, certain of our current and former executive officers and certain of our current and former directors during 2017. We
could be the target of other such litigation in the future. Class action and derivative lawsuits, whether successful or not, could
result in substantial costs, damage or settlement awards and a diversion of our management’s resources and attention from running
our business, which could materially harm our reputation, financial condition and results of operations.
We are currently incurring and expect to continue to incur increased costs as a result of operating as a public company,
including compliance with Section 404 of the Sarbanes-Oxley Act of 2002, and our management is and will continue to be
required to devote substantial time to compliance initiatives. In addition, the failure to establish and maintain adequate finance
infrastructure and accounting systems and controls could impair our ability to comply with the financial reporting and internal
controls requirements for publicly traded companies.
As a public company, we incur significant legal, accounting and other expenses that we did not incur as a private company. In
addition, the Sarbanes-Oxley Act of 2002, or Sarbanes-Oxley, the Dodd-Frank Act, the listing requirements of (cid:1)asdaq and other
applicable securities rules and regulations impose various requirements on public companies, including establishment and
maintenance of effective disclosure and financial controls and corporate governance practices. Our management and other personnel
have and will need to continue to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and
regulations have and will continue to increase our legal and financial compliance costs and will continue to make some activities
more time-consuming and costly. For example, these rules and regulations have made it more difficult and more expensive for us
to obtain director and officer liability insurance.
Pursuant to Section 404 Sarbanes-Oxley, or Section 404, we are required to furnish a report by our management on the effectiveness
of our internal control over financial reporting and an attestation report on internal control over financial reporting issued by our
independent registered public accounting firm. Compliance with Section 404, including documentation and evaluation of our
internal control over financial reporting, is both costly and challenging. If we are not able to comply with the requirements of
Section 404 in a timely manner each year, we could be subject to sanctions or investigations by the SEC, (cid:1)asdaq or other regulatory
authorities which would require additional financial and management resources and could adversely affect the market price of our
common stock. Furthermore, if we cannot provide reliable financial reports or prevent fraud, our business and results of operations
could be harmed and investors could lose confidence in our reported financial information.
Because we do not anticipate paying any cash dividends on our capital in the foreseeable future, capital appreciation, if any,
will be our stockholders sole source of gain.
We have never declared or paid cash dividends on our capital stock. We currently intend to retain all of our future earnings, if any,
to finance the development and growth of our business. The terms of our credit and security agreement with MidCap Financial
preclude us from paying dividends, other than permitted dividends set forth in the agreement. In addition, the terms of any future
debt agreements may preclude us from paying dividends. As a result, capital appreciation, if any, of our common stock will be
our stockholders sole source of gain for the foreseeable future.
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The issuance of additional shares of our common stock or the sale of shares of our common stock by our stockholders could
dilute our stockholders’ ownership interest in the Company and could significantly reduce the market price of our common
stock.
Sales of a substantial number of shares of our common stock in the public market could occur at any time. These sales, or the
perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of our
common stock.
We have issued a significant number of equity awards under our equity compensation plans or as inducement grants to new hire
employees pursuant to (cid:1)asdaq rules. The shares underlying these awards are or, with respect to certain option grants, will be
registered on a Form S-8 registration statement. As a result, upon vesting these shares can be freely exercised and sold in the public
market upon issuance, subject to volume limitations applicable to affiliates. The exercise of options and the subsequent sale of
the underlying common stock or the sale of restricted stock upon vesting could cause a decline in our stock price. These sales also
might make it difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate.
Certain of our employees, executive officers and directors have entered or may enter into Rule 10b5-1 plans providing for sales
of shares of our common stock from time to time. Under a Rule 10b5-1 plan, a broker executes trades pursuant to parameters
established by the employee, director or officer when entering into the plan, without further direction from the employee, officer
or director. A Rule 10b5-1 plan may be amended or terminated in some circumstances. Our employees, executive officers and
directors may also buy or sell additional shares outside of a Rule 10b5-1 plan when they are not in possession of material, nonpublic
information.
In August 2019, we entered into the Sales Agreement, pursuant to which we may offer and sell shares of our common stock, having
an aggregate offering price of up to $125.0 million from time to time, through the Sales Agents by any method that is deemed to
be an “at the market offering” as defined in Rule 415(a)(4) promulgated under the Securities Act. In addition, the issuance of
shares of our common stock upon conversion of the Convertible (cid:1)otes could dilute our stockholders. We have engaged in, and
may in the future engage in, strategic transactions that could dilute our stockholders’ ownership and cause our stock price to
decline. For example, our acquisitions of Agilis and the rights to Emflaza each involved the payment of common stock consideration.
The sale or resale of these shares in the public market, or the market’s expectation of such sales, may result in an immediate and
substantial decline in our stock price. Such a decline will adversely affect our investors and also might make it difficult for us to
sell equity securities in the future at a time and at a price that we deem appropriate.
Sales of substantial amounts of shares of our common stock or other securities by our stockholders or by us, or the issuance of
shares of our common stock upon conversion of our outstanding Convertible (cid:1)otes or any future securities convertible or
exchangeable into our common stock or in connection with a strategic transaction, could dilute our stockholders, lower the market
price of our common stock and impair our ability to raise capital through the sale of equity securities.
Item 1B. Unresolved Staff Comments
(cid:1)one.
Item 2. Properties
Our principal facilities consist of approximately 126,000 square feet of research and office space located at 100, 200, 250 and 400
Corporate Court, Middlesex Business Center, South Plainfield, (cid:1)ew Jersey, that we occupy under leases that expire in 2024, with
two consecutive five-year renewal options to renew the leases after 2024 and at 4041 Hadley Road, South Plainfield (cid:1)ew Jersey
that we occupy under a lease that will expire in 2022, with one three-year renewal option to renew the lease after 2022. We also
have entered into a lease agreement for approximately 185,000 square feet of office, manufacturing and laboratory space at a
facility located in Hopewell Township, (cid:1)ew Jersey. The rental term for such facility is expected to commence on July 1, 2020,
with an initial term of fifteen years and two consecutive 10-year renewal periods at our option. We lease approximately 6,500
square feet of office space in Dublin, Ireland, that we occupy under a lease that expires in 2024. Additionally, we lease approximately
5,000 square feet of office space in Sao Paulo, Brazil, that we occupy under a lease that expires in 2022. We also lease additional
office space in the U.S. and other countries to support our operations as a global organization, but these leases are not material to
us.
Item 3. Legal Proceedings
From time to time in the ordinary course of our business, we are subject to claims, legal proceedings and disputes. We are not
currently aware of any material legal proceedings which we are a party to or of which any of our property is the subject.
Item 4. Mine Safety Disclosures
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(cid:1)one.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuers Purchases of Equity Securities
Market Information
Our common stock has been publicly traded on the (cid:1)asdaq Global Select Market under the symbol “PTCT” since June 20, 2013.
Prior to that time, there was no public market for our common stock.
Holders
As of February 27, 2020, there were 71 holders of record of our common stock. This number does not include beneficial owners
whose shares are held in street name.
Recent Sales of Unregistered Securities
Inducement stock option awards
Pursuant to the (cid:1)asdaq inducement grant exception, during the quarter ended December 31, 2019, we issued options to purchase
an aggregate of 675,775 shares of common stock to certain new hire employees at a weighted-average exercise price of $40.97
per share. The shares underlying these option awards have been registered on a Form S-8 registration statement.
Purchase of Equity Securities
We did not purchase any of our registered equity securities during the period covered by this Annual Report on Form 10-K.
Item 6. Selected Financial Data
The following table sets forth certain financial data with respect to our business. The selected consolidated financial data is derived
from, and should be read in conjunction with, our Consolidated Financial Statements and related (cid:1)otes and Item 7, “Management’s
Discussion and Analysis of Financial Condition and Results of Operations”, and other information contained elsewhere in this
Annual Report on Form 10-K.
108
Statement of Operations Data:
Revenues:
(cid:1)et product revenue
Collaboration and grant revenue
Total revenues
Operating expenses:
Year ended December 31,
2019
2018
2017
2016
2015
(In thousands, except per share data)
$
291,306
$
263,005
$
174,066
$
81,447
$
33,696
15,674
306,980
1,729
264,734
20,326
194,392
1,258
82,705
3,070
36,766
Cost of product sales, excluding amortization of
acquired intangible asset
Amortization of acquired intangible asset
Research and development
Selling, general and administrative
Change in the fair value of deferred and contingent
consideration
Total operating expenses
Loss from operations
Interest (expense) income, net
Other income (expense), net
Loss before income tax benefit (expense)
Income tax benefit (expense)
12,135
27,650
257,452
202,541
48,360
548,138
(241,158)
(12,491)
13,723
(239,926)
(11,650)
12,670
22,877
171,984
153,548
19,340
380,419
(115,685)
(12,554)
129
(128,110)
29
4,577
15,380
117,456
121,271
—
258,684
(64,292)
(12,094)
(1,279)
(77,665)
(1,335)
—
—
—
—
117,633
97,130
121,816
82,080
—
214,763
(132,058)
(8,276)
(1,207)
(141,541)
(569)
—
203,896
(167,130)
(2,367)
(465)
(169,962)
(485)
(cid:1)et loss attributable to common stockholders
$ (251,576) $ (128,081) $
(79,000) $ (142,110) $ (170,447)
(cid:1)et loss attributable to common stockholders per
share:
Basic
Diluted
Weighted-average shares outstanding:
Basic
Diluted
$
$
(4.27) $
(4.27) $
(2.75) $
(2.75) $
(2.02) $
(2.02) $
(4.17) $
(4.17) $
(5.07)
(5.07)
58,863,185
46,576,313
39,183,073
34,044,584
33,626,248
58,863,185
46,576,313
39,183,073
34,044,584
33,626,248
2019
2018
2017
2016
2015
As of December 31,
(In thousands)
Balance Sheet Data:
Cash, cash equivalents, and marketable securities
$
686,563
$
227,586
$
191,246
$
231,666
$
338,925
Working capital
Total assets*
Total debt*
Accumulated deficit
Total stockholders’ equity
543,427
154,061
1,623,782
1,119,222
313,859
(1,190,499)
594,330
153,014
(938,923)
350,727
167,015
391,653
144,971
(814,108)
156,437
211,662
269,345
98,216
(735,108)
119,583
310,563
365,281
91,848
(592,998)
226,001
* Reclassified debt issuance costs of $2.8 million related to the Convertible (cid:1)otes as of December 31, 2015 from Total
Assets and Long-term debt in connection with the adoption of ASU 2015-03.
109
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion of our financial condition and results of operations should be read in conjunction with our financial
statements and the notes to those financial statements appearing elsewhere in this Annual Report on Form 10-K. This discussion
contains forward-looking statements that involve significant risks and uncertainties. As a result of many factors, such as those set
forth in Part I, Item 1A. Risk Factors, of this Annual Report on Form 10-K, our actual results may differ materially from those
anticipated in these forward-looking statements.
We are a science-driven global biopharmaceutical company focused on the discovery, development and commercialization
of clinically-differentiated medicines that provide benefits to patients with rare disorders. Our ability to commercialize products
is the foundation that drives our continued investment in a robust diversified pipeline of transformative medicines and our mission
to provide access to best-in-class treatments for patients who have an unmet medical need. Our strategy is to bring best-in-class
therapies with differentiated clinical benefit to patients affected by rare disorders and to leverage our global commercial
infrastructure to maximize value for our patients and other stakeholders. We have a portfolio pipeline that includes commercial
products as well as product candidates in various stages of development, including clinical, pre-clinical and research and discovery
stages, focused on the development of new treatments for multiple therapeutic areas, including rare diseases and oncology.
We have two products, Translarna™ (ataluren) and Emflaza™ (deflazacort), for the treatment of Duchenne muscular
dystrophy, or DMD, a rare, life threatening disorder. Translarna has marketing authorization in the European Economic Area, or
EEA, for the treatment of nonsense mutation Duchenne muscular dystrophy, or nmDMD, in ambulatory patients aged two years
and older and in Brazil for the treatment of nmDMD in ambulatory patients aged five years and older. During the year
ended December 31, 2019, we recognized $190.0 million in sales of Translarna. We hold worldwide commercialization rights to
Translarna for all indications in all territories. Emflaza is approved in the United States for the treatment of DMD in patients two
years and older. During the year ended December 31, 2019, Emflaza achieved net sales of $101.0 million.
Our marketing authorization for Translarna in the EEA is subject to annual review and renewal by the European
Commission following reassessment by the European Medicines Agency, or EMA, of the benefit-risk balance of the authorization,
which we refer to as the annual EMA reassessment. In July 2019, the European Commission renewed our marketing authorization,
making it effective, unless extended, through August 5, 2020. In February 2020, we submitted a marketing authorization renewal
request to the EMA. This marketing authorization is further subject to a specific obligation to conduct and submit the results of
a18-month, placebo-controlled trial, followed by an 18-month open-label extension, which we refer to together as Study 041. The
final report on the trial and open-label extension is to be submitted by us to the EMA by the end of the third quarter of 2022.
Each country, including each member state of the EEA, has its own pricing and reimbursement regulations. In order to
commence commercial sale of product pursuant to our Translarna marketing authorization in any particular country in the EEA,
we must finalize pricing and reimbursement negotiations with the applicable government body in such country. As a result, our
commercial launch will continue to be on a country-by-country basis. We also have made, and expect to continue to make, product
available under early access programs, or EAP programs, both in countries in the EEA and other territories. Our ability to negotiate,
secure and maintain reimbursement for product under commercial and EAP programs can be subject to challenge in any particular
country and can also be affected by political, economic and regulatory developments in such country.
There is substantial risk that if we are unable to renew our EEA marketing authorization during any annual renewal cycle,
or if our product label is materially restricted, or if Study 041 does not provide the data necessary to maintain our marketing
authorization, we would lose all, or a significant portion of, our ability to generate revenue from sales of Translarna in the EEA
and other territories.
Translarna is an investigational new drug in the United States. During the first quarter of 2017, we filed a (cid:1)ew Drug
Application, or (cid:1)DA, for Translarna for the treatment of nmDMD over protest with the United States Food and Drug Administration,
or FDA. In October 2017, the Office of Drug Evaluation I of the FDA issued a Complete Response Letter for the (cid:1)DA, stating
that it was unable to approve the application in its current form. In response, we filed a formal dispute resolution request with the
Office of (cid:1)ew Drugs of the FDA. In February 2018, the Office of (cid:1)ew Drugs of the FDA denied our appeal of the Complete
Response Letter. In its response, the Office of (cid:1)ew Drugs recommended a possible path forward for the ataluren (cid:1)DA submission
based on the accelerated approval pathway. This would involve a re-submission of an (cid:1)DA containing the current data on
effectiveness of ataluren with new data to be generated on dystrophin production in nmDMD patients’ muscles. We intend to
follow the FDA’s recommendation and will collect, using newer technologies via procedures and methods that we designed, such
dystrophin data in a new study, Study 045, which we initiated in the fourth quarter of 2018. We expect that a potential re-submission
of an (cid:1)DA could occur in mid-year 2020. Additionally, should a re-submission of an (cid:1)DA receive accelerated approval, the Office
of (cid:1)ew Drugs stated that Study 041, which is currently enrolling, could serve as the confirmatory post-approval trial required in
connection with the accelerated approval framework.
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There is substantial risk that Study 045, or any other studies we may use to collect the dystrophin data, will not provide
the necessary data to support a marketing approval for Translarna for the treatment of nmDMD in the U.S.
We hold the rights for the commercialization of Tegsedi™ (inotersen) and Waylivra™ (volanesorsen) for the treatment
of rare diseases in countries in Latin America and the Caribbean pursuant to our Collaboration and License Agreement with Akcea
Therapeutics, Inc., or Akcea. Tegsedi has received marketing authorization in the United States, EU and Brazil for the treatment
of stage 1 or stage 2 polyneuropathy in adult patients with hereditary transthyretin amyloidosis, or hATTR amyloidosis. Waylivra
has received marketing authorization in the European Union, or EU, for the treatment of familial chylomicronemia syndrome, or
FCS. We anticipate filing for marketing authorization with A(cid:1)VISA in the second half of 2020.
We have a pipeline of gene therapy product candidates for rare monogenic diseases that affect the central nervous system,
or C(cid:1)S, including PTC-AADC for the treatment of Aromatic L-Amino Acid Decarboxylase, or AADC, deficiency, or AADC
deficiency, a rare C(cid:1)S disorder arising from reductions in the enzyme AADC that result from mutations in the dopa decarboxylase
gene. We are preparing a biologics license application, or BLA, for PTC-AADC for the treatment of AADC deficiency in the
United States, which we anticipate submitting to the FDA in the second quarter of 2020. In January 2020, we submitted a marketing
authorization application, or MAA, for PTC-AADC for the treatment of AADC deficiency in the EEA to the EMA and we expect
an opinion from the Committee for Medicinal Products for Human Use, or CHMP, by the end of 2020.
We also have a spinal muscular atrophy, or SMA, collaboration with F. Hoffman-La Roche Ltd. and Hoffman-La
Roche Inc., which we refer to collectively as Roche, and the Spinal Muscular Atrophy Foundation, or SMA Foundation. The lead
compound in the SMA program is risdiplam (RG7916, RO7034067). Roche submitted an (cid:1)DA for risdiplam to the FDA in the
fourth quarter of 2019 and the Prescription Drug User Fee Act, or PDUFA, date for a decision by the FDA is May 24, 2020.
Risdiplam is expected to be indicated in the United States for SMA type 1, 2 and 3 patients, if approved. Roche anticipates
submitting an MAA for risdiplam for the treatment of SMA in the EEA in mid-year 2020.
In 2019, we acquired substantially all of the assets of BioElectron Technology Corporation, or BioElectron, including
certain compounds that we have begun to develop as part of our Bio-e platform. In 2020, we plan to initiate three trials in this
platform with two unique compounds that regulate inflammation and oxidative stress.
In addition, we have a pipeline of product candidates and discovery programs that are in early clinical, pre-clinical and
research and development stages focused on the development of new treatments for multiple therapeutic areas, including rare
diseases and oncology.
Overview—Funding
The success of our products and any other product candidates we may develop, depends largely on obtaining and
maintaining reimbursement from governments and third-party insurers. During 2019, our revenues were generated from sales of
Translarna for the treatment of nmDMD in countries where we were able to obtain acceptable commercial pricing and
reimbursement terms and in select countries where we are permitted to distribute Translarna under our EAP programs, and from
sales of Emflaza for the treatment of DMD in the United States.
See “Item 1. Business—Commercial Matters—Market Access Considerations” for additional information and “Item 1A.
Risk Factors—Commercialization of Translarna has been in, and is expected to continue to take place in, countries that tend to
impose strict price controls, which may adversely affect our revenues. Failure to obtain and maintain acceptable pricing and
reimbursement terms for Translarna for the treatment of nmDMD in the EEA and other countries where Translarna is available
would delay or prevent us from marketing our product in such regions, which would adversely affect our business, results of
operations, and financial condition.”
On April 20, 2017, we completed our acquisition of all rights to Emflaza, or the Transaction, for total upfront consideration
comprised of $75.0 million in cash, funded through cash on hand, and 6,683,598 shares of our common stock, which was determined
by dividing $65.0 million by the volume weighted average price per share of our common stock on the (cid:1)asdaq Global Select
Market, or (cid:1)asdaq for the 15 trading-day period ending on the third trading day immediately preceding the closing.
On May 5, 2017, we entered into a credit and security agreement, or the Credit Agreement, with MidCap Financial Trust,
or MidCap Financial, as administrative agent and MidCap Financial and other certain institutions as lenders thereto, that provides
for a senior secured term loan facility of $60 million, of which $40 million was drawn by us on May 5, 2017. Our ability to draw
on the remaining $20.0 million under the senior secured term loan facility expired on December 31, 2018. The maturity date of
the Credit Agreement is May 1, 2021, unless terminated earlier.
In April 2018, we closed an underwritten public offering of our common stock pursuant to a registration statement on
Form S-3. We issued and sold an aggregate of 4,600,000 shares of common stock under the registration statement at a public
offering price of $27.04 per share, including 600,000 shares issued upon exercise by the underwriters of their option to purchase
111
additional shares. We received net proceeds of approximately $117.9 million after deducting underwriting discounts and
commissions and other offering expenses payable by us.
On August 23, 2018, we completed our acquisition of Agilis Biotherapeutics, Inc., or Agilis, for total upfront consideration
comprised of $49.2 million in cash and 3,500,907 shares of our common stock, which was determined by dividing $150.0 million
by the volume-weighted average price per share of our common stock on (cid:1)asdaq for the 10 consecutive trading-day period ending
on the second trading-day immediately preceding the closing.
In January 2019, we closed an underwritten public offering of our common stock pursuant to a registration statement on
Form S-3. We issued and sold an aggregate of 7,563,725 shares of common stock under the registration statement at a public
offering price of $30.20 per share, including 843,725 shares issued upon exercise by the underwriter of its option to purchase
additional shares in February 2019. We received net proceeds of approximately $224.2 million after deducting underwriting
discounts and commissions and other offering expenses payable by us.
In August 2019, we entered into an At the Market Offering Sales Agreement, or the Sales Agreement, with Cantor
Fitzgerald and RBC Capital Markets, LLC, or together, the Sales Agents, pursuant to which, we may offer and sell shares of our
common stock, having an aggregate offering price of up to $125.0 million from time to time through the Sales Agents by any
method that is deemed to be an “at the market offering” as defined in Rule 415(a)(4) promulgated under the Securities Act of
1933, as amended, or the Securities Act pursuant to a registration statement on Form S-3. During the year ended December 31,
2019, we issued and sold an aggregate of 63,926 shares of common stock pursuant to the Sales Agreement at a weighted average
public offering price of $46.60 per share. We received net proceeds of $2.6 million after deducting agent discounts and commissions
and other offering expenses payable by us.
In September 2019, we closed an underwritten public offering of our common stock pursuant to a registration statement
on Form S-3. We issued and sold an aggregate of 2,475,248 shares of common stock under the registration statement at a public
offering price of $40.40 per share. The offering included an option to purchase up to an additional 371,287 shares for a period of
30 days following the offering. This option was not exercised by the underwriter. We received net proceeds of $97.0 million after
deducting underwriting discounts and commissions and other offering expenses payable by us.
In September 2019, we issued $287.5 million aggregate principal amount of 1.50% convertible senior notes due September
15, 2026, or the 2026 Convertible (cid:1)otes, which included an option to purchase up to an additional $37.5 million in aggregate
principal amount of the 2026 Convertible (cid:1)otes, which was exercised in full by the initial purchasers. The 2026 Convertible (cid:1)otes
bear cash interest at a rate of 1.50% per year, payable semi-annually on March 15 and September 15 of each year, beginning on
March 15, 2020. The 2026 Convertible (cid:1)otes will mature on September 15, 2026, unless earlier repurchased or converted. We
received net proceeds of $279.3 million after deducting the initial purchasers’ discounts and commissions and the offering expenses
payable by us.
On October 25, 2019, we completed our acquisition of substantially all of the assets of BioElectron for total upfront
consideration of $10.0 million in cash less (i) transaction expenses incurred by BioElectron, (ii) the amount of outstanding
indebtedness of BioElectron including a $4.0 million loan advance to BioElectron plus accrued and unpaid interest thereon and
(iii) $1.5 million held in an escrow account to secure potential indemnification obligations owed to us.
To date, we have financed our operations primarily through our offering of 3.00% convertible senior notes due August 15,
2022, or the 2022 Convertible (cid:1)otes offering, our offering of 1.50% convertible senior notes due September 15, 2026, or the 2026
Convertible (cid:1)otes, and, together with the 2022 Convertible (cid:1)otes, the Convertible (cid:1)otes, our public offerings of common stock
in February 2014, in October 2014, in April 2018, in January 2019, and in September 2019, the common stock issued in our “at
the marketing offering”, our initial public offering of common stock in June 2013, private placements of our preferred stock,
collaborations, bank debt and convertible debt financings, the Credit Agreement and grants and clinical trial support from
governmental and philanthropic organizations and patient advocacy groups in the disease areas addressed by our product candidates.
Since 2014, we have also relied on revenue generated from net sales of Translarna for the treatment of nmDMD in territories
outside of the United States, and since May 2017, we have generated revenue from net sales of Emflaza for the treatment of DMD
in the United States.
As of December 31, 2019, we had an accumulated deficit of $1,190.5 million. We had a net loss of $251.6 million and
$128.1 million for the fiscal years ended December 31, 2019 and 2018, respectively.
We anticipate that our expenses will continue to increase in connection with our commercialization efforts in the United
States, the EEA, Latin America and other territories, including the expansion of our infrastructure and corresponding sales and
marketing, legal and regulatory, distribution and manufacturing, including expanding our direct manufacturing capabilities at our
new biologics manufacturing facility and administrative and employee-based expenses. In addition to the foregoing, we expect
to continue to incur ongoing research and development expenses for our products and product candidates, including our gene
therapy, splicing, Bio-e and oncology programs as well as studies in our products for maintaining authorizations, including Study
112
041, label extensions and additional indications. In addition, we may incur substantial costs in connection with our efforts to
advance our regulatory submissions. We continue to seek marketing authorization for Translarna for the treatment of nmDMD in
territories that we do not currently have marketing authorization in and we may also seek marketing authorization for Translarna
for other indications. We submitted an MAA to the EMA for the treatment of AADC deficiency with PTC-AADC in the EEA and
we are preparing a BLA for PTC-AADC for the treatment of AADC deficiency in the United States, which we anticipate submitting
to the FDA in the second quarter of 2020. We also anticipate filing for marketing authorization for Waylivra with A(cid:1)VISA in the
second half of 2020. These efforts may significantly impact the timing and extent of our commercialization expenses.
We may seek to expand and diversify our product pipeline through opportunistically in-licensing or acquiring the rights
to products, product candidates or technologies and we may incur expenses, including with respect to transaction costs, subsequent
development costs or any upfront, milestone or other payments or other financial obligations associated with any such transaction,
which would increase our future capital requirements.
With respect to our outstanding 2022 Convertible (cid:1)otes, cash interest payments are payable on a semi-annual basis in
arrears, which require total funding of $4.5 million annually. With respect to our outstanding 2026 Convertible (cid:1)otes, cash interest
payments are payable on a semi-annual basis in arrears, which will require total funding of $4.3 million annually. Additionally,
under the terms of our Credit Agreement cash interest payments are payable monthly in arrears. We are also required to pay $40.0
million in development milestone payments upon the passing of the second anniversary of the closing of the Agilis acquisition,
August 23, 2020, regardless of whether the applicable milestones have been achieved. In addition, Akcea is eligible to receive
from us an additional milestone payment of $4.0 million upon receipt of regulatory approval for Waylivra from A(cid:1)VISA.
Furthermore, since we are a public company, we have incurred and expect to continue to incur additional costs associated with
operating as such including significant legal, accounting, investor relations and other expenses. See also, “The price of our common
stock may be volatile and fluctuate substantially, which could result in substantial losses for purchasers of our common stock and
lawsuits against us and our officers and directors” under Part II, Item 1A. Risk Factors - Risks Related to Our Common Stock.
We will need to generate significant revenues to achieve and sustain profitability, and we may never do so. Accordingly,
we may need to obtain substantial additional funding in connection with our continuing operations. Adequate additional financing
may not be available to us on acceptable terms, or at all. If we are unable to raise capital when needed or on attractive terms, we
could be forced to delay, reduce or eliminate our research and development programs or our commercialization efforts.
Financial operations overview
To date, our net product revenues have consisted primarily of sales of Translarna for the treatment of nmDMD in territories
outside of the United States and sales of Emflaza for the treatment of DMD in the United States. Our process for recognizing
revenue is described below under “Critical accounting policies and significant judgments and estimates—Revenue recognition”.
Roche and the SMA Foundation Collaboration. In (cid:1)ovember 2011, we entered into a license and collaboration agreement,
or licensing agreement, with Roche and the SMA Foundation pursuant to which we are collaborating with Roche and the SMA
Foundation to further develop and commercialize compounds identified under our spinal muscular atrophy program with the SMA
Foundation. The research component of this agreement terminated effective December 31, 2014. The licensing agreement included
a $30 million upfront payment made in 2011 which was recognized on a deferred basis over the research term, and the potential
for up to $460 million in milestone payments and royalties on net sales.
In August 2013, we announced the selection of a development candidate, RG7800. The achievement of this milestone
triggered a $10.0 million payment to us from Roche, which we recorded as collaboration revenue for the year ended December 31,
2013.
In January 2014, we initiated a Phase 1 clinical program for RG7800, which triggered a $7.5 million milestone payment to
us from Roche which we recorded as collaboration revenue for the year ended December 31, 2014.
In (cid:1)ovember 2014, we announced that our joint development program in SMA with Roche and the SMA Foundation, or
SMAF has started a Phase 2 study for RG7800 in adult and pediatric patients. The achievement of this milestone triggered a
$10.0 million payment to us from Roche which we recorded as collaboration revenue for the year ended December 31, 2014.
In October 2017, we announced that the joint development program in SMA with Roche and SMAF had transitioned into
the pivotal second part of its study evaluating the efficacy and safety of RG7916 in pediatric and adult Type 2/3 SMA patients.
The achievement of this milestone triggered a $20.0 million payment to us from Roche which we recorded as collaboration revenue
at time of achievement.
113
In (cid:1)ovember 2019, we announced that the FDA accepted the filing of and granted priority review for the (cid:1)DA for risdiplam
for the treatment of SMA. The filing acceptance by the FDA triggered a $15.0 million payment to us from Roche which we
recorded as collaboration revenue at time of achievement.
The remaining potential research and development event milestones that can be received as of December 31, 2019 is $72.5
million. The remaining potential sales milestones as of December 31, 2019 is $325.0 million upon achievement of certain sales
events. In addition, the Company is eligible to receive up to double digit royalties on worldwide annual net sales of a commercial
product.
Grant revenue. From time to time, we receive grant funding from various institutions and governmental bodies. The grants
are typically for early discovery research, and generally such grant programs last from two to five years.
Research and development expense
Research and development expenses consist of the costs associated with our research activities, as well as the costs associated
with our drug discovery efforts, conducting preclinical studies and clinical trials, manufacturing development efforts and activities
related to regulatory filings. Our research and development expenses consist of:
•
•
•
external research and development expenses incurred under agreements with third-party contract research organizations
and investigative sites, third-party manufacturing organizations and consultants;
employee-related expenses, which include salaries and benefits, including share-based compensation, for the personnel
involved in our drug discovery and development activities; and
facilities, depreciation and other allocated expenses, which include direct and allocated expenses for rent and
maintenance of facilities, depreciation of leasehold improvements and equipment, and laboratory and other supplies.
We use our employee and infrastructure resources across multiple research projects, including our drug development
programs. We track expenses related to our clinical programs and certain preclinical programs on a per project basis.
We expect our research and development expenses to fluctuate in connection with our ongoing activities, particularly in
connection with Study 041 and other studies for Translarna for the treatment of nmDMD, our activities under our gene therapy,
splicing, Bio-e and oncology programs, our studies of Translarna for additional indications, and performance of our FDA post-
marketing requirements with respect to Emflaza in the United States. The timing and amount of these expenses will depend upon
the outcome of our ongoing clinical trials and the costs associated with our planned clinical trials. The timing and amount of these
expenses will also depend on the costs associated with potential future clinical trials of our products or product candidates and
the related expansion of our research and development organization, regulatory requirements, advancement of our preclinical
programs, and product and product candidate manufacturing costs.
The following table provides research and development expense for our most advanced principal product development
programs, for the years ended December 31, 2019, 2018, and 2017.
Translarna (nmDMD, aniridia and Dravet)
$
Bio-e
Gene therapy
Oncology
(cid:1)ext generation nonsense readthrough
Emflaza
Akcea
Other research and preclinical
Total research and development
Year ended
December 31,
2019
2018
2017
(in thousands)
80,859
$
$
75,954
—
6,534
16,438
6,735
16,461
11,957
33,000
—
—
4,481
5,609
7,053
—
24,359
94,246
10,060
62,839
21,199
4,089
22,572
—
42,447
$
257,452
$
171,984
$
117,456
The successful development of our product and product candidates is highly uncertain. This is due to the numerous risks
and uncertainties associated with developing drugs, including the uncertainty of:
•
the scope, rate of progress and expense of our clinical trials and other research and development activities;
114
•
•
•
•
•
the potential benefits of our product and product candidates over other therapies;
our ability to market, commercialize and achieve market acceptance for our product or any of our product candidates
that we are developing or may develop in the future, including our ability to negotiate pricing and reimbursement terms
acceptable to us;
clinical trial results;
the terms and timing of regulatory approvals; and
the expense of filing, prosecuting, defending and enforcing patent claims and other intellectual property rights.
A change in the outcome of any of these variables with respect to the development of any of our products or product candidates
could mean a significant change in the costs and timing associated with the development of that product candidates. For example,
if the EMA or FDA or other regulatory authority were to require us to conduct clinical trials beyond those which we currently
anticipate will be required for the completion of clinical development of any of our products or product candidate or if we experience
significant delays in enrollment in any of our clinical trials, we could be required to expend significant additional financial resources
and time on the completion of clinical development.
Selling, general and administrative expense
Selling, general and administrative expenses consist primarily of salaries and other related costs for personnel, including
share-based compensation expenses, in our executive, legal, business development, finance, accounting, information technology
and human resource functions. Other selling, general and administrative expenses include facility-related costs not otherwise
included in research and development expense; advertising and promotional expenses; costs associated with industry and trade
shows; and professional fees for legal services, including patent-related expenses, accounting services and miscellaneous selling
costs.
We expect that selling, general and administrative expenses will increase in future periods in connection with our continued
efforts to commercialize our products, including increased payroll, expanded infrastructure, commercial operations, increased
consulting, legal, accounting and investor relations expenses.
Interest expense, net
Interest expense, net consists of interest income earned on investments and interest expense from the Convertible (cid:1)otes
outstanding and interest expense from the Credit Agreement.
Critical accounting policies
Our management’s discussion and analysis of our financial condition and results of operations is based on our financial
statements, which we have prepared in accordance with generally accepted accounting principles in the United States. The
preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets
and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported
revenues and expenses during the reporting periods. Actual results may differ from these estimates under different assumptions
or conditions.
Of our policies, the following are considered critical to an understanding of our consolidated financial statements as they
require the application of the most subjective and complex judgment, involving critical accounting estimates and assumptions
impacting our consolidated financial statements:
• Revenue recognition
• Convertible notes offering
• Income taxes
• Business combinations and asset acquisitions
• Indefinite-lived intangible assets
Revenue recognition
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) (cid:1)o.
2014-9, “Revenue from Contracts with Customers (Topic 606)”. ASU (cid:1)o. 2014-9 eliminated transaction- and industry-specific
revenue recognition guidance under FASB Accounting Standards Codification (“ASC”) Subtopic 605-15, Revenue Recognition-
Products (Topic 605) and replaced it with a principle-based approach for determining revenue recognition. ASC Topic 606 requires
115
entities to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the
consideration to which the entity expects to be entitled in exchange for those goods or services. On January 1, 2018, we adopted
ASC Topic 606 using the modified retrospective approach, a practical expedient permitted under Topic 606, and applied this
approach only to contracts that were not completed as of January 1, 2018. We calculated a one-time transition adjustment of $3.3
million, which was recorded on January 1, 2018 to the opening balance of accumulated deficit, related to the product sales of
Emflaza. The ASC 606 transition adjustment recorded for Emflaza resulted in sales being recognized earlier than under Topic
605, as the deferred revenue recognition model (sell-through) is not allowed under Topic 606. The one-time adjustment consisted
of $3.9 million in deferred revenue offset by $0.6 million of variable consideration. The information presented for the periods
prior to January 1, 2018 has not been adjusted and is reported under Topic 605.
Periods prior to January 1, 2018
We recognize revenue when amounts are realized or realizable and earned. Revenue is considered realizable and earned
when the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services have
been rendered; (3) the price is fixed or determinable; and (4) collection of the amounts due are reasonably assured.
(cid:1)et product sales
Prior to the second quarter of 2017, our net product sales have consisted primarily of sales of Translarna for the treatment
of nmDMD in territories outside of the U.S. We recognize revenue from product sales when there is persuasive evidence that an
arrangement exists, title to product and associated risk of loss has passed to the customer, the price is fixed or determinable,
collectability is reasonably assured and we have no further performance obligations in accordance with Financial Accounting
Standards Board, or FASB, Accounting Standards Codification, or ASC, Subtopic 605-15, Revenue Recognition—Products.
We have recorded revenue on sales where Translarna is available either on a commercial basis or through a reimbursed EAP
program. Orders for Translarna are generally received from hospital and retail pharmacies and our third-party partner distributors.
Our third-party distributors act as intermediaries between us and end users and do not typically stock significant quantities of
Translarna. The ultimate payor for Translarna is typically a government authority or institution or a third-party health insurer.
In May 2017, we began the commercialization of Emflaza in the U.S. We recorded product revenue related to the sales of
Emflaza in the U.S. in accordance with ASC 605-15, when persuasive evidence of an arrangement exists, delivery has occurred
and title of the product and associated risk of loss has passed to the customer, the price is fixed or determinable and collection
from the customer has been reasonably assured. Due to the early stage of the product launch, we determined that we were not able
to reliably make certain estimates, including returns, necessary to recognize product revenue upon shipment to distributors. As a
result, we recorded net product revenue for Emflaza using a deferred revenue recognition model (sell-through). Under the deferred
revenue model, we did not recognize revenue until Emflaza was shipped to the specialty pharmacy. During the fourth quarter of
2017, we evaluated and determined that we had sufficient volume of historical activity and visibility into the distribution channel
to reasonably make all estimates required under ASC 605 to recognize revenue upon shipment to its specialty pharmacy. The
change from the sell-through model to recognizing revenue upon shipment to specialty pharmacies during the fourth quarter of
2017 was immaterial to the financial statements.
We record revenue net of estimated third-party discounts and rebates. Allowances are recorded as a reduction of revenue at
the time revenues from product sales are recognized. Allowances for government and other third-party rebates and discounts are
established or estimated at the time of delivery. These allowances are adjusted to reflect known changes in factors and may impact
such allowances in the quarter those changes are known. For the year ended December 31, 2017, we recognized Translarna net
sales of $145.2 million and Emflaza net sales of $28.8 million.
We expect that net product sales of Translarna for the treatment of nmDMD will fluctuate quarter-over-quarter. In some
countries, including those in Latin America, orders for named patient sales or by governmental buyers may be for multiple months
of therapy which can lead to an unevenness in orders. In addition, net product sales may fluctuate quarter-over-quarter as a result
of government actions, economic pressures and political unrest. (cid:1)et product sales may be significantly impacted by multiple
factors, including, among other things, decisions by regulatory authorities, in particular the FDA, the EMA and A(cid:1)VISA, with
respect to our submissions for Translarna for the treatment of nmDMD and our ability to successfully negotiate favorable pricing
and reimbursement processes on a timely basis in the countries in which we have or may obtain regulatory approval, including
the United States, EEA and other territories.
Periods commencing January 1, 2018
Our net product revenue primarily consists of sales of Translarna in territories outside of the U.S. and sales of Emflaza in
the U.S., both for the treatment of DMD.
(cid:1)et Product Revenue
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We recognize revenue when performance obligations with customers have been satisfied. Our performance obligations are
to provide products based on customer orders from distributors, hospitals, specialty pharmacies or retail pharmacies. The
performance obligations are satisfied at a point in time when our customer obtains control of the product, which is typically upon
delivery. We invoice customers after the products have been delivered and invoice payments are generally due within 30 to 90
days of invoice date. We determine the transaction price based on fixed consideration in its contractual agreements. Contract
liabilities arise in certain circumstances when consideration is due for goods not yet provided. As we have identified only one
distinct performance obligation, the transaction price is allocated entirely to the product sale. In determining the transaction price,
a significant financing component does not exist since the timing from when we deliver product to when the customers pay for
the product is typically less than one year. Customers in certain countries pay in advance of product delivery. In those instances,
payment and delivery typically occur in the same month.
We record product sales net of any variable consideration, which includes discounts, allowances, rebates related to Medicaid
and other government pricing programs, and distribution fees. and distribution fees. We use the expected value or most likely
amount method when estimating variable consideration, unless discount or rebate terms are specified within contracts. The identified
variable consideration is recorded as a reduction of revenue at the time revenues from product sales are recognized. These estimates
for variable consideration are adjusted to reflect known changes in factors and may impact such estimates in the quarter those
changes are known. Revenue recognized does not include amounts of variable consideration that are constrained. For the years
ended December 31, 2019 and 2018, net product sales outside of the United States were $190.3 million and $171.0 million
respectively, and net product sales in the United States were $101.0 million and $92.0 million respectively.
In relation to customer contracts, we incur costs to fulfill a contract but do not incur costs to obtain a contract. These costs
to fulfill a contract do not meet the criteria for capitalization and are expensed as incurred.
Upon adoption of ASC Topic 606 on January 1, 2018, we have elected the following practical expedients:
•
•
•
•
Portfolio Approach - We applied the Portfolio Approach to contract reviews within identified revenue streams that have
similar characteristics and we believe this approach would not differ materially than if applying ASC Topic 606 to each
individual contract.
Significant Financing Component - We expect the period between when an we transfer a promised good or service to a
customer and when the customer pays for the good or service to be one year or less.
Immaterial Performance Obligations - We disregard promises deemed to be immaterial in the context of the contract.
Shipping and Handling Activities - We consider any shipping and handling costs that are incurred after the customer has
obtained control of the product as a cost to fulfill a promise.
Shipping and handling costs associated with finished goods delivered to customers are recorded as a selling expense.
Convertible (cid:1)otes Offerings
In September 2019, we issued $287.5 million aggregate principal amount of 2026 Convertible (cid:1)otes, which included an
option to purchase up to an additional $37.5 million in aggregate principal amount of the 2026 Convertible (cid:1)otes, which was
exercised in full by the initial purchasers. The 2026 Convertible (cid:1)otes bear cash interest at a rate of 1.50% per year, payable semi-
annually on March 15 and September 15 of each year, beginning on March 15, 2020. The 2026 Convertible (cid:1)otes will mature
on September 15, 2026, unless earlier repurchased or converted. The net proceeds to us from the offering were $279.3 million
after deducting the initial purchasers’ discounts and commissions and the offering expenses payable by us.
The 2026 Convertible (cid:1)otes are governed by an indenture, or the 2026 Convertible (cid:1)otes Indenture, with U.S Bank
(cid:1)ational Association as trustee, or the 2026 Convertible (cid:1)otes Trustee.
In August 2015, we issued $150.0 million aggregate principal amount of 2022 Convertible (cid:1)otes. The 2022 Convertible
(cid:1)otes bear cash interest at a rate of 3.00% per year, payable semi-annually on February 15 and August 15 of each year, beginning
on February 15, 2016. The 2022 Convertible (cid:1)otes will mature on August 15, 2022, unless earlier repurchased or converted. The
net proceeds to us from the offering were $145.4 million after deducting the initial purchasers’ discounts and commissions and
the offering expenses payable by us.
The 2022 Convertible (cid:1)otes are governed by an indenture, or the 2022 Convertible (cid:1)otes Indenture, with U.S Bank
(cid:1)ational Association as trustee, or the 2022 Convertible (cid:1)otes Trustee.
As the Convertible (cid:1)otes contained embedded conversion features, we separated the Convertible (cid:1)otes into liability and
equity components, in accordance with the guidance in ASC 815. The carrying amount for each of the liability components was
calculated by measuring the fair value of a similar liability that does not have an associated convertible feature. The carrying
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amount of each of the equity components representing the conversion option was determined by deducting the fair value of the
respective liability component from the par value of the Convertible (cid:1)otes as a whole. The excess of the principal amount of each
of the liability components over its respective carrying amount, referred to as the debt discount, is amortized to interest expense
over the seven-year term of each of the Convertible (cid:1)otes in accordance with ASC 835. The equity component is not re-measured
as long as it continues to meet the conditions for equity classification. The equity components recorded at each issuance was
recorded in additional paid-in capital.
In accounting for the transaction costs related to the issuance of each of the Convertible (cid:1)otes, we allocated the total
costs incurred to the liability and equity components of the Convertible (cid:1)otes based on their relative values in accordance with
ASC 470. Transaction costs attributable to each of the liability components are amortized to interest expense over the seven-year
term of each of the Convertible (cid:1)otes, and transaction costs attributable to the equity component are netted with the equity
components in stockholders’ equity. Additionally, we initially recorded net deferred tax liabilities in connection with each of the
Convertible (cid:1)otes.
Income taxes
As part of the process of preparing our financial statements, we are required to estimate our income taxes in each of the
jurisdictions in which we operate. This process involves estimating our actual current tax expense together with assessing temporary
differences resulting from differing treatments of items for tax and accounting purposes. These differences result in deferred tax
assets and liabilities. At December 31, 2019 and 2018, we recorded a valuation allowance against our net deferred tax assets of
approximately $267.1 million and $180.5 million, respectively. The change in the valuation allowance during the years ended
December 31, 2019 and 2018 was approximately $86.7 million and $2.8 million, respectively. A valuation allowance has been
recorded since, in the judgment of management, these assets are not more likely than not to be realized. The ultimate realization
of deferred tax assets is dependent upon the generation of future taxable income during periods in which those temporary differences
and carryforwards become deductible or are utilized. As of December 31, 2019, we have approximately $433.3 million, $224.4
million, and $8.4 million of federal, state, and ex-U.S. net operating loss carryforwards, respectively. As a result of the adoption
of ASU 2016-09, we no longer exclude tax benefits that arose directly from equity compensation in excess of compensation
recognized for financial reporting in its U.S. federal and U.S. state net operating loss carryforwards.
During 2018, we acquired in-process research and development, or IPR&D, as part of the acquisition of Agilis. This asset is
currently considered an indefinite-lived intangible with no related book amortization and tested for impairment, annually. As the
IPR&D has no tax basis and is an indefinite-lived intangible, the deferred tax liability created at the time of acquisition is not
considered positive evidence of future income and is presented as a deferred tax liability in the balance sheet.
As of December 31, 2019, research and development credit carryforwards for federal and state purposes are approximately
$14.2 million and $6.2 million, respectively. In addition, the Orphan Drug Credit Carryover available as of December 31, 2019
is approximately $85.2 million. As a result of U.S. tax reform legislation, federal net operating losses, or (cid:1)OLs, generated in 2018
carryforward indefinitely, however, we have federal net operating losses that pre-date U.S. tax reform legislation which begin to
expire in 2021 and federal credit carryforwards that begin to expire in 2019. State net operating loss carryforwards begin to expire
in 2030, and the state credit carryforwards began to expire in 2016. Sections 382 and 383 of the Internal Revenue Code of 1986
subject the future utilization of net operating losses and certain other tax attributes, such as research and development tax credits,
to an annual limitation in the event of certain ownership changes, as defined. We have undergone an ownership change and have
determined that a “change in ownership” as defined by IRC Section 382 of the Internal Revenue Code of 1986, as amended, and
the rules and regulations promulgated thereunder, did occur in June of 2013. Accordingly, about $231.5 million of our (cid:1)OL
carryforwards are limited and we can only use $16.7 million for the first five years from the ownership change and $5.7 million
per year going forward. Therefore, $169.2 million of the (cid:1)OLs will be freed up over the next 20 years and $62.3 million are
expected to expire unused which are not included in the deferred tax assets listed above. In summary, including the (cid:1)OLs expected
to expire, there are $495.7 million of (cid:1)OLs available, out of which $231.5 million are limited by IRC Section 382. At December 31,
2019, there is $333.2 million available for immediate use and an additional $5.7 million will free up in 2020.
Business combinations and asset acquisitions
We evaluate acquisitions of assets and other similar transactions to assess whether or not the transaction should be accounted
for as a business combination or asset acquisition by first applying a screen to determine if substantially all of the fair value of the
gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets. If the screen is met, the
transaction is accounted for as an asset acquisition. If the screen is not met, further determination is required as to whether or not
we have acquired inputs and processes that have the ability to create outputs, which would meet the requirements of a business.
If determined to be a business combination, we account for the transaction under the acquisition method of accounting as indicated
in ASU 2017-01, “Business Combinations”, which requires the acquiring entity in a business combination to recognize the fair
value of all assets acquired, liabilities assumed, and any non-controlling interest in the acquiree and establishes the acquisition
date as the fair value measurement point. Accordingly, we recognize assets acquired and liabilities assumed in business
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combinations, including contingent assets and liabilities, and non-controlling interest in the acquiree based on the fair value
estimates as of the date of acquisition. In accordance with ASC 805, we recognize and measure goodwill as of the acquisition date,
as the excess of the fair value of the consideration paid over the fair value of the identified net assets acquired.
The consideration for our business acquisitions may include future payments that are contingent upon the occurrence of a
particular event or events. The obligations for such contingent consideration payments are recorded at fair value on the acquisition
date. The contingent consideration obligations are then evaluated each reporting period. Changes in the fair value of contingent
consideration, other than changes due to payments, are recognized as a gain or loss and recorded within the change in the fair
value of deferred and contingent consideration in the consolidated statements of operations.
If determined to be an asset acquisition, we account for the transaction under ASC 805-50, which requires the acquiring
entity in an asset acquisition to recognize assets acquired and liabilities assumed based on the cost to the acquiring entity on a
relative fair value basis, which includes transaction costs in addition to consideration given. (cid:1)o gain or loss is recognized as of
the date of acquisition unless the fair value of noncash assets given as consideration differs from the assets' carrying amounts on
the acquiring entity's books. Consideration transferred that is noncash will be measured based on either the cost (which shall be
measured based on the fair value of the consideration given) or the fair value of the assets acquired and liabilities assumed,
whichever is more reliably measurable. Goodwill is not recognized in an asset acquisition and any excess consideration transferred
over the fair value of the net assets acquired is allocated to the identifiable assets based on relative fair values.
Contingent consideration payments in asset acquisitions are recognized when the contingency is resolved and the
consideration is paid or becomes payable (unless the contingent consideration meets the definition of a derivative, in which case
the amount becomes part of the basis in the asset acquired). Upon recognition of the contingent consideration payment, the amount
is included in the cost of the acquired asset or group of assets.
Indefinite-lived intangible assets
Indefinite-lived intangible assets consist of IPR&D. IPR&D acquired directly in a transaction other than a business
combination is capitalized if the projects will be further developed or have an alternative future use; otherwise they are expensed.
The fair values of IPR&D projects acquired in business combinations are capitalized. Several methods may be used to determine
the estimated fair value of the IPR&D acquired in a business combination. We utilize the "income method”, and use estimated
future net cash flows that are derived from projected sales revenues and estimated costs. These projections are based on factors
such as relevant market size, patent protection, and expected pricing and industry trends. The estimated future net cash flows are
then discounted to the present value using an appropriate discount rate. These assets are treated as indefinite-lived intangible assets
until completion or abandonment of the projects, at which time the assets are amortized over the remaining useful life or written
off, as appropriate. Intangible assets with indefinite lives, including IPR&D, are tested for impairment if impairment indicators
arise and, at a minimum, annually. However, an entity is permitted to first assess qualitative factors to determine if a quantitative
impairment test is necessary. Further testing is only required if the entity determines, based on the qualitative assessment, that it
is more likely than not that an indefinite-lived intangible asset’s fair value is less than its carrying amount. Otherwise, no further
impairment testing is required. The indefinite-lived intangible asset impairment test consists of a one-step analysis that compares
the fair value of the intangible asset with its carrying amount. If the carrying amount of an intangible asset exceeds its fair value,
an impairment loss is recognized in an amount equal to that excess. We consider many factors in evaluating whether the value of
its intangible assets with indefinite lives may not be recoverable, including, but not limited to, expected growth rates, the cost of
equity and debt capital, general economic conditions, our outlook and market performance of our industry and recent and forecasted
financial performance. We performed our annual test for its indefinite-lived intangible assets as of October 1, 2019 and concluded
that no impairment exists as of December 31, 2019.
For a description of our significant accounting policies, see note 2 to our consolidated financial statements.
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Year ended December 31, 2019 compared to year ended December 31, 2018
The following table summarizes revenues and selected expense and other income data for the year ended December 31, 2019
and 2018:
(in thousands)
(cid:1)et product revenue
Collaboration and grant revenue
Cost of product sales, excluding amortization of acquired intangible
asset
Amortization of acquired intangible asset
Research and development expense
Selling, general and administrative expense
Change in the fair value of deferred and contingent consideration
Interest expense, net
Other income, net
Income tax (expense) benefit
Year ended
December 31,
$
2019
291,306
15,674
2018
$ 263,005
1,729
$
$
$
$
$
$
Change
2019 vs. 2018
28,301
13,945
(535)
4,773
85,468
48,993
29,020
63
13,594
(11,679)
12,670
22,877
171,984
153,548
19,340
$
(12,554) $
$
129
29
$
12,135
27,650
257,452
202,541
48,360
(12,491)
13,723
(11,650)
(cid:1)et product revenue. (cid:1)et product revenue was $291.3 million for the year ended December 31, 2019, an increase of $28.3
million, or 11%, from net product revenue of $263.0 million for the year ended December 31, 2018. The increase in net product
revenue was primarily due to the increase in net product sales in existing markets where Translarna is available as well as continued
geographic expansion into new territories, in addition to an increase in net product sales of Emflaza.
Collaboration and grant revenue. Collaboration and grant revenue was $15.7 million for the year ended December 31,
2019, an increase of $13.9 million, over 100%, from collaboration and grant revenue of $1.7 million for the year ended December 31,
2018. The increase in collaboration and grant revenue was primarily due to the $15.0 million milestone achieved during the fourth
quarter of 2019 from Roche, which was triggered in (cid:1)ovember 2019 upon the FDA’s acceptance of the filing of the (cid:1)DA for
risdiplam for the treatment of SMA.
Cost of product sales, excluding amortization of acquired intangible asset. Cost of product sales, excluding amortization
of acquired intangible asset, was $12.1 million for the year end December 31, 2019, a decrease of $0.5 million, or 4%, from $12.7
million for the year ended December 31, 2018. Cost of product sales consist primarily of royalty payments associated with Emflaza
and Translarna net product sales, excluding contingent payments to Marathon Pharmaceuticals, LLC (now known as Complete
Pharma Holdings, LLC), or Marathon, and costs associated with product sold during the period. The decrease year over year is
primarily due to a $1.8 million inventory write down for the twelve month period ended December 31, 2018, primarily related to
inventory labeling changes.
Amortization of acquired intangible asset. Amortization of acquired intangible asset was $27.7 million for the year ended
December 31, 2019, an increase of $4.8 million, or 21%, from $22.9 million for the year ended December 31, 2018. These amounts
are related to the acquisition of all rights to Emflaza acquired in May 2017, Marathon contingent payments, and our Waylivra and
Tegsedi intangible assets. The increase is primarily related to additional Marathon contingent payments. The amount allocated to
the Emflaza intangible asset is amortized on a straight-line basis over its estimated useful life of approximately seven years from
the date of the completion of the acquisition of all rights to Emflaza, the period of estimated future cash flows. The Marathon
contingent payments are amortized prospectively as incurred, straight-line, over the remaining useful life of the Emflaza intangible
asset. The Waylivra and Tegsedi assets are amortized on a straight-line basis over their estimated useful life of approximately ten
years, respectively.
Research and development expense. Research and development expense was $257.5 million for the year ended
December 31, 2019, an increase of $85.5 million, or 50%, compared to $172.0 million for the year ended December 31, 2018.
The increase reflects costs associated with advancing the gene therapy platform and increased investment in research programs,
such as our acquisition of PTC743 from BioElectron, which represents $10.1 million of the increase, as well as advancement of
the clinical pipeline.
Selling, general and administrative expense. Selling, general and administrative expense was $202.5 million for the year
ended December 31, 2019, an increase of $49.0 million, or 32%, from $153.5 million for the year ended December 31, 2018. The
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increase was primarily due to continued investment to support our commercial activities including our expanding commercial
portfolio.
Change in the fair value of deferred and contingent consideration. Change in the fair value of deferred and contingent
consideration was $48.4 million for the year ended December 31, 2019, an increase of $29.0 million, or 150%, from $19.3 million
for the year ended December 31, 2018. The change is related to the fair valuation of the potential future consideration to be paid
to former equity holders of Agilis, as a result of our merger with Agilis which closed in August 2018. Changes in the fair value
were due to the re-calculation of discounted cash flows for the passage of time and changes to certain other estimated assumptions.
Interest expense, net. (cid:1)et interest expense was $12.5 million for the year ended December 31, 2019, a decrease of $0.1
million, or 1%, from net interest expense of $12.6 million for the year ended December 31, 2018. The decrease in interest expense,
net was primarily due to increased interest income from investments, which partially offset current year interest expense recorded
from the 2022 and 2026 Convertible (cid:1)otes and the Credit Agreement.
Other income, net. Other income, net was $13.7 million for the year ended December 31, 2019, an increase of $13.6
million, over 100%, from other income, net of $0.1 million for the year ended December 31, 2018. The increase in other income,
net resulted primarily from a foreign exchange gain from the remeasurement of our intercompany loan and an unrealized gain on
our equity investment in ClearPoint (cid:1)euro, Inc. (formerly MRI Interventions, Inc.), or our Equity Investment, of $2.2 million,
partially offset by exchange rate changes in the current period.
Income tax (expense) benefit. Income tax expense was $11.7 million for the year ended December 31, 2019, a change of
$11.7 million, over 100%, from income tax benefit of $0.03 million for the year ended December 31, 2018. We incurred income
tax expense in various ex-U.S. jurisdictions, and our ex-U.S. tax liabilities are largely dependent upon the distribution of pre-tax
earnings among these different jurisdictions. We are paying minimum income taxes in the United States because of incurred losses
in the various state jurisdictions.
Year ended December 31, 2018 compared to year ended December 31, 2017
The following table summarizes revenues and selected expense and other income data for the years ended December 31,
2018 and 2017:
(in thousands)
(cid:1)et product revenue
Collaboration and grant revenue
Cost of product sales, excluding amortization of acquired intangible asset
Amortization of acquired intangible asset
Research and development expense
Selling, general and administrative expense
Change in the fair value of deferred and contingent consideration
Interest expense, net
Other income (expense), net
Income tax benefit (expense)
Year ended
December 31,
2018
263,005
$
2017
174,066
$
Change
2018 vs. 2017
88,939
(18,597)
8,093
7,497
54,528
32,277
19,340
(460)
1,408
1,364
$
$
$
$
$
$
20,326
4,577
15,380
117,456
121,271
— $
(12,094) $
(1,279) $
(1,335) $
1,729
12,670
22,877
171,984
153,548
19,340
(12,554)
129
29
(cid:1)et product revenue. (cid:1)et product revenue was $263.0 million for the year ended December 31, 2018, an increase of $88.9
million, or 51%, from net product revenue of $174.1 million for the year ended December 31, 2017. The increase in net product
revenue was primarily due to the increase in net product sales of $25.8 million in existing markets where Translarna is available
as well as continued geographic expansion into new territories, in addition to an increase in $63.2 million in net product sales of
Emflaza, which launched domestically in May 2017.
Collaboration and grant revenue. Collaboration and grant revenue was $1.7 million for the year ended December 31,
2018, a decrease of $18.6 million, or 91%, from collaboration and grant revenue of $20.3 million for the year ended December 31,
2017. The decrease in collaboration and grant revenue was primarily due to the $20.0 million milestone achieved during the fourth
quarter of 2017 from Roche. In October 2017, we announced that Sunfish, a two-part clinical trial in pediatric and adult type 2
and type 3 spinal muscular atrophy initiated in the fourth quarter of 2016, had transitioned into the pivotal second part of its study
which triggered the milestone payment.
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Cost of product sales, excluding amortization of acquired intangible asset. Cost of product sales, excluding amortization
of acquired intangible asset, was $12.7 million for the year end December 31, 2018, an increase of $8.1 million, or 177%, from
$4.6 million for the year ended December 31, 2018. Cost of product sales consist primarily of royalty payments associated with
Emflaza and Translarna net product sales and costs associated with Emflaza and Translarna product sold during the period. For
Translarna sold in 2017, the majority of related manufacturing costs incurred had previously been expensed prior to January 1,
2017 as research and development expenses.
Amortization of acquired intangible asset. Amortization of acquired intangible asset was $22.9 million for the year ended
December 31, 2018, an increase of $7.5 million, or 49%, from $15.4 million for the year ended December 31, 2017, which is
related to the acquisition of all rights to Emflaza, acquired in May 2017 and Marathon contingent payments . The amount allocated
to the Emflaza intangible asset is amortized on a straight-line basis over its estimated useful life of approximately seven years
from the date of the completion of the acquisition of all rights to Emflaza, the period of estimated future cash flows. The Marathon
contingent payments are amortized prospectively as incurred, straight-line, over the remaining useful life of the Emflaza intangible
asset.
Research and development expense. Research and development expense was $172.0 million for the year ended
December 31, 2018, an increase of $54.5 million, or 46%, compared to $117.5 million for the year ended December 31, 2017.
The increase reflects costs associated with advancing the gene therapy platform and increased investment in research programs
as well as advancement of the clinical pipeline.
Selling, general and administrative expense. Selling, general and administrative expense was $153.5 million for the year
ended December 31, 2018, an increase of $32.3 million or 27% from $121.3 million for the year ended December 31, 2017.
The increase was primarily due to continued investment in commercial activities for Emflaza and Translarna.
Change in the fair value of deferred and contingent consideration. Change in the fair value of deferred and contingent
consideration was $19.3 million for the year ended December 31, 2018. The change is related to the fair valuation of the potential
future consideration to be paid to former Agilis’ equity holders as a result of the Merger, which closed in August 2018. Changes
in the fair value were due to the re-calculation of discounted cash flows for the passage of time and changes to certain other
estimated assumptions.
Interest expense, net. Interest expense, net was $12.6 million for the year ended December 31, 2018, an increase of $0.5
million, or 4%, from interest expense, net of $12.1 million for the year ended December 31, 2017. The increase in interest expense
was primarily due to current year interest expense recorded from the Convertible (cid:1)otes and the Credit Agreement partially offset
by interest income from investments.
Other income (expense), net. Other income, net was $0.1 million for the year ended December 31, 2018, an increase of
$1.4 million, or 110%, from other expense, net of $1.3 million for the year ended December 31, 2017. The increase in other
income (expense), net resulted primarily from exchange rate changes in the current period.
Income tax benefit (expense). Income tax benefit was $0.03 million for the year ended December 31, 2018, an change of
$1.4 million, or 102%, from income tax expense of $1.3 million for the year ended December 31, 2017. We incurred income tax
expense in various foreign jurisdictions, and our ex-U.S. tax liabilities are largely dependent upon the distribution of pre-tax
earnings among these different jurisdictions. We are paying minimum income taxes in the United States because of incurred losses
in the various state jurisdictions. The ex-U.S. tax benefit for the year ended December 31, 2018 is primarily driven by the Akcea
upfront licensing fee.
Liquidity and capital resources
Sources of liquidity
Since inception, we have incurred significant operating losses.
As a growing commercial-stage biopharmaceutical company, we are engaging in significant commercialization efforts for
our products while also devoting a substantial portion of our efforts on research and development related to our products, product
candidates and other programs. To date, almost all of our product revenue has been attributable to sales of Translarna for the
treatment of nmDMD in territories outside of the United States and from Emflaza for the treatment of DMD in the United States.
Our ongoing ability to generate revenue from sales of Translarna for the treatment of nmDMD is dependent upon our ability to
maintain our marketing authorization in Brazil and in the EEA and secure market access through commercial programs following
the conclusion of pricing and reimbursement terms at sustainable levels in the member states of the EEA or through EAP programs
in the EEA and other territories. The marketing authorization requires annual review and renewal by the European Commission
following reassessment by the EMA of the benefit-risk balance of the authorization and is subject to the specific obligation to
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conduct Study 041. Our ability to generate product revenue from Emflaza will largely depend on the coverage and reimbursement
levels set by governmental authorities, private health insurers and other third-party payors.
On August 23, 2018, we completed our acquisition of Agilis for total upfront consideration comprised of $49.2 million in
cash and 3,500,907 shares of our common stock, which was determined by dividing $150.0 million by the volume-weighted
average price per share of our common stock on (cid:1)asdaq for the 10 consecutive trading-day period ending on the second trading-
day immediately preceding the closing. Agilis equityholders may become entitled to receive contingent payments from us based
on the achievement of certain development, regulatory and net sales milestones as well as based upon a percentage of net sales
of certain products. Under the Agreement and Plan of Merger, dated as of July 19, 2018, or the Merger Agreement, by and among
us, Agility Merger Sub, Inc., a Delaware corporation and our wholly owned, indirect subsidiary, Agilis and, solely in its capacity
as the representative, agent and attorney-in-fact of the equityholders of Agilis, Shareholder Representative Services LLC, we are
required to pay $40.0 million of the development milestone payments upon the passing of the second anniversary of the closing
of the Merger, August 23, 2020, regardless of whether the applicable milestones have been achieved.
We have historically financed our operations primarily through the issuance and sale of our common stock in public offerings,
our “at the market offering” of our common stock, the private placements of our preferred stock, collaborations, bank debt,
convertible debt financings, the Credit Agreement and grants and clinical trial support from governmental and philanthropic
organizations and patient advocacy groups in the disease areas addressed by our product candidates. We expect to continue to
incur significant expenses and operating losses for at least the next several years. The net losses we incur may fluctuate significantly
from quarter to quarter.
In February 2014, we closed a public offering of 5,163,265 shares of common stock at a public offering price of $24.50 per
share, including 673,469 shares pursuant to the exercise by the underwriters of an overallotment option. We received net proceeds
from the public offering of approximately $118.4 million after deducting underwriting discounts and commissions and other
offering expenses payable by us.
In October 2014, we closed a public offering of 3,450,000 shares of common stock at a public offering price of $36.25 per
share, including 450,000 shares pursuant to the exercise by the underwriters of their option to purchase additional shares. We
received net proceeds from the public offering of approximately $117.6 million after deducting underwriting discounts and
commissions and other offering expenses payable by us.
In August 2015, we closed a private offering of $150.0 million in aggregate principal amount of 2022 Convertible (cid:1)otes,
including the exercise by the initial purchasers of an option to purchase an additional $25.0 million in aggregate principal amount
of the 2022 Convertible (cid:1)otes. The 2022 Convertible (cid:1)otes bear cash interest payable on February 15 and August 15 of each year,
beginning on February 15, 2016. The 2022 Convertible (cid:1)otes are senior unsecured obligations of ours and will mature on August 15,
2022, unless earlier converted, redeemed or repurchased in accordance with their terms prior to such date. We received net proceeds
from the offering of approximately $145.4 million, after deducting the initial purchasers’ discounts and commissions and the
estimated offering expenses payable by us.
Holders may convert their 2022 Convertible (cid:1)otes at their option at any time prior to the close of business on the business
day immediately preceding February 15, 2022 only under the following circumstances: (1) during any calendar quarter
commencing on or after September 30, 2015 (and only during such calendar quarter), if the last reported sale price of our common
stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last
trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable
trading day; (2) during the five business day period after any five consecutive trading day period (the “measurement period”) in
which the trading price (as defined in the 2022 Convertible (cid:1)otes Indenture) per $1,000 principal amount of 2022 Convertible
(cid:1)otes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of our
common stock and the conversion rate on each such trading day; (3) during any period after we have issued notice of redemption
until the close of business on the scheduled trading day immediately preceding the relevant redemption date; or (4) upon the
occurrence of specified corporate events. On or after February 15, 2022, until the close of business on the business day immediately
preceding the maturity date, holders may convert their 2022 Convertible (cid:1)otes at any time, regardless of the foregoing
circumstances. Upon conversion, we will pay cash up to the aggregate principal amount of the 2022 Convertible (cid:1)otes to be
converted and deliver shares of our common stock in respect of the remainder, if any, of our conversion obligation in excess of
the aggregate principal amount of 2022 Convertible (cid:1)otes being converted.
The conversion rate for the 2022 Convertible (cid:1)otes was initially, and remains, 17.7487 shares of our common stock per
$1,000 principal amount of the 2022 Convertible (cid:1)otes, which is equivalent to an initial conversion price of approximately $56.34
per share of our common stock.
We were not permitted to redeem the 2022 Convertible (cid:1)otes prior to August 20, 2018. As of August 20, 2018, we may
redeem for cash all or any portion of the 2022 Convertible (cid:1)otes, at our option, on or after August 20, 2018 if the last reported
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sale price of our common stock has been at least 130% of the conversion price then in effect on the last trading day of, and for at
least 19 other trading days (whether or not consecutive) during, any 30 consecutive trading day period ending on, and including,
the trading day immediately preceding the date on which we provide notice of redemption, at a redemption price equal to 100%
of the principal amount of the 2022 Convertible (cid:1)otes to be redeemed, plus accrued and unpaid interest to, but excluding, the
redemption date. (cid:1)o sinking fund is provided for the 2022 Convertible (cid:1)otes, which means that we are not required to redeem or
retire the 2022 Convertible (cid:1)otes periodically. There have been no redemptions to date.
If we undergo a “fundamental change” (as defined in the Indenture governing the 2022 Convertible (cid:1)otes Indenture), subject
to certain conditions, holders of the 2022 Convertible (cid:1)otes may require us to repurchase for cash all or part of their 2022 Convertible
(cid:1)otes at a repurchase price equal to 100% of the principal amount of the 2022 Convertible (cid:1)otes to be repurchased, plus accrued
and unpaid interest to, but excluding, the fundamental change repurchase date.
The 2022 Convertible (cid:1)otes represent senior unsecured obligations and will rank senior in right of payment to our future
indebtedness that is expressly subordinated in right of payment to the notes, equal in right of payment to our existing and future
unsecured indebtedness that is not so subordinated, effectively junior in right of payment to any of our secured indebtedness to
the extent of the value of the assets securing such indebtedness, and structurally subordinated to all existing and future indebtedness
and other liabilities (including trade payables) incurred by our subsidiaries. The 2022 Convertible (cid:1)otes Indenture contains
customary events of default with respect to the 2022 Convertible (cid:1)otes, including that upon certain events of default (including
our failure to make any payment of principal or interest on the 2022 Convertible (cid:1)otes when due and payable) occurring and
continuing, the 2022 Convertible (cid:1)otes Trustee by notice to us, or the holders of at least 25% in principal amount of the outstanding
2022 Convertible (cid:1)otes by notice to us and the 2022 Convertible (cid:1)otes Trustee, may, and the 2022 Convertible (cid:1)otes Trustee at
the request of such holders (subject to the provisions of the 2022 Convertible (cid:1)otes Indenture) shall, declare 100% of the principal
of and accrued and unpaid interest, if any, on all the 2022 Convertible (cid:1)otes to be due and payable. In case of certain events of
bankruptcy, insolvency or reorganization, involving us or a significant subsidiary, 100% of the principal of and accrued and unpaid
interest on the 2022 Convertible (cid:1)otes will automatically become due and payable. Upon such a declaration of acceleration, such
principal and accrued and unpaid interest, if any, will be due and payable immediately.
On May 5, 2017, we entered into the Credit Agreement with MidCap Financial which provides for a senior secured term
loan facility of $60.0 million, of which $40.0 million was drawn by us on May 5, 2017. Our ability to draw on the remaining $20.0
million under the senior secured term loan facility expired on December 31, 2018. The maturity date of the Credit Agreement is
May 1, 2021, unless terminated earlier. The facility is structured to require only monthly interest payments for the initial two years
with principal amortization beginning in years three and four. The facility bears interest at a rate per annum equal to the London
Interbank Offered Rate, or LIBOR, (with a LIBOR floor rate of 1.00%) plus 6.15%, as well as additional upfront and administrative
fees and expenses.
In April 2018, we closed an underwritten public offering of our common stock pursuant to a registration statement on Form
S-3. We issued and sold an aggregate of 4,600,000 shares of common stock under the registration statement at a public offering
price of $27.04 per share, including 600,000 shares issued upon exercise by the underwriters of their option to purchase additional
shares. We received net proceeds of approximately $117.9 million after deducting underwriting discounts and commissions and
other offering expenses payable by us.
In January 2019, we closed an underwritten public offering of our common stock pursuant to a registration statement on
Form S-3. We issued and sold an aggregate of 7,563,725 shares of common stock under the registration statement at a public
offering price of $30.20 per share, including 843,725 shares issued upon exercise by the underwriter of its option to purchase
additional shares in February 2019. We received net proceeds of approximately $224.2 million after deducting agent discounts
and commissions and other offering expenses payable by us.
In August 2019, we entered into the Sales Agreement with the Sales Agents, pursuant to which, we may offer and sell shares
of our common stock, having an aggregate offering price of up to $125.0 million from time to time through the Sales Agents by
any method that is deemed to be an “at the market offering” as defined in Rule 415(a)(4) promulgated under the Securities Act
pursuant to a registration statement on Form S-3. During the year ended December 31, 2019, we issued and sold an aggregate of
63,926 shares of common stock pursuant to the Sales Agreement at a weighted average public offering price of $46.60 per share.
We received net proceeds of $2.6 million after deducting underwriting discounts and commissions and other offering expenses
payable by us.
In September 2019, we closed an underwritten public offering of our common stock pursuant to a registration statement on
Form S-3. We issued and sold an aggregate of 2,475,248 shares of common stock under the registration statement at a public
offering price of $40.40 per share. The offering included an option to purchase up to an additional 371,287 shares for a period of
30 days following the offering. This option was not exercised by the underwriter. We received net proceeds of $97.0 million after
deducting underwriting discounts and commissions and other offering expenses payable by us.
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In September 2019, we issued $287.5 million aggregate principal amount of 2026 Convertible (cid:1)otes, which included an
option to purchase up to an additional $37.5 million in aggregate principal amount of the 2026 Convertible (cid:1)otes, which was
exercised in full by the initial purchasers. The 2026 Convertible (cid:1)otes bear cash interest at a rate of 1.50% per year, payable semi-
annually on March 15 and September 15 of each year, beginning on March 15, 2020. The 2026 Convertible (cid:1)otes will mature on
September 15, 2026, unless earlier repurchased or converted. We received net proceeds of $279.3 million after deducting the initial
purchasers’ discounts and commissions and the offering expenses payable by us.
Holders may convert their 2026 Convertible (cid:1)otes at their option at any time prior to the close of business on the business
day immediately preceding March 15, 2026 only under the following circumstances: (1) during any calendar quarter commencing
on or after December 31, 2019 (and only during such calendar quarter), if the last reported sale price of our common stock for at
least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day
of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading
day; (2) during the five business day period after any five consecutive trading day period, or the measurement period, in which
the trading price (as defined in the 2026 Convertible (cid:1)otes Indenture) per $1,000 principal amount of 2026 Convertible (cid:1)otes for
each trading day of the measurement period was less than 98% of the product of the last reported sale price of our common stock
and the conversion rate on each such trading day; (3) during any period after we have issued notice of redemption until the close
of business on the scheduled trading day immediately preceding the relevant redemption date; or (4) upon the occurrence of
specified corporate events. On or after March 15, 2026, until the close of business on the business day immediately preceding the
maturity date, holders may convert their 2026 Convertible (cid:1)otes at any time, regardless of the foregoing circumstances. Upon
conversion, we will pay or deliver, as the case may be, cash, shares of our common stock or any combination thereof at our election.
The conversion rate for the 2026 Convertible (cid:1)otes was initially, and remains, 19.0404 shares of our common stock per
$1,000 principal amount of the 2026 Convertible (cid:1)otes, which is equivalent to an initial conversion price of approximately $52.52
per share of our common stock. The conversion rate may be subject to adjustment in some events but will not be adjusted for any
accrued and unpaid interest.
We are not permitted to redeem the 2026 Convertible (cid:1)otes prior to September 20, 2023. We may redeem for cash all or any
portion of the 2026 Convertible (cid:1)otes, at our option, if the last reported sale price of its common stock has been at least 130% of
the conversion price then in effect on the last trading day of, and for at least 19 other trading days (whether or not consecutive)
during, any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which
we provide notice of redemption, at a redemption price equal to 100% of the principal amount of the 2026 Convertible (cid:1)otes to
be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. (cid:1)o sinking fund is provided for the 2026
Convertible (cid:1)otes, which means that we are not required to redeem or retire the 2026 Convertible (cid:1)otes periodically.
If we undergo a “fundamental change” (as defined in the 2026 Convertible (cid:1)otes Indenture), subject to certain conditions,
holders of the 2026 Convertible (cid:1)otes may require us to repurchase for cash all or part of their 2026 Convertible (cid:1)otes at a
repurchase price equal to 100% of the principal amount of the 2026 Convertible (cid:1)otes to be repurchased, plus accrued and unpaid
interest to, but excluding, the fundamental change repurchase date.
The 2026 Convertible (cid:1)otes represent senior unsecured obligations and will rank senior in right of payment to our future
indebtedness that is expressly subordinated in right of payment to the notes, equal in right of payment to our existing and future
unsecured indebtedness that is not so subordinated, effectively junior in right of payment to any of our secured indebtedness to
the extent of the value of the assets securing such indebtedness, and structurally subordinated to all existing and future indebtedness
and other liabilities (including trade payables) incurred by our subsidiaries. The 2026 Convertible (cid:1)otes Indenture contains
customary events of default with respect to the 2026 Convertible (cid:1)otes, including that upon certain events of default (including
our failure to make any payment of principal or interest on the 2026 Convertible (cid:1)otes when due and payable) occurring and
continuing, the 2026 Convertible (cid:1)otes Trustee by notice to us, or the holders of at least 25% in principal amount of the outstanding
2026 Convertible (cid:1)otes by notice to us and the Convertible (cid:1)otes Trustee, may, and the 2026 Convertible (cid:1)otes Trustee at the
request of such holders (subject to the provisions of the 2026 Convertible (cid:1)otes Indenture) shall, declare 100% of the principal
of and accrued and unpaid interest, if any, on all the 2026 Convertible (cid:1)otes to be due and payable. In case of certain events of
bankruptcy, insolvency or reorganization, involving us or a significant subsidiary, 100% of the principal of and accrued and unpaid
interest on the 2026 Convertible (cid:1)otes will automatically become due and payable. Upon such a declaration of acceleration, such
principal and accrued and unpaid interest, if any, will be due and payable immediately.
Cash flows
As of December 31, 2019, we had cash and cash equivalents and marketable securities of $686.6 million.
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The following table provides information regarding our cash flows and our capital expenditures for the periods indicated.
(in thousands)
Cash (used in) provided by:
Operating activities
Investing activities
Financing activities
Years ended
December 31,
2019
2018
2017
$
$
$
(98,639) $
(387,237) $
$
613,209
(27,641) $
(42,613) $
$
131,571
(10,063)
13,117
44,218
(cid:1)et cash used in operating activities was $98.6 million, $27.6 million, and $10.1 million for the years ended December 31,
2019, 2018 and 2017, respectively. The cash used in operating activities primarily related to supporting clinical development,
including the manufacture of drug product, commercial launch activities for Emflaza and Translarna, and costs associated with
the expansion of our international infrastructure for the years ended December 31, 2019, 2018, and 2017.
(cid:1)et cash used in investing activities was $387.2 million and $42.6 million for the years ended December 31, 2019 and 2018,
respectively. The cash used in investing activities for the year ended December 31, 2019 was primarily related to purchases of
marketable securities, the acquisition of product rights, purchases of fixed assets, and our Equity Investment, partially offset by
net sales and redemptions of marketable securities. The cash used in investing activities for the year ended December 31, 2018
was primarily related to the business acquisition of Agilis, purchases of fixed assets, and the acquisition of product rights partially
offset by net sales and redemptions of marketable securities. (cid:1)et cash provided by investing activities was $13.1 million for the
year ended December 31, 2017 and was primarily related to net sales and redemptions of marketable securities, partially offset
by the cash used in the acquisition of Emflaza.
(cid:1)et cash provided by financing activities for the year ended December 31, 2019 is primarily attributable to net proceeds
received from our public stock offerings, net proceeds received from our “at the market offering” of our common stock, net
proceeds received from our convertible notes offering, the exercise of options, and issuance of stock under our Employee Stock
Purchase Plan, or ESPP, partially offset by repayment on our senior secured term loan. (cid:1)et cash provided by financing activities
for the year ended December 31, 2018 is primarily attributable to net proceeds received from our public stock offering, the exercise
of options, and issuance of stock under the ESPP. (cid:1)et cash provided by financing activities for the year ended December 31, 2017
was primarily attributable to borrowings under the Credit Agreement and the exercise of options and issuance of stock under the
ESPP.
Funding requirements
We anticipate that our expenses will continue to increase in connection with our commercialization efforts in the United
States, the EEA, Latin America and other territories, including the expansion of our infrastructure and corresponding sales and
marketing, legal and regulatory, distribution and manufacturing and administrative and employee-based expenses. In addition to
the foregoing, we expect to continue to incur significant costs in connection with the research and development of our gene therapy,
splicing, Bio-e and oncology programs as well as studies in our products for maintaining authorizations, including Study 041,
label extensions and additional indications. In addition, we may incur substantial costs in connection with our efforts to advance
our regulatory submissions. We continue to seek marketing authorization for Translarna for the treatment of nmDMD in territories
that we do not currently have marketing authorization in and we may also seek marketing authorization for Translarna for other
indications. We recently submitted an MAA to the EMA for the treatment of AADC deficiency with PTC-AADC in the EEA and
we are preparing a BLA for PTC-AADC for the treatment of AADC deficiency in the United States, which we anticipate submitting
to the FDA in the second quarter of 2020. We also anticipate filing for marketing authorization for Waylivra with A(cid:1)VISA in the
second half of 2020. These efforts may significantly impact the timing and extent of our commercialization expenses.
In addition, our expenses will increase if and as we:
• seek to satisfy contractual and regulatory obligations we assumed in connection with the Agilis acquisition, including
the payment of $40.0 million in development milestone payments upon the passing of the second anniversary of the
closing of the Agilis acquisition, August 23, 2020, regardless of whether the applicable milestones have been achieved;
• seek to satisfy contractual and regulatory obligations in conjunction with the Akcea Agreement, including an additional
milestone payment of $4.0 million that Akcea is eligible to receive upon receipt of regulatory approval for Waylivra
from A(cid:1)VISA;
• satisfy contractual and regulatory obligations that we assumed through our other acquisitions and collaborations;
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• execute our commercialization strategy for our products and product candidates that may receive marketing
authorization;
• are required to complete any additional clinical trials, non-clinical studies or CMC assessments or analyses in order to
advance Translarna for the treatment of nmDMD in the United States or elsewhere;
• utilize the Hopewell Facility to begin manufacturing program materials for certain of our gene therapy product
candidates;
•
initiate or continue the research and development of our gene therapy, splicing, Bio-e and oncology programs as well
as studies in our products for maintaining authorizations, including Study 041, label extensions and additional
indications;
• seek to discover and develop additional product candidates;
• seek to expand and diversify our product pipeline through strategic transactions;
• maintain, expand and protect our intellectual property portfolio; and
• add operational, financial and management information systems and personnel, including personnel to support our
product development and commercialization efforts.
We believe that our cash flows from product sales, together with existing cash and cash equivalents, including the net proceeds
from our term loan facility with MidCap Financial, our offerings of the Convertible (cid:1)otes, public offerings of common stock, our
“at the market offering” of our common stock, and marketable securities, will be sufficient to fund our operating expenses and
capital expenditure requirements for at least the next twelve months. We have based this estimate on assumptions that may prove
to be wrong, and we could use our capital resources sooner than we currently expect.
Our future capital requirements will depend on many factors, including:
•
•
•
•
•
•
•
•
•
•
•
our ability to commercialize and market our products and product candidates that may receive marketing authorization;
our ability to negotiate, secure and maintain adequate pricing, coverage and reimbursement terms, on a timely basis,
with third-party payors for our products and products candidates;
our ability to maintain orphan exclusivity for, and successfully complete all FDA post-marketing requirements with
respect to, Emflaza;
our ability to maintain the marketing authorization for our products, including in the EEA for Translarna for the treatment
of nmDMD and whether the EMA determines on an annual basis that the benefit-risk balance of Translarna supports
renewal of our marketing authorization in the EEA, on the current approved label;
the costs, timing and outcome of Study 041;
the costs, timing and outcome of our efforts to advance Translarna for the treatment of nmDMD in the United States,
including, whether we will be required to perform additional clinical trials, non-clinical studies or CMC assessments
or analyses at significant cost which, if successful, may enable FDA review of an (cid:1)DA submission by us and, ultimately,
may support approval of Translarna for nmDMD in the United States;
our ability to maintain orphan exclusivity in the United States for Emflaza and successfully completing all post-
marketing requirements with respect to Emflaza and any other products;
the progress and results of activities under our gene therapy, splicing, Bio-e and oncology programs as well as studies
in our products for maintaining authorizations, label extensions and additional indications;
the scope, costs and timing of our commercialization activities, including product sales, marketing, legal, regulatory,
distribution and manufacturing, for any of our products and for any of our other product candidates that may receive
marketing authorization or any additional indications or territories in which we receive authorization to market
Translarna;
the costs, timing and outcome of regulatory review of our gene therapy, splicing, Bio-e and oncology programs,
Translarna for additional indications and in other territories;
our ability to utilize the Hopewell Facility to begin manufacturing program materials for certain of our gene therapy
product candidates;
127
•
•
•
•
•
•
•
•
•
•
our ability to satisfy our obligations under the terms of the Credit Agreement with MidCap Financial;
our ability to satisfy our obligations under the indentures governing the Convertible (cid:1)otes;
the timing and scope of growth in our employee base;
the scope, progress, results and costs of preclinical development, laboratory testing and clinical trials for our other
product candidates, including those in our gene therapy, splicing, Bio-e and oncology programs and Translarna for
additional indications;
revenue received from commercial sales of our products or any of our product candidates;
our ability to obtain additional and maintain existing reimbursed named patient and cohort EAP programs for Translarna
for the treatment of nmDMD on adequate terms, or at all;
the ability and willingness of patients and healthcare professionals to access Translarna through alternative means if
pricing and reimbursement negotiations in the applicable territory do not have a positive outcome;
the costs of preparing, filing and prosecuting patent applications, maintaining, and protecting our intellectual property
rights and defending against intellectual property-related claims;
the extent to which we acquire or invest in other businesses, products, product candidates, and technologies, including
the success of any acquisition, in-licensing or other strategic transaction we may pursue, and the costs of subsequent
development requirements and commercialization efforts, including with respect to our acquisition of Emflaza, our
acquisition of Agilis, our licensing of Tegsedi and Waylivra and our acquisition of our Bio-e platform; and
our ability to establish and maintain collaborations, including our collaborations with Roche and the SMA Foundation,
and our ability to obtain research funding and achieve milestones under these agreements.
With respect to our outstanding 2022 Convertible (cid:1)otes, cash interest payments are payable on a semi-annual basis in arrears,
which require total funding of $4.5 million annually. With respect to our outstanding 2026 Convertible (cid:1)otes, cash interest payments
are payable on a semi-annual basis in arrears, which will require total funding of $4.3 million annually. Additionally, under the
terms of our Credit Agreement cash interest payments are payable monthly in arrears. Furthermore, since we are a public company,
we have incurred and expect to continue to incur additional costs associated with operating as such. These costs include significant
legal, accounting, investor relations and other expenses that we did not incur as a private company.
We will need to generate significant revenues to achieve and sustain profitability, and we may never do so. We may need to
obtain substantial additional funding in connection with our continuing operations. Until such time, if ever, as we can generate
substantial product revenues, we expect to finance our cash needs primarily through a combination of equity offerings, debt
financings, collaborations, strategic alliances, grants and clinical trial support from governmental and philanthropic organizations
and patient advocacy groups in the disease areas addressed by our product and product candidates and marketing, distribution or
licensing arrangements. Adequate additional financing may not be available to us on acceptable terms, or at all. To the extent that
we raise additional capital through the sale of equity or convertible debt securities, our shareholders ownership interest will be
diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common
stockholders. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take
specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds
through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to
relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to grant licenses
on terms that may not be favorable to us.
If we are unable to raise additional funds through equity or debt financings when needed or on attractive terms, we may be
required to delay, limit, reduce or terminate our product development or commercialization efforts or grant rights to develop and
market product candidates that we would otherwise prefer to develop and market ourselves.
Contractual obligations
The following table summarizes our significant contractual obligations and commercial commitments as of December 31,
2019.
128
(in thousands)
Operating lease obligations, not yet commenced (1)
Operating lease obligations (2)
Long-term debt obligations, including interest (3)
Minimum royalty (4)
Credit agreement, including interest (5)
Deferred consideration payable (6)
Purchase commitments (7)
Total contractual obligations
Total
88,122
20,941
$
$
$ 481,128
$
$
$
$
6,665
29,703
40,000
6,850
Less than
1 year
2,130
7,756
8,753
1,666
21,270
40,000
6,850
1 - 3 years
9,729
3 - 5 years
10,968
9,808
167,625
3,333
8,433
—
—
3,172
8,625
1,666
—
—
More than
5 years
65,295
205
296,125
—
—
—
—
$ 673,409
$
88,425
$ 198,928
$
24,431
$ 361,625
_______________________________________________________________________________
(1) Obligations stem from lease agreement entered into with Bristol-Myers Squibb Company in August 2019 relating to the
lease of approximately 185,000 square feet of office, manufacturing and laboratory space at a facility located in Hopewell
Township, (cid:1)ew Jersey. The term of occupancy has not yet commenced as of December 31, 2019.
(2) We lease office space for our principal office in South Plainfield, (cid:1)ew Jersey under three non-cancelable operating leases
with terms that extend through May 2022, August 2024 and October 2024. In addition, we lease office space in various
other domestic and international locations for our employees and operations.
(3) Our long-term debt obligations reflect our obligations under the Convertible (cid:1)otes to pay interest on the $437.5 million
aggregate principal amount of the Convertible (cid:1)otes and to make principal payments on the Convertible (cid:1)otes at maturity
or upon conversion.
(4) Under an Exclusive License and Supply Agreement, or the Faes Agreement, with Faes Farma, S.A., or Faes, we are
required to pay royalties as a percentage of or as a fixed payment with respect to net product sales by us allocable to the
Emflaza oral suspension product. We are required to pay Faes an annual minimum royalty during the first seven calendar
years with a fixed percentage royalty during the remainder of the Faes Agreement term. The amounts above reflect the
minimum required payment based on the euro to U.S. dollar exchange rate as of December 31, 2019.
(5) Under the terms of the Credit Agreement, we are required to make interest only payments through April 30, 2019.
Commencing on May 1, 2019 and continuing for the remaining twenty-four months of the facility, we will be required
to make monthly interest payments and monthly principal payments. The principal payments are to be made based on
straight-line amortization of the principal over the twenty-four month period.
(6) Pursuant to the Merger Agreement with Agilis, we are required to pay $40.0 million of development milestone payments,
or deferred consideration payments, upon the passing of the second anniversary of the closing of the Merger, August 23,
2020, regardless of whether the applicable milestones have been achieved. The payment schedule above reflects our
expected timing of when the payments will be made as of December 31, 2019. The fair value of the deferred consideration
payments at the December 31, 2019 was $40.0 million.
(7) During the twelve months ended December 31, 2019, the Company entered into a purchase commitment with Aldevron,
LLC to secure good manufacturing practices, or GMP, manufacturing capacity for our gene therapy portfolio. As of
December 31, 2019, the commitment was for $6.9 million, which will be paid in fiscal year 2020.
The preceding table excludes contingent contractual payments that we may become obligated to make. Under various
agreements, we will be required to pay royalties and milestone payments upon the successful development and commercialization
of products, including the following agreements with The Wellcome Trust Limited, or Wellcome Trust, and the SMA Foundation.
We have entered into funding agreements with Wellcome Trust for the research and development of small molecule compounds
in connection with our oncology and antibacterial programs. As we have discontinued development under our antibacterial program,
we no longer expect that milestone and royalty payments from us to Wellcome Trust will apply under that agreement, resulting
in a change to the total amount of development and regulatory milestone payments we may become obligated to pay for this
program. Under our oncology program funding agreement, to the extent that we develop and commercialize program intellectual
property on a for-profit basis ourselves or in collaboration with a partner (provided we retain overall control of worldwide
commercialization), we may become obligated to pay to Wellcome Trust development and regulatory milestone payments and
single-digit royalties on sales of any research program product. Our obligation to pay such royalties would continue on a country-
by-country basis until the longer of the expiration of the last patent in the program intellectual property in such country covering
the research program product and the expiration of market exclusivity of such product in such country. We made the first
129
development milestone payment of $0.8 million to Wellcome Trust under the oncology program funding agreement during the
second quarter of 2016. Additional development and regulatory milestone payments of up to an aggregate of $22.4 million may
become payable by us under this agreement.
We have also entered into a sponsored research agreement with the SMA Foundation in connection with our spinal muscular
atrophy program. We may become obligated to pay the SMA Foundation single-digit royalties on worldwide net product sales of
any collaboration product that we successfully develop and subsequently commercialize or, with respect to collaboration products
we outlicense, a specified percentage of certain payments we receive from our licensee. We are not obligated to make such payments
unless and until annual sales of a collaboration product exceed a designated threshold. Our obligation to make such payments
would end upon our payment to the SMA Foundation of a specified amount.
We have employment agreements with certain employees which require the funding of a specific level of payments, if certain
events, such as a change in control or termination without cause, occur.
Off-Balance Sheet Arrangements
We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined
under Securities and Exchange Commission rules.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
We are exposed to market risk related to changes in interest rates. Our primary exposure to market risk is interest rate
sensitivity, which is affected by changes in the general level of U.S. interest rates, particularly because our investments are in
short-term securities. Our available for sale securities are subject to interest rate risk and will fall in value if market interest rates
increase. At any time, sharp changes in interest rates can affect the fair value of the investment portfolio and its interest earnings.
There were no investments classified as long-term at December 31, 2019. At December 31, 2019, we held $686.6 million in cash
and cash equivalents and short-term investments. After a review of our marketable investment securities, we believe that in the
event of a hypothetical ten percent increase in interest rates, the resulting decrease in fair value of our marketable investment
securities would be insignificant to the consolidated financial statements.
Currently, we do not hedge these interest rate exposures. We maintain an investment portfolio in accordance with our
investment policy. The primary objectives of our investment policy are to preserve principal, maintain proper liquidity and to meet
operating needs. Although our investments are subject to credit risk, our investment policy specifies credit quality standards for
our investments and limits the amount of credit exposure from any single issue, issuer or type of investment. Our investments are
also subject to interest rate risk and will decrease in value if market interest rates increase. However, due to the conservative nature
of our investments and relatively short duration, interest rate risk is mitigated. We do not own derivative financial instruments.
Accordingly, we do not believe that there is any material market risk exposure with respect to derivative or other financial
instruments.
As a result of our ex-U.S. operations, we face exposure to movements in foreign currency exchange rates, including the
British Pound, Euro, Brazilian Real, and Swiss Franc against the U.S. dollar. The current exposures arise primarily from cash,
accounts receivable, intercompany receivables and payables, intercompany loans and product sales denominated in foreign
currencies. Both positive and negative impacts to our international product sales from movements in foreign currency exchange
rates may be partially mitigated by the natural, opposite impact that foreign currency exchange rates have on our international
operating expenses. For the year ended December 31, 2019, we recognized foreign currency transaction losses, net of $0.8 million,
which is recorded within foreign currency translation loss on the consolidated statement of comprehensive loss, along with the
remeasurement of our intercompany loan. A hypothetical ten percent increase or decrease in the exchange rate between the U.S.
dollar and the British Pound, Euro, Brazilian Real, or Swiss Franc from the December 31, 2019 rate would not have a significant
impact on our cash flows. We are not currently engaged in any foreign currency hedging activities. We will evaluate the use of
derivative financial instruments to hedge our exposure as the needs and risks should arise.
In August 2015, we issued $150.0 million of 3.00% convertible senior notes due August 15, 2022, or the 2022 Convertible
(cid:1)otes. We do not have economic interest rate exposure on the 2022 Convertible (cid:1)otes as they have a fixed annual interest rate of
3.00%. However, the fair value of the 2022 Convertible (cid:1)otes is exposed to interest rate risk. We do not carry the 2022 Convertible
(cid:1)otes at fair value on our balance sheet but present the fair value of the principal amount for disclosure purposes. Generally, the
fair value of the 2022 Convertible (cid:1)otes will increase as interest rates fall and decrease as interest rates rise. The 2022 Convertible
(cid:1)otes are also affected by the price and volatility of our common stock and will generally increase or decrease as the market price
of our common stock changes. The estimated fair value of the 2022 Convertible (cid:1)otes was approximately $171.2 million as
of December 31, 2019.
In May 2017, we entered into the Credit Agreement with MidCap Financial, which provides for a senior secured term loan
facility of $60.0 million, of which $40.0 million was drawn by us for the year ended December 31, 2019. The maturity date of the
130
Credit Agreement is May 1, 2021, unless terminated earlier. The facility bears interest at a rate per annum equal to LIBOR (with
a LIBOR floor rate of 1.00%) plus 6.15%. Borrowings under the term loan facility are at variable rates of interest and expose us
to interest rate risk. As such, our net income is sensitive to movements in interest rates. If interest rates increase, our debt obligations
on the variable rate indebtedness would increase even though the amount borrowed remained the same, and our net income would
decrease. Such increases in interest rates could have a material adverse effect on our cash flow and financial condition. We do not
hold any derivative instruments and do not engage in any hedging activities to mitigate interest rate risk. Based on our outstanding
borrowings under the Credit Agreement at December 31, 2019, a one-percentage change in interest rates would have affected
interest expense on the debt by an immaterial amount on an annualized basis.
In September 2019, we issued $287.5 million of 1.50% convertible senior notes due September 15, 2026, or the 2026
Convertible (cid:1)otes. We do not have economic interest rate exposure on the 2026 Convertible (cid:1)otes as they have a fixed annual
interest rate of 1.50%. However, the fair value of the 2026 Convertible (cid:1)otes is exposed to interest rate risk. We do not carry the
2026 Convertible (cid:1)otes at fair value on our balance sheet but present the fair value of the principal amount for disclosure purposes.
Generally, the fair value of the 2026 Convertible (cid:1)otes will increase as interest rates fall and decrease as interest rates rise. The
2026 Convertible (cid:1)otes are also affected by the price and volatility of our common stock and will generally increase or decrease
as the market price of our common stock changes. The estimated fair value of the Convertible (cid:1)otes was approximately $335.0
million as of December 31, 2019.
131
Item 8. Financial Statements and Supplementary Data
Index to consolidated financial statements
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2019 and 2018
Consolidated Statements of Operations for the years ended December 31, 2019, 2018 and 2017
Consolidated Statements of Comprehensive Loss for the years ended December 31, 2019, 2018 and 2017
Consolidated Statements Stockholders’ Equity for the years ended December 31, 2019, 2018 and 2017
Consolidated Statements of Cash Flows for the years ended December 31, 2019, 2018 and 2017
(cid:1)otes to Consolidated Financial Statements
133
136
137
138
139
140
142
132
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of PTC Therapeutics, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of PTC Therapeutics, Inc. (the Company) as of December 31,
2019 and 2018, the related consolidated statements of operations, comprehensive loss, stockholders' equity and cash flows for
each of the three years in the period ended December 31, 2019, and the related notes (collectively referred to as the “consolidated
financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial
position of the Company at December 31, 2019 and 2018, and the consolidated results of its operations and its cash flows for each
of the three years in the period ended December 31, 2019, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company's internal control over financial reporting as of December 31, 2019, based on criteria established in
Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013
framework) and our report dated March 2, 2020 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on
the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error
or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether
due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that
were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are
material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The
communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as
a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters
or on the accounts or disclosures to which they relate.
133
Description of
the Matter
How We
Addressed the
Matter in Our
Audit
Variable consideration in contracts with customers
As discussed in (cid:1)ote 2 of the consolidated financial statements, the Company’s revenues for product sold
to its customers reflect discounts mandated by the Medicaid Drug Rebate Program and other allowances that
vary by international jurisdiction. The Company includes an estimate of this variable consideration in its
transaction price at the time of sale, when control of the product transfers to the customer. The Company
uses the expected value or most likely amount method when estimating variable consideration, unless discount
or rebate terms are specified within contracts. The estimates for variable consideration are adjusted to reflect
known changes.
Auditing the amount of consideration to be paid under the Medicaid Drug Rebate Program (Medicaid) was
complex and highly judgmental due to significant uncertainty about the levels of expected claims from
governmental entities, the amount of forecasted shipments from wholesalers that will be dispensed to eligible
benefit plan participants, as well as the complexity of governmental pricing calculations in various
jurisdictions. Governmental pricing calculations are complex as a result of assumptions such as patient mix,
the average manufacturer price, best price, and the unit rebate amount. Auditing the other international
allowances was challenging because selling prices are subject to adjustment by foreign governments. The
reductions to gross product revenues are sensitive to these significant estimates and calculations.
We identified, evaluated and tested controls over management’s review of the calculated reductions to gross
product prices related to Medicaid and international allowances and the significant assumptions and data
inputs utilized in the calculations.
To test the revenue adjustments related to Medicaid and international allowances our audit procedures
included, among others, evaluating the methodology used as well as testing the significant estimates discussed
above and the underlying assumptions and data used by the Company in its analysis. We compared the
assumptions used by management to historical trends, evaluated pricing adjustments recorded in the current
period, and assessed the historical accuracy of management’s estimates against actual results. In addition,
we involved an internal governmental pricing specialist to assist with our evaluation of management’s
methodology and the calculations made to measure the estimated Medicaid rebates.
Description of
the Matter
Valuation of acquisition-related contingent consideration liability
As discussed in (cid:1)ote 2 to the consolidated financial statements under the caption “Business combinations
and asset acquisitions,” the Company recognizes contingent consideration liabilities at their estimated fair
values on the acquisition date. Subsequent changes to the fair values of the contingent consideration liabilities
are recorded within the consolidated statement of operations in the period of change. At December 31, 2019,
the Company recorded $356.3 million in total contingent consideration liabilities related to development,
regulatory and net sales milestones.
How We
Addressed the
Matter in Our
Audit
The fair value of the contingent consideration is estimated using a combination of a probability adjusted,
discounted cash flow approach and an option pricing model with Monte Carlo simulation. Certain
assumptions, including development timelines, probabilities of success, and certain inputs to the weighted
average cost of capital are highly subjective and the fair value estimate is sensitive to these assumptions.
Auditing the valuation of contingent consideration liabilities was complex and required significant auditor
judgment due to the high degree of subjectivity in evaluating these assumptions and the method used for the
calculation.
We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over
the Company’s contingent consideration liabilities process including management’s process to establish the
significant assumptions and measure the liability.
To test the estimated fair value of the contingent consideration liabilities, our audit procedures included,
among others, assessing the fair value methodology and testing the significant assumptions discussed above
and the underlying data used in management’s analyses. We evaluated the assumptions and judgments in
light of observable industry and economic trends and standards, external data sources and regulatory factors.
Estimated amounts of future sales and probabilities of achieving milestones were evaluated in relation to
internal and external analyses, clinical development progress and timelines, probability of success
benchmarks, and regulatory notices. Additionally, we compared the weighted average cost of capital that
was adjusted for the Company’s credit risk, to those of comparable guideline companies. Our procedures
also included evaluating the data sources used by management in determining its assumptions and, where
necessary, included an evaluation of available information that either corroborated or contradicted
management’s conclusions. We involved valuation specialists to assist with our assessment of the Company’s
fair value measurement methodology and to perform corroborative fair value calculations.
134
Description of
the Matter
Convertible debt liability
In September 2019, the Company issued $287.5 million of 1.50% convertible senior notes due September
15, 2026. As discussed in (cid:1)ote 8 of the consolidated financial statements the Company determined the
separate liability and equity components of the notes based on the estimated fair value of a similar liability
without an associated conversion feature. The resulting liability was recorded at its estimated fair value on
the date of issuance. The carrying amount of the liability component of the convertible debt instrument as
of December 31, 2019 was $163.6 million.
Auditing the valuation of the conversion option was complex and involved a high degree of subjectivity as
the Company used complex valuation methodologies that incorporated significant assumptions including
the expected volatility of the Company’s common stock as well as its credit rating and its credit spread.
How We
Addressed the
Matter in Our
Audit
We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over
the Company’s valuation of the conversion option, including controls over management’s review of the
valuation model and the significant assumptions used in the calculation.
To test the estimated fair value of the conversion option, our audit procedures included, among others,
evaluating methodologies used in the valuation model and testing the significant assumptions. For example,
we compared the discount rate that was adjusted for the Company’s credit risk to the interest rates on
comparable debt instruments, and we compared the forward looking implied volatility to our independently
calculated estimated equity volatility specific to the convertible note. In addition, we involved our internal
valuation specialists to assist in our evaluation of the significant assumptions and methodologies used by
the Company. We have also evaluated the Company’s financial statement disclosures related to these matters
included in (cid:1)ote 8 to the consolidated financial statements.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2010.
Iselin, (cid:1)ew Jersey
March 2, 2020
135
PTC Therapeutics, Inc.
Consolidated Balance Sheets
In thousands, except shares
Assets
Current assets:
Cash and cash equivalents
Marketable securities
Trade receivables, net
Inventory
Prepaid expenses and other current assets
Total current assets
Fixed assets, net
Intangible assets, net
Goodwill
Deposits and other assets
Total assets
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable and accrued expenses
Current portion of long-term debt
Deferred revenue
Other current liabilities
Deferred consideration payable- current
Total current liabilities
Deferred revenue- long-term
Long-term debt
Contingent consideration payable
Deferred consideration payable- long-term
Deferred tax liability
Other long-term liabilities
Total liabilities
Stockholders’ equity:
Common stock, $0.001 par value. Authorized 125,000,000 shares; issued and outstanding
61,935,870 shares at December 31, 2019. Authorized 125,000,000 shares; issued and
outstanding 50,606,147 shares at December 31, 2018.
Additional paid-in capital
Accumulated other comprehensive (loss) income
Accumulated deficit
Total stockholders’ equity
Total liabilities and stockholders’ equity
See accompanying consolidated notes.
136
December 31,
2019
2018
$
288,028
$
169,498
398,535
55,538
19,285
17,898
779,284
21,549
710,500
82,341
30,108
58,088
67,907
16,117
9,247
320,857
12,694
701,031
82,341
2,299
$ 1,623,782
$ 1,119,222
159,276
20,000
8,242
8,339
40,000
235,857
3,415
293,859
356,300
—
130,862
9,159
128,199
11,667
3,716
3,814
19,400
166,796
9,722
141,347
310,240
18,300
122,032
58
1,029,452
768,495
62
51
1,795,351
(10,584)
(1,190,499)
594,330
1,288,137
1,462
(938,923)
350,727
$ 1,623,782
$ 1,119,222
PTC Therapeutics, Inc.
Consolidated Statements of Operations
In thousands, except shares and per share data
Revenues:
(cid:1)et product revenue
Collaboration and grant revenue
Total revenues
Operating expenses:
Cost of product sales, excluding amortization of acquired intangible asset
Amortization of acquired intangible asset
Research and development
Selling, general and administrative
Change in the fair value of deferred and contingent consideration
Total operating expenses
Loss from operations
Interest expense, net
Other income (expense), net
Loss before income tax expense
Income tax (expense) benefit
(cid:1)et loss attributable to common stockholders
Weighted-average shares outstanding:
Basic and diluted (in shares)
(cid:1)et loss per share—basic and diluted (in dollars per share)
$
$
Year ended December 31,
2019
2018
2017
$
291,306
$
263,005
$
174,066
15,674
306,980
12,135
27,650
257,452
202,541
48,360
548,138
(241,158)
(12,491)
13,723
(239,926)
(11,650)
(251,576) $
1,729
264,734
12,670
22,877
171,984
153,548
19,340
380,419
(115,685)
(12,554)
129
(128,110)
29
(128,081) $
20,326
194,392
4,577
15,380
117,456
121,271
—
258,684
(64,292)
(12,094)
(1,279)
(77,665)
(1,335)
(79,000)
58,863,185
46,576,313
(4.27) $
(2.75) $
39,183,073
(2.02)
See accompanying consolidated notes.
137
PTC Therapeutics, Inc.
Consolidated Statements of Comprehensive Loss
In thousands
(cid:1)et loss
Other comprehensive loss:
Unrealized gain on marketable securities, net of tax
Foreign currency translation (loss) gain, net of tax
Comprehensive loss
Year ended December 31,
2019
(251,576) $
2018
(128,081) $
2017
(79,000)
724
(12,770)
(263,622) $
9
(2,516)
(130,588) $
225
5,229
(73,546)
$
$
See accompanying consolidated notes.
138
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PTC Therapeutics, Inc.
Consolidated Statements of Cash Flows
In thousands
Cash flows from operating activities
(cid:1)et loss
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization
(cid:1)on-cash lease expense
Change in the fair value of deferred and contingent consideration
Unrealized gain on equity investment
Amortization of (discounts) premiums on investments, net
Amortization of debt issuance costs
Share-based compensation expense
(cid:1)on-cash interest expense
Disposal of asset
Deferred income taxes
Unrealized foreign currency transaction gains, net
Changes in operating assets and liabilities:
Inventory, net
Prepaid expenses and other current assets
Trade receivables, net
Deposits and other assets
Accounts payable and accrued expenses
Other liabilities
Deferred revenue
(cid:1)et cash used in operating activities
Cash flows from investing activities
Purchases of fixed assets
Purchase of equity investment
Purchases of marketable securities
Sale & redemption of marketable securities
Acquisition of product rights
Business acquisition, net of cash acquired
(cid:1)et cash (used in) provided by investing activities
Cash flows from financing activities
Proceeds from issuance of convertible notes
Proceeds from exercise of options
Proceeds from shares issued under employee stock purchase plan
Debt issuance costs related to secured term loan
(cid:1)et proceeds from public offering
Proceeds from issuance of secured term loan
Repayment of senior secured term loan
(cid:1)et cash provided by financing activities
Effect of exchange rate changes on cash
(cid:1)et increase in cash and cash equivalents
Cash and cash equivalents, beginning of period
Year ended December 31,
2019
2018
2017
$
(251,576) $
(128,081) $
(79,000)
32,180
3,709
48,360
(2,194)
(1,922)
694
42,134
12,027
312
8,829
(11,619)
(3,456)
(8,835)
11,525
(17,923)
26,836
13,668
(1,388)
(98,639)
(13,757)
(4,000)
(494,068)
156,270
(31,682)
—
(387,237)
279,267
18,276
3,577
—
323,756
—
(11,667)
613,209
(1,303)
126,030
169,498
26,087
—
19,340
—
(433)
524
33,252
7,518
2
—
(59)
(5,823)
(1,609)
(29,589)
(1,093)
43,877
1,932
6,514
(27,641)
(7,097)
—
(68,614)
90,423
(8,433)
(48,892)
(42,613)
—
10,868
2,787
—
117,916
—
—
131,571
(3,611)
57,706
111,792
17,682
—
—
—
535
433
30,559
6,755
5
199
(459)
(6,454)
(1,784)
(12,203)
(544)
24,011
733
9,469
(10,063)
(3,101)
—
(81,368)
174,749
(77,163)
—
13,117
—
2,182
2,468
(432)
—
40,000
—
44,218
6,199
53,471
58,321
Cash and cash equivalents, and restricted cash end of period
$
295,528
$
169,498
$
111,792
140
Supplemental disclosure of cash information
Cash paid for interest
Cash paid for income taxes
Supplemental disclosures of non-cash information related to investing and financing
activities
Unrealized gain on marketable securities
Right-of-use assets obtained in exchange for lease obligations
Acquisition of product rights and licenses
$
$
$
$
$
7,693
2,109
724
17,389
11,434
$
$
$
$
$
7,773
1,583
$
$
9
$
— $
5,981
$
6,271
1,101
225
—
—
See accompanying consolidated notes.
141
PTC Therapeutics, Inc.
(cid:1)otes to consolidated financial statements (Continued)
December 31, 2019
(In thousands except share and per share amount)
1. The Company
PTC Therapeutics, Inc. (the “Company” or “PTC”) is a science-driven global biopharmaceutical company focused on
the discovery, development and commercialization of clinically-differentiated medicines that provide benefits to patients with rare
disorders. The Company’s ability to globally commercialize products is the foundation that drives its continued investment in a
robust diversified pipeline of transformative medicines and its mission to provide access to best-in-class treatments for patients
who have an unmet medical need. The Company’s strategy is to bring best-in-class therapies with differentiated clinical benefit
to patients affected by rare disorders and to leverage its global commercial infrastructure to maximize value for its patients and
other stakeholders.
The Company has two products, Translarna™ (ataluren) and Emflaza™ (deflazacort), for the treatment of Duchenne
muscular dystrophy, or DMD, a rare, life threatening disorder. Translarna has marketing authorization in the European Economic
Area (the “EEA”) for the treatment of nonsense mutation Duchenne muscular dystrophy, or nmDMD, in ambulatory patients aged
2 years and older and in Brazil for the treatment of nmDMD in ambulatory patients aged 5 years and older, subject to annual
renewal and other conditions. Emflaza is approved in the United States for the treatment of DMD in patients two years and older.
The Company has a pipeline of gene therapy product candidates for rare monogenic diseases that affect the central nervous
system (“C(cid:1)S”) including PTC-AADC for the treatment of Aromatic L-Amino Acid Decarboxylase, or AADC, deficiency, or
AADC deficiency, a rare C(cid:1)S disorder arising from reductions in the enzyme AADC that results from mutations in the dopa
decarboxylase gene. The Company is preparing a biologics license application, or BLA, for PTC-AADC for the treatment of
AADC deficiency in the United States, which it anticipates submitting to the U.S. Food and Drug Administration, or FDA, in the
second quarter of 2020. In January 2020, the Company submitted a marketing authorization application, or MAA, to the European
Medicines Agency (“EMA”) for PTC-AADC for the treatment of AADC deficiency in the EEA, and the Company expects an
opinion from the Committee for Medicinal Products for Human Use by the end of 2020.
The Company holds the rights for the commercialization of Tegsedi™ (inotersen) and Waylivra™ (volanesorsen) for the
treatment of rare diseases in countries in Latin America and the Caribbean pursuant to the Company’s Collaboration and License
Agreement with Akcea Therapeutics, Inc. (“Akcea”). Tegsedi has received marketing authorization in the United States, the
European Union (the “EU”) and Brazil for the treatment of stage 1 or stage 2 polyneuropathy in adult patients with hereditary
transthyretin amyloidosis, or hATTR amyloidosis. Waylivra has received marketing authorization in the EU for the treatment of
familial chylomicronemia syndrome, or FCS. The Company anticipates filing for marketing authorization for Waylivra with
A(cid:1)VISA in the second half of 2020.
The Company also has a spinal muscular atrophy ("SMA") collaboration with F. Hoffman-La Roche Ltd and Hoffman-
La Roche Inc., referred to collectively as Roche, and the Spinal Muscular Atrophy Foundation, or SMA Foundation. The lead
compound in the SMA program is risdiplam (RG7916, RO7034067). Roche submitted an (cid:1)DA for risdiplam to the FDA in the
fourth quarter of 2019 and the Prescription Drug User Fee Act, or PDUFA, date for a decision by the FDA is May 24, 2020.
Risdiplam is expected to be indicated in the United States for SMA type 1, 2 and 3 patients, if approved. Roche anticipates submitting
an MAA for risdiplam in the EEA in mid-year 2020.
On October 25, 2019, the Company completed the acquisition of substantially all of the assets of BioElectron Technology
Corporation (“BioElectron”), a Delaware corporation, including certain compounds that the Company has begun to develop as
part of its Bio-e platform, (the “Asset Acquisition”) pursuant to an Asset Purchase Agreement by and between the Company and
BioElectron, dated October 1, 2019 (the “Asset Acquisition Agreement”). The transaction was accounted for as an asset acquisition.
In 2020, the Company plans to initiate three trials in this platform with two unique compounds that regulate inflammation and
oxidative stress.
In addition, the Company has a pipeline of product candidates and discovery programs that are in early clinical, pre-
clinical and research and development stages focused on the development of new treatments for multiple therapeutic areas, including
rare diseases and oncology.
The Company’s marketing authorization for Translarna in the EEA is subject to annual review and renewal by the European
Commission following reassessment by the EMA of the benefit-risk balance of the authorization, which the Company refers to as
the annual EMA reassessment. This marketing authorization is further subject to the specific obligation to conduct and submit the
results of a multi-center, randomized, double-blind, 18-month, placebo-controlled trial, followed by an 18-month open-label
142
PTC Therapeutics, Inc.
(cid:1)otes to consolidated financial statements (Continued)
December 31, 2019
(In thousands except share and per share amount)
extension, according to an agreed protocol, in order to confirm the efficacy and safety of Translarna. The final report on the trial
and open-label extension is to be submitted by the Company to the EMA by the end of the third quarter of 2022. The Company
refers to the trial and open-label extension together as Study 041.
The marketing authorization in the EEA was last renewed in July 2019 and is effective, unless extended, through August
5, 2020. The renewal was based on the Company’s commitment to conduct Study 041 and the totality of the clinical data available
from its trials and studies of Translarna for the treatment of nmDMD, including the safety and efficacy results of the Phase 2b and
Phase 3 clinical trials. The primary efficacy endpoint was not achieved in either trial within the pre-specified level of statistical
significance.
Translarna is an investigational new drug in the United States. During the first quarter of 2017, the Company filed a (cid:1)ew
Drug Application, or (cid:1)DA, over protest with the FDA, for which the FDA granted a standard review. In October 2017, the Office
of Drug Evaluation I of the FDA issued a complete response letter for the (cid:1)DA, stating that it was unable to approve the application
in its current form. In response, the Company filed a formal dispute resolution request with the Office of (cid:1)ew Drugs of the FDA.
In February 2018, the Office of (cid:1)ew Drugs of the FDA denied PTC’s appeal of the Complete Response Letter. In its response, the
Office of (cid:1)ew Drugs recommended a possible path forward for the ataluren (cid:1)DA submission based on the accelerated approval
pathway. This would involve a re-submission of an (cid:1)DA containing the current data on effectiveness of ataluren with new data
to be generated on dystrophin production in nmDMD patients’ muscles. The Company intends to follow the FDA’s recommendation
and will collect, using newer technologies via procedures and methods that the Company designed, such dystrophin data in a new
study, Study 045, which the Company initiated in the fourth quarter of 2018. The Company expects that a potential re-submission
of an (cid:1)DA could occur in mid-year 2020. Additionally, should a re-submission of an (cid:1)DA receive accelerated approval, the Office
of (cid:1)ew Drugs stated that Study 041, which is currently enrolling, could serve as the confirmatory post-approval trial required in
connection with the accelerated approval framework.
On April 20, 2017, the Company completed its acquisition of all rights to Emflaza, or the Transaction. The Transaction
was completed pursuant to an asset purchase agreement, dated March 15, 2017, as amended on April 20, 2017, (the "Asset Purchase
Agreement"), by and between the Company and Marathon Pharmaceuticals, LLC (now known as Complete Pharma Holdings,
LLC), or Marathon. The Transaction was accounted for as an asset acquisition. The assets acquired by the Company in the
Transaction include intellectual property rights related to Emflaza, inventories of Emflaza, and certain contractual rights related
to Emflaza. The Company assumed certain liabilities and obligations in the Transaction arising out of, or relating to, the assets
acquired in the Transaction.
Upon the closing of the Transaction, the Company paid to Marathon total upfront consideration comprised of $75.0 million
in cash, funded through cash on hand, and 6,683,598 shares of the Company’s common stock. The number of shares of common
stock issued at closing was determined by dividing $65.0 million by the volume weighted average price per share of the Company’s
common stock on the (cid:1)asdaq Global Select Market (“(cid:1)asdaq”) for the 15 trading-day period ending on the third trading day
immediately preceding the closing. Marathon will be entitled to receive contingent payments from the Company based on annual
net sales of Emflaza beginning in 2018, up to a specified aggregate maximum amount over the expected commercial life of the
asset, and a single $50.0 million sales-based milestone, in each case subject to the terms and conditions of the Asset Purchase
Agreement.
On August 23, 2018, the Company completed its acquisition of Agilis Biotherapeutics, Inc., or Agilis, pursuant to an
Agreement and Plan of Merger, dated as of July 19, 2018 (the “Merger Agreement”), by and among the Company, Agility Merger
Sub, Inc., a Delaware corporation and the Company's wholly owned, indirect subsidiary, Agilis and, solely in its capacity as the
representative, agent and attorney-in-fact of the equityholders of Agilis, Shareholder Representative Services LLC, (the "Merger").
Upon the closing of the Merger, the Company paid to Agilis equityholders total upfront consideration comprised of $49.2
million in cash and 3,500,907 shares of the Company’s common stock (the “Closing Stock Consideration”). The Closing Stock
Consideration was determined by dividing $150.0 million by the volume-weighted average price per share of the Company’s
common stock on (cid:1)asdaq for the 10 consecutive trading-day period ending on the second trading-day immediately preceding the
closing of the Merger. Agilis equityholders may become entitled to receive contingent payments from the Company based on the
achievement of certain development, regulatory and net sales milestones as well as based upon a percentage of net sales of certain
products. Under the Merger Agreement, the Company is required to pay $40.0 million of the development milestone payments
143
PTC Therapeutics, Inc.
(cid:1)otes to consolidated financial statements (Continued)
December 31, 2019
(In thousands except share and per share amount)
upon the passing of the second anniversary of the closing of the Merger, regardless of whether the applicable milestones have been
achieved.
Upon the closing of the Asset Acquisition, the Company paid to BioElectron total upfront consideration of $10.0 million,
funded with cash on hand, less (i) transaction expenses incurred by BioElectron, (ii) the amount of outstanding indebtedness of
BioElectron including a $4.0 million loan advance to BioElectron plus accrued and unpaid interest thereon and (iii) $1.5 million
held in an escrow account to secure potential indemnification obligations owed to the Company. Subject to the terms and conditions
of the Asset Acquisition Agreement, BioElectron may become entitled to receive contingent milestone payments of up to $200.0
million (in cash or in shares of the Company’s common stock, as determined by the Company) from the Company based on the
achievement of certain regulatory and net sales milestones. Subject to the terms and conditions of the Asset Acquisition Agreement,
BioElectron may also become entitled to receive contingent payments based on a percentage of net sales of certain products.
As of December 31, 2019, the Company had an accumulated deficit of approximately $1,190.5 million. The Company has
financed its operations to date primarily through the private offerings in September 2019 of 1.50% convertible senior notes due
2026 and in August 2015 of 3.00% convertible senior notes due 2022 (see (cid:1)ote 8), public offerings of common stock in February
2014, October 2014, April 2018, January 2019, and September 2019, "at the market offering" of its common stock, its initial public
offering of common stock in June 2013, private placements of its convertible preferred stock, collaborations, bank debt, grant
funding and clinical trial support from governmental and philanthropic organizations and patient advocacy groups in the disease
area addressed by the Company’s product candidates. Since 2014, the Company has also relied on revenue generated from net
sales of Translarna for the treatment of nmDMD in territories outside of the United States, and since May 2017, the Company has
generated revenue from net sales of Emflaza for the treatment of DMD in the United States. The Company expects that cash flows
from the sales of its products, together with the Company's cash, cash equivalents and marketable securities, will be sufficient to
fund its operations for at least the next twelve months.
2. Summary of significant accounting policies
Basis of presentation
The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted
accounting principles (GAAP) and include all adjustments necessary for the fair presentation of the Company’s financial position
for the periods presented.
Use of estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions
that affect the amounts reported in the financial statements and accompanying notes. Significant estimates in these consolidated
financial statements have been made in connection with the calculation of net product sales, certain accruals related to the Company’s
research and development expenses, valuation procedures for the convertible notes, acquired intangible assets, fair value of the
contingent consideration, and the provision for or benefit from income taxes. Actual results could differ from those estimates.
Changes in estimates are reflected in reported results in the period in which they become known.
Restricted Cash
Restricted cash included in deposits and other assets on the consolidated balance sheet relates to an unconditional,
irrevocable and transferable letter of credit that was entered into during the twelve-month period ended December 31, 2019 in
connection with obligations under a facility lease for the Company’s leased biologics manufacturing facility in Hopewell Township,
(cid:1)ew Jersey. The amount of the letter of credit is $7.5 million, is to be maintained for a term of not less than five years and has the
potential to be reduced to $3.8 million if after five years the Company is not in default of its lease. The amount is classified within
deposits and other assets on the consolidated balance sheet due to the long-term nature of the letter of credit.
The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the consolidated
balance sheet that sum to the total of the same amounts shown in the statement of cash flows:
144
PTC Therapeutics, Inc.
(cid:1)otes to consolidated financial statements (Continued)
December 31, 2019
(In thousands except share and per share amount)
Cash and cash equivalents
Restricted cash included in deposits and other assets
Total Cash, cash equivalents and restricted cash per statement of cash flows
Consolidation
Beginning of
period-
December 31,
2018
169,498
$
End of period-
December 31,
2019
288,028
$
—
7,500
$
169,498
$
295,528
The consolidated financial statements include the accounts of PTC Therapeutics, Inc. and its wholly owned subsidiaries. All
inter-company accounts, transactions, and profits have been eliminated in consolidation.
Segment and geographic information
Operating segments are defined as components of an enterprise about which separate discrete information is available for
evaluation by the chief operating decision maker, or decision making group, in deciding how to allocate resources and in assessing
performance. The Company views its operations and manages its business in one operating and reporting segment.
Cash equivalents
The Company considers all highly liquid investments with a maturity of 90 days or less at the time of purchase to be cash
equivalents. Cash equivalents are carried at cost which approximates fair value due to their short-term nature.
Marketable securities
The Company considers securities with original maturities of greater than 90 days to be available for sale securities. Securities
under this classification are recorded at fair value and unrealized gains and losses within accumulated other comprehensive income.
The estimated fair value of the available for sale securities is determined based on quoted market prices or rates for similar
instruments. In addition, the cost of debt securities in this category is adjusted for amortization of premium and accretion of discount
to maturity. The Company evaluates securities with unrealized losses to determine whether such losses, if any, are other than
temporary.
Fixed assets
Fixed assets are stated at cost. Depreciation is computed starting when the asset is placed into service on a straight-line
basis over the estimated useful life of the related asset as follows:
Leasehold improvements
Computer equipment and software
Furniture, fixtures, machinery and lab equipment
Lesser of useful life or lease term
3 years
7 years
Concentration of credit risk
The Company’s financial instruments that are exposed to credit risks consist primarily of cash and cash equivalents, available-
for-sale marketable securities and accounts receivable. The Company maintains its cash and cash equivalents in bank accounts,
which, at times, exceed federally insured limits. The Company has not experienced any credit losses in these accounts and does
not believe it is exposed to any significant credit risk on these funds. The Company’s investment policy includes guidelines on
the quality of the financial institutions and financial instruments the Company is allowed to invest in, which the Company believes
minimizes the exposure to concentration of credit risk.
The Company is subject to credit risk from its accounts receivable related to its product sales. The payment terms are
predetermined and the Company evaluates the creditworthiness of each customer or distributor on a regular basis. The Company
reserves all uninsured amounts billed directly to a patient until the time of cash receipt as collectability is not reasonably assured
at the time the product is received. To date, the Company has not incurred any material credit losses.
145
PTC Therapeutics, Inc.
(cid:1)otes to consolidated financial statements (Continued)
December 31, 2019
(In thousands except share and per share amount)
Inventory and cost of product sales
Inventory
Inventories are stated at the lower of cost and net realizable value with cost determined on a first-in, first-out basis by
product. The Company capitalizes inventory costs associated with products following regulatory approval when future
commercialization is considered probable and the future economic benefit is expected to be realized. Products which may be used
in clinical development programs are included in inventory and charged to research and development expense when the product
enters the research and development process and no longer can be used for commercial purposes. Inventory used for marketing
efforts are charged to selling, general and administrative expense. Amounts related to clinical development programs and marketing
efforts are immaterial.
The following table summarizes the components of the Company’s inventory for the periods indicated:
Raw materials
Work in progress
Finished goods
Total inventory
December 31,
2019
December 31,
2018
$
874
$
9,652
8,759
1,431
9,324
5,362
$
19,285
$
16,117
The Company periodically reviews its inventories for excess amounts or obsolescence and writes down obsolete or
otherwise unmarketable inventory to its estimated net realizable value. The Company recorded a $0.4 million write down for the
twelve month period ended December 31, 2019, primarily related to product approaching expiration. The Company recorded a
$1.8 million inventory write down for the twelve month period ended December 31, 2018, primarily related to inventory labeling
changes. Additionally, though the Company’s product is subject to strict quality control and monitoring which it performs
throughout the manufacturing processes, certain batches or units of product may not meet quality specifications resulting in a
charge to cost of product sales. For the twelve month periods ended December 31, 2019 and December 31, 2018, these amounts
were immaterial.
Cost of product sales
Cost of product sales consists of the cost of inventory sold, manufacturing and supply chain costs, storage costs,
amortization of the acquired intangible asset and royalty payments associated with net product sales. Production costs are expensed
as cost of product sales when the related products are sold.
Accumulated other comprehensive income (loss)
Accumulated other comprehensive income (loss) consists of unrealized gains or losses on marketable securities and foreign
currency translation adjustments.
Revenue recognition
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) (cid:1)o.
2014-9, “Revenue from Contracts with Customers (Topic 606)”. ASU (cid:1)o. 2014-9 eliminated transaction- and industry-specific
revenue recognition guidance under FASB Accounting Standards Codification (“ASC”) Subtopic 605-15, Revenue Recognition-
Products (Topic 605) and replaced it with a principle-based approach for determining revenue recognition. ASC Topic 606 requires
entities to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the
consideration to which the entity expects to be entitled in exchange for those goods or services. On January 1, 2018, the Company
adopted ASC Topic 606 using the modified retrospective approach, a practical expedient permitted under Topic 606, and applied
this approach only to contracts that were not completed as of January 1, 2018. The Company calculated a one-time transition
adjustment of $3.3 million, which was recorded on January 1, 2018 to the opening balance of accumulated deficit, related to the
product sales of Emflaza. The ASC 606 transition adjustment recorded for Emflaza resulted in sales being recognized earlier than
under Topic 605, as the deferred revenue recognition model (sell-through) is not allowed under Topic 606. The one-time adjustment
146
PTC Therapeutics, Inc.
(cid:1)otes to consolidated financial statements (Continued)
December 31, 2019
(In thousands except share and per share amount)
consisted of $3.9 million in deferred revenue offset by $0.6 million of variable consideration. The information presented for the
periods prior to January 1, 2018 has not been adjusted and is reported under Topic 605.
Periods prior to January 1, 2018
The Company recognizes revenue when amounts are realized or realizable and earned. Revenue is considered realizable
and earned when the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or
services have been rendered; (3) the price is fixed or determinable; and (4) collection of the amounts due are reasonably assured.
(cid:1)et product sales
Prior to the second quarter of 2017, the Company’s net product sales consisted of sales of Translarna for the treatment of
nmDMD in territories outside of the U.S. The Company recognizes revenue from product sales when there is persuasive evidence
that an arrangement exists, title to product and associated risk of loss has passed to the customer, the price is fixed or determinable,
collectability is reasonably assured and the Company has no further performance obligations in accordance with FASB ASC
Subtopic 605-15, Revenue Recognition—Products.
The Company has recorded revenue on sales where Translarna is available either on a commercial basis or through a
reimbursed EAP program. Orders for Translarna are generally received from hospital and retail pharmacies and the Company’s
third-party partner distributors. Revenue is recognized when risk of ownership has transferred. The Company’s third-party partner
distributors act as intermediaries between the Company and end users and do not typically stock significant quantities of Translarna.
The ultimate payor for Translarna is typically a government authority or institution or a third-party health insurer.
In May 2017, the Company began the commercialization of Emflaza in the U.S. The Company recorded product revenue
related to the sales of Emflaza in the U.S. in accordance with ASC 605-15, when persuasive evidence of an arrangement exists,
delivery has occurred and title of the product and associated risk of loss has passed to the customer, the price is fixed or determinable
and collection from the customer has been reasonably assured. Due to the early stage of the product launch, the Company determined
that it was not able to reliably make certain estimates, including returns, necessary to recognize product revenue upon shipment
to distributors. As a result, the Company recorded net product revenue for Emflaza using a deferred revenue recognition model
(sell-through). Under the deferred revenue model, the Company does not recognize revenue until Emflaza is shipped to the specialty
pharmacy.
The Company records revenue net of estimated third-party discounts and rebates. Allowances are recorded as a reduction
of revenue at the time revenues from product sales are recognized. These allowances are adjusted to reflect known changes in
factors and may impact such allowances in the quarter those changes are known. For the year ended December 31, 2017, the
Company recognized Translarna net sales of $145.2 million and Emflaza net sales of $28.8 million.
Collaboration and grant revenue
The terms of these agreements typically include payments to the Company of one or more of the following: nonrefundable,
upfront license fees; milestone payments; research funding and royalties on future product sales. In addition, the Company generates
service revenue through agreements that generally provide for fees for research and development services and may include additional
payments upon achievement of specified events.
The Company evaluates all contingent consideration earned, such as a milestone payment, using the criteria as provided
by ASC 605-28, Revenue Recognition—Milestone Method. At the inception of a collaboration arrangement, the Company evaluates
if a milestone payment is substantive. The criteria requires that (1) the Company determines if the milestone is commensurate with
either its performance to achieve the milestone or the enhancement of value resulting from its activities to achieve the milestone;
(2) the milestone be related to past performance; and (3) the milestone be reasonable relative to all deliverable and payment terms
of the collaboration arrangement. If these criteria are met then the contingent milestones can be considered a substantive milestone
and will be recognized as revenue in the period that the milestone is achieved. The Company recognizes royalties as earned in
accordance with the terms of various research and collaboration agreements. If not substantive, the contingent consideration is
allocated to the existing units of accounting based on relative selling price and recognized following the same basis previously
established for the associated unit of accounting.
147
PTC Therapeutics, Inc.
(cid:1)otes to consolidated financial statements (Continued)
December 31, 2019
(In thousands except share and per share amount)
The Company recognizes revenue for reimbursements of research and development costs under collaboration agreements
as the services are performed. The Company records these reimbursements as revenue and not as a reduction of research and
development expenses as the Company has the risks and rewards as the principal in the research and development activities.
Periods commencing January 1, 2018
The Company's net product revenue primarily consists of sales of Translarna in territories outside of the U.S. and sales
of Emflaza in the U.S., both for the treatment of DMD.
(cid:1)et product revenue
The Company's net product revenue primarily consists of sales of Translarna in territories outside of the U.S. for the
treatment of nmDMD and sales of Emflaza in the U.S. for the treatment of DMD. The Company recognizes revenue when its
performance obligations with its customers have been satisfied. The Company’s performance obligations are to provide products
based on customer orders from distributors, hospitals, specialty pharmacies or retail pharmacies. The performance obligations are
satisfied at a point in time when the Company’s customer obtains control of the product, which is typically upon delivery. The
Company invoices its customers after the products have been delivered and invoice payments are generally due within 30 to 90
days of the invoice date. The Company determines the transaction price based on fixed consideration in its contractual agreements.
Contract liabilities arise in certain circumstances when consideration is due for goods the Company has yet to provide. As the
Company has identified only one distinct performance obligation, the transaction price is allocated entirely to product sales. In
determining the transaction price, a significant financing component does not exist since the timing from when the Company
delivers product to when the customers pay for the product is typically less than one year. Customers in certain countries pay in
advance of product delivery. In those instances, payment and delivery typically occur in the same month.
The Company records product sales net of any variable consideration, which includes discounts, allowances, rebates
related to Medicaid and other government pricing programs, and distribution fees. The Company uses the expected value or most
likely amount method when estimating its variable consideration, unless discount or rebate terms are specified within contracts.
The identified variable consideration is recorded as a reduction of revenue at the time revenues from product sales are recognized.
These estimates for variable consideration are adjusted to reflect known changes in factors and may impact such estimates in the
quarter those changes are known. Revenue recognized does not include amounts of variable consideration that are constrained.
For the years ended December 31, 2019 and 2018, net product sales outside of the United States were $190.3 million and $171.0
million respectively, and net product sales in the United States were $101.0 million and $92.0 million respectively.
In relation to customer contracts, the Company incurs costs to fulfill a contract but does not incur costs to obtain a contract.
These costs to fulfill a contract do not meet the criteria for capitalization and are expensed as incurred.
Upon adoption of ASC Topic 606 on January 1, 2018, the Company elected the following practical expedients:
•
•
•
•
Portfolio Approach - the Company applied the Portfolio Approach to contract reviews within its identified revenue streams
that have similar characteristics and the Company believes this approach would not differ materially than if applying
ASC Topic 606 to each individual contract.
Significant Financing Component - the Company expects the period between when it transfers a promised good to a
customer and when the customer pays for the good or service to be one year or less.
Immaterial Performance Obligations - the Company disregards promises deemed to be immaterial in the context of the
contract.
Shipping and Handling Activities - the Company considers any shipping and handling costs that are incurred after the
customer has obtained control of the product as a cost to fulfill a promise.
Shipping and handling costs associated with finished goods delivered to customers are recorded as a selling expense.
Collaboration revenue
The terms of these agreements typically include payments to the Company of one or more of the following: nonrefundable,
upfront license fees; milestone payments; research funding and royalties on future product sales. In addition, the Company generates
148
PTC Therapeutics, Inc.
(cid:1)otes to consolidated financial statements (Continued)
December 31, 2019
(In thousands except share and per share amount)
service revenue through agreements that generally provide for fees for research and development services and may include additional
payments upon achievement of specified events.
At the inception of a collaboration arrangement, the Company needs to first evaluate if the arrangement meets the criteria
in ASC Topic 808 “Collaborative Arrangements” to then determine if ASC Topic 606 is applicable by considering whether the
collaborator meets the definition of a customer. If the criteria are met, the Company assesses the promises in the arrangement to
identify distinct performance obligations.
For licenses of intellectual property, the Company assesses, at contract inception, whether the intellectual property is
distinct from other performance obligations identified in the arrangement. If the licensing of intellectual property is determined
to be distinct, revenue is recognized for nonrefundable, upfront license fees when the license is transferred to the customer and
the customer can use and benefit from the license. If the licensing of intellectual property is determined not to be distinct, then
the license will be bundled with other promises in the arrangement into one distinct performance obligation. The Company needs
to determine if the bundled performance obligation is satisfied over time or at a point in time. If the Company concludes that the
nonrefundable, upfront license fees will be recognized over time, the Company will need to assess the appropriate method of
measuring proportional performance.
For milestone payments, the Company assesses, at contract inception, whether the development or sales-based milestones
are considered probable of being achieved. If it is probable that a significant revenue reversal will occur, the Company will not
record revenue until the uncertainty has been resolved. Milestone payments that are contingent upon regulatory approval are not
considered probable of being achieved until the applicable regulatory approvals or other external conditions are obtained as such
conditions are not within the Company's control. If it is probable that a significant revenue reversal will not occur, the Company
will estimate the milestone payments using the most likely amount method. The Company will re-assess the development and
sales-based milestones each reporting period to determine the probability of achievement.
The Company recognizes revenue for reimbursements of research and development costs under collaboration agreements
as the services are performed. The Company records these reimbursements as revenue and not as a reduction of research and
development expenses as the Company has the risks and rewards as the principal in the research and development activities.
Allowance for doubtful accounts
The Company maintains an allowance for estimated losses resulting from the inability of its customers to make required
payments. The Company estimates uncollectible amounts based upon current customer receivable balances, the age of customer
receivable balances, the customer’s financial condition and current economic trends. The allowance for doubtful accounts was $0.3
million as of December 31, 2019 and $0.7 million as of December 31, 2018. For the twelve months ended December 31, 2019,
2018, and 2017, bad debt expense was immaterial.
Research and development costs
Research and development expenses include the clinical development costs associated with the Company’s product
development programs and research and development costs associated with the Company’s discovery programs. These expenses
include internal research and development costs and the costs of research and development conducted on behalf of the Company
by third parties, including sponsored university-based research agreements and clinical study vendors. All research and development
costs are expensed as incurred. Costs incurred in obtaining technology licenses are charged immediately to research and development
expense if the technology licensed has not reached technological feasibility and has no alternative future uses.
Advance payments made for goods and services that will be used in future research and development activities are deferred
if the contracted party has not yet performed the related activities. The amount deferred is then recognized as expense when the
research and development activities are performed. The deferred research and development advance payments were $4.5 million
and $2.4 million as of December 31, 2019 and 2018, respectively.
Fair value of financial instruments
The Company follows the fair value measurement rules, which provides guidance on the use of fair value in accounting and
disclosure for assets and liabilities when such accounting and disclosure is called for by other accounting literature. These rules
establish a fair value hierarchy for inputs to be used to measure fair value of financial assets and liabilities. This hierarchy prioritizes
149
PTC Therapeutics, Inc.
(cid:1)otes to consolidated financial statements (Continued)
December 31, 2019
(In thousands except share and per share amount)
the inputs to valuation techniques used to measure fair value into three levels: Level 1 (highest priority), Level 2, and Level 3
(lowest priority).
• Level 1—Unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability
to access at the balance sheet date.
• Level 2—Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either
directly or indirectly. Level 2 inputs include quoted prices for similar assets and liabilities in active markets, quoted prices
for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable
for the asset or liability (i.e., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated
by observable market data by correlation or other means (market corroborated inputs).
• Level 3—Inputs are unobservable and reflect the Company’s assumptions as to what market participants would use in
pricing the asset or liability. The Company develops these inputs based on the best information available.
Marketable securities and equity investments are reflected in the accompanying financial statements at fair value. The carrying
amount of receivables and accounts payable and accrued expenses approximates fair value due to the short-term nature of those
instruments.
Share-based compensation
The Company measures the cost of employee services received in exchange for an award of equity instruments based on
the grant date fair value of the award. Restricted stock awards are measured based on the fair market values of the underlying stock
on the dates of grant. For service type awards, share-based compensation expense is recognized on a straight-line basis over the
period during which the employee is required to provide service in exchange for the entire award. For awards that vest or begin
vesting upon achievement of a performance condition, the Company estimates the likelihood of satisfaction of the performance
condition and recognizes compensation expense when achievement of the performance condition is deemed probable using an
accelerated attribution model.
The fair value of options is calculated using the Black-Scholes option pricing model to determine the fair value of stock
options on the date of grant based on key assumptions such as expected volatility and expected term. The Company historically
estimated the expected volatility of share options based on a historical volatility analysis of peers that were similar to the Company
with respect to industry, stage of life cycle, size, and financial leverage. During the third quarter of 2019, the Company determined
that it had sufficient stock volatility history to be able to estimate the expected volatility of its options. Accordingly, for the third
and fourth quarters of 2019, the expected volatility of options was estimated based on the Company's historical stock volatility.
The Company historically used the “simplified method” to determine the expected term of options. Under this method, the expected
term represents the average of the vesting period and the contractual term. During the third quarter of 2019, the Company determined
that it had sufficient exercise history to be able to estimate the expected term of its options. Accordingly, for the third and fourth
quarters of 2019, the expected term of options was estimated based on the Company's historical exercise data. The risk-free rate
of the option is based on U.S. Government Securities Treasury Constant Maturities yields at the date of grant for a term similar to
the expected term of the option. In connection with the adoption of ASU 2016-9, the Company made a policy election to continue
its methodology for estimating its forfeiture rate.
Income taxes
On December 22, 2017, the U.S. government enacted the 2017 Tax Cuts and Jobs Act (the 2017 Tax Act), which
significantly revises U.S. tax law by, among other provisions, lowering the U.S. federal statutory income tax rate to 21%, imposing
a mandatory one-time transition tax on previously deferred foreign earnings, and eliminating or reducing certain income tax
deductions. The Global Intangible Low-tax Income (GILTI) provisions of the 2017 Tax Act require the Company to include in its
U.S. income tax return foreign subsidiary earnings in excess of an allowable return on the foreign subsidiary’s tangible assets. The
Company has elected to account for GILTI tax in the period in which it is incurred, and therefore has not provided any deferred
tax impacts of GILTI in its consolidated financial statements for the period ended December 31, 2019.
In December 2017, the SEC staff issued Staff Accounting Bulletin (cid:1)o. 118, Income Tax Accounting Implications of the
Tax Cuts and Jobs Act (SAB 118), which allowed the Company to record provisional amounts during a measurement period not
150
PTC Therapeutics, Inc.
(cid:1)otes to consolidated financial statements (Continued)
December 31, 2019
(In thousands except share and per share amount)
to extend beyond one year of the enactment date. As a result of the reduction in the U.S. corporate income tax rate, the Company
revalued its ending net deferred tax assets as of December 31, 2017. In the fourth quarter of 2018, the Company completed its
analysis to determine the effect of the Tax Act and recorded no further adjustments.
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and their respective tax bases and net operating loss and
credit carryforwards. Deferred tax assets and liabilities are measured at rates expected to apply to taxable income in the years in
which those temporary differences and carryforwards are expected to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in the statement of operations in the period that includes the enactment date. A
valuation allowance is recorded when it is not more likely than not that all or a portion of the net deferred tax assets will be realized.
The Company recorded a deferred tax liability in conjunction with the Merger, further discussed in (cid:1)otes 1 and 3, of
$122.0 million, related to the tax basis difference in the In-Process Research and Development, or IPR&D, indefinite-lived
intangibles acquired. The Company's policy is to record a deferred tax liability related to acquired IPR&D which may eventually
be realized either upon amortization of the asset when the research is completed and a product is successfully launched or the
write-off of the asset if it is abandoned or unsuccessful.
Foreign currency
The functional currencies of the Company’s foreign subsidiaries primarily are the local currencies of the country in which
the subsidiary operates. The Company’s asset and liability accounts are translated using the current exchange rate as of the balance
sheet date. Stockholders’ equity accounts are translated using historical rates at the balance sheet date. Revenue and expense
accounts are translated using a weighted average exchange rate over the period ended on the balance sheet date. Adjustments
resulting from the translation of the financial statements of the Company’s foreign subsidiaries into U.S. dollars are accumulated
as a separate component of stockholders’ equity within other comprehensive income. Gains or losses resulting from transactions
denominated in foreign currencies are included in other income or expense, within the consolidated statements of income.
(cid:1)et (loss) income per share
Basic net (loss) income per share is calculated by dividing the net income attributable to common stockholders by the
weighted average number of common shares outstanding for the period, without consideration for common stock equivalents.
Diluted net income per share is calculated by dividing the net income attributable to common stockholders by the weighted-average
number of common share equivalents outstanding for the period determined using the treasury-stock method and the if-converted
method. During periods in which the Company incurs net losses, both basic and diluted loss per share is calculated by dividing
the net loss by the weighted average shares outstanding—potentially dilutive securities are excluded from the calculation because
their effect would be anti-dilutive. Dilutive common stock equivalents are comprised of options and unvested restricted stock
outstanding under the Company’s stock option plans.
Business combinations and asset acquisitions
The Company evaluates acquisitions of assets and other similar transactions to assess whether or not the transaction
should be accounted for as a business combination or asset acquisition by first applying a screen to determine if substantially all
of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets. If
the screen is met, the transaction is accounted for as an asset acquisition. If the screen is not met, further determination is required
as to whether or not the Company has acquired inputs and processes that have the ability to create outputs, which would meet the
requirements of a business. If determined to be a business combination, the Company accounts for the transaction under the
acquisition method of accounting as indicated in ASU 2017-01, “Business Combinations”, which requires the acquiring entity in
a business combination to recognize the fair value of all assets acquired, liabilities assumed, and any non-controlling interest in
the acquiree and establishes the acquisition date as the fair value measurement point. Accordingly, the Company recognizes assets
acquired and liabilities assumed in business combinations, including contingent assets and liabilities, and non-controlling interest
in the acquiree based on the fair value estimates as of the date of acquisition. In accordance with ASC 805, the Company recognizes
and measures goodwill as of the acquisition date, as the excess of the fair value of the consideration paid over the fair value of the
identified net assets acquired.
151
PTC Therapeutics, Inc.
(cid:1)otes to consolidated financial statements (Continued)
December 31, 2019
(In thousands except share and per share amount)
The consideration for the Company’s business acquisitions may include future payments that are contingent upon the
occurrence of a particular event or events. The obligations for such contingent consideration payments are recorded at fair value
on the acquisition date. The contingent consideration obligations are then evaluated each reporting period. Changes in the fair
value of contingent consideration, other than changes due to payments, are recognized as a gain or loss and recorded within the
change in the fair value of deferred and contingent consideration in the consolidated statements of operations.
If determined to be an asset acquisition, the Company accounts for the transaction under ASC 805-50, which requires the
acquiring entity in an asset acquisition to recognize assets acquired and liabilities assumed based on the cost to the acquiring entity
on a relative fair value basis, which includes transaction costs in addition to consideration given. (cid:1)o gain or loss is recognized as
of the date of acquisition unless the fair value of noncash assets given as consideration differs from the assets' carrying amounts
on the acquiring entity's books. Consideration transferred that is noncash will be measured based on either the cost (which shall
be measured based on the fair value of the consideration given) or the fair value of the assets acquired and liabilities assumed,
whichever is more reliably measurable. Goodwill is not recognized in an asset acquisition and any excess consideration transferred
over the fair value of the net assets acquired is allocated to the identifiable assets based on relative fair values.
Contingent consideration payments in asset acquisitions are recognized when the contingency is resolved and the
consideration is paid or becomes payable (unless the contingent consideration meets the definition of a derivative, in which case
the amount becomes part of the basis in the asset acquired). Upon recognition of the contingent consideration payment, the amount
is included in the cost of the acquired asset or group of assets.
Finite-lived intangible assets
The Company records the fair value of purchased intangible assets with finite useful lives as of the transaction date of a
business combination or asset acquisition. Purchased intangible assets with finite useful lives are amortized to their estimated
residual values over their estimated useful lives.
Impairment of long-lived assets
The Company monitors its long-lived assets and finite-lived intangibles for indicators of impairment. If such indicators are
present, the Company assesses the recoverability of affected assets by determining whether the carrying value of such assets is
less than the sum of the undiscounted future cash flows of the assets. If such assets are found not to be recoverable, the Company
measures the amount of such impairment by comparing the carrying value of the assets to the fair value of the assets, with the fair
value generally determined based on the present value of the expected future cash flows associated with the assets. The Company
believes that no impairment of long-lived assets exists as of December 31, 2019.
Indefinite-lived intangible assets
Indefinite-lived intangible assets consist of IPR&D. IPR&D acquired directly in a transaction other than a business
combination is capitalized if the projects will be further developed or have an alternative future use; otherwise they are expensed.
The fair values of IPR&D projects and license agreement assets acquired in business combinations are capitalized. Several methods
may be used to determine the estimated fair value of the IPR&D and license agreement asset acquired in a business combination.
The Company utilizes the "income method”, and uses estimated future net cash flows that are derived from projected sales revenues
and estimated costs. These projections are based on factors such as relevant market size, patent protection, and expected pricing
and industry trends. The estimated future net cash flows are then discounted to the present value using an appropriate discount
rate. These assets are treated as indefinite-lived intangible assets until completion or abandonment of the projects, at which time
the assets are amortized over the remaining useful life or written off, as appropriate. Intangible assets with indefinite lives, including
IPR&D, are tested for impairment if impairment indicators arise and, at a minimum, annually. However, an entity is permitted to
first assess qualitative factors to determine if a quantitative impairment test is necessary. Further testing is only required if the
entity determines, based on the qualitative assessment, that it is more likely than not that an indefinite-lived intangible asset’s fair
value is less than its carrying amount. Otherwise, no further impairment testing is required. The indefinite-lived intangible asset
impairment test consists of a one-step analysis that compares the fair value of the intangible asset with its carrying amount. If the
carrying amount of an intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess.
The Company considers many factors in evaluating whether the value of its intangible assets with indefinite lives may not be
recoverable, including, but not limited to, expected growth rates, the cost of equity and debt capital, general economic conditions,
152
PTC Therapeutics, Inc.
(cid:1)otes to consolidated financial statements (Continued)
December 31, 2019
(In thousands except share and per share amount)
the Company's outlook and market performance of the Company's industry and recent and forecasted financial performance. The
Company performed a qualitative annual test for its indefinite-lived intangible assets as of October 1, 2019 and concluded that no
impairment exists as of December 31, 2019.
Goodwill
Goodwill represents the amount of consideration paid in excess of the fair value of net assets acquired as a result of the
Company’s business acquisitions accounted for using the acquisition method of accounting. Goodwill is not amortized and is
subject to impairment testing at a reporting unit level on an annual basis or when a triggering event occurs that may indicate the
carrying value of the goodwill is impaired. The Company reassess its reporting units as part of its annual segment review. As of
December 31, 2019, the Company concluded that it continues to operate as one reporting unit. An entity is permitted to first assess
qualitative factors to determine if a quantitative impairment test is necessary. Further testing is only required if the entity determines,
based on the qualitative assessment, that it is more likely than not that the fair value of the reporting unit is less than its carrying
amount.The Company performed an annual test for goodwill as of October 1, 2019 and concluded that no impairment exists as of
December 31, 2019.
Recent accounting pronouncements
In June 2016, the FASB issued ASU (cid:1)o. 2016-13, “Financial Instruments — Credit Losses (Topic 326): Measurement
of Credit Losses on Financial Instruments”. This standard requires financial assets measured at amortized cost basis to be presented
at the net amount expected to be collected. This standard is effective for public companies who are SEC filers for fiscal years
beginning after December 15, 2019, including interim periods within those years. In (cid:1)ovember 2019, the FASB issued ASU
2019-11, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, which expands the scope of the practical
expedient that allows entities to exclude the accrued interest component of amortized cost from various disclosures required by
ASC 326 to also include certain disclosures required by ASC 320. Entities that elect to apply the practical expedient must disclose
the total amount of accrued interest that they exclude from their disclosures of amortized cost. The amendments have the same
effective dates as ASU 2016-13 (Topic 326) for entities that have not yet adopted that standard. The Company will ASU 2016-13
and ASU 2019-11 effective January 1, 2020. The Company has completed its assessment of the effect of the adoption of ASU
2016-13 and ASU 2019-11on its consolidated financial statements and has the determined that the impact will be immaterial, as
the Company has not historically had any material credit losses related to its accounts receivable or its available for sale debt
securities. The Company will update its notes to the financial statements with additional disclosures as required by the standard
upon adoption.
In August 2018, the FASB issued ASU 2018-13, "Fair Value Measurement (Topic 820), Disclosure Framework—Changes
to the Disclosure Requirements for Fair Value Measurement". This standard eliminates certain disclosure requirements for fair
value measurements for all entities, requires public entities to disclose certain new information and modifies some disclosure
requirements. The new guidance is effective for all entities for fiscal years beginning after December 15, 2019 and for interim
periods within those fiscal years. An entity is permitted to early adopt either the entire standard or only the provisions that eliminate
or modify requirements. Entities can elect to early adopt in interim periods, including periods for which they have not yet issued
financial statements or made their financial statements available for issuance. The Company will adopt this guidance January 1,
2020. The Company will update its notes to the financial statements with additional disclosures as required by the standard upon
adoption.
In August 2018, the FASB issued ASU 2018-15,"Intangibles - Goodwill and Other - Internal-Use Software (Subtopic
350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract".
ASU 2018-15 requires a customer in a cloud computing arrangement that is a service contract to follow the internal-use software
guidance in Accounting Standards Codification 350-40 to determine which implementation costs to defer and recognize as an
asset. For public business entities, the guidance is effective for annual periods, and interim periods within those annual periods,
beginning after December 15, 2019. For all other entities, it is effective for annual periods beginning after December 15, 2020 and
interim periods in annual periods beginning after December 15, 2021. Early adoption is permitted, including adoption in any
interim period for all entities. The Company will adopt this guidance January 1, 2020. The adoption is not expected to have a
material impact on the Company’s consolidated financial statements and accompanying footnotes.
153
PTC Therapeutics, Inc.
(cid:1)otes to consolidated financial statements (Continued)
December 31, 2019
(In thousands except share and per share amount)
In (cid:1)ovember 2018, the FASB issued ASU 2018-18,"Collaborative Arrangements (Topic 808): Clarifying the Interaction
between Topic 808 and Topic 606”. ASU 2018-18 provides guidance on whether certain transactions between collaborative
arrangement participants should be accounted for with revenue under Topic 606. For public business entities, the guidance is
effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2019. For all other
entities, it is effective for annual periods beginning after December 15, 2020 and interim periods in annual periods beginning after
December 15, 2021. Early adoption is permitted, including adoption in any interim period for all entities. The Company will adopt
this guidance January 1, 2020. The adoption is not expected to have a material impact on the Company’s consolidated financial
statements and accompanying footnotes.
In December 2019, the FASB issued ASU 2019-12,"Income Taxes (Topic 740): Simplifying the Accounting for Income
Taxes”. ASU 2019-12 simplifies the accounting for income taxes by removing certain exceptions to the general principals in Topic
740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and
amending the existing guidance. For public business entities, the guidance is effective for annual periods, and interim periods
within those annual periods, beginning after December 15, 2020. For all other entities, it is effective for annual periods beginning
after December 15, 2021 and interim periods in annual periods beginning after December 15, 2022. Early adoption is permitted,
including adoption in any interim period. The Company is currently planning to adopt this guidance when effective. The Company
is assessing the impact of the adoption on the Company’s consolidated financial statements and accompanying footnotes.
Impact of recently adopted accounting pronouncements
In February 2016, the FASB issued ASU (cid:1)o. 2016-2, “Leases (Topic 842)”. This standard requires organizations that
lease assets with lease terms of more than 12 months to recognize assets and liabilities for the rights and obligations created by
those leases on their balance sheets. The ASU also requires new qualitative and quantitative disclosures to help investors and other
financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. The standard is
effective for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018,
with early adoption permitted. Additionally, in March 2019, the FASB issued ASU 2019-01,"Leases (Topic 842): Codification
Improvements”. ASU 2019-01 clarifies the transition guidance related to interim disclosures provided in the year of adoption.
The Company adopted the new guidance on January 1, 2019 using the modified retrospective method. Prior period results were
not adjusted and continue to be presented under Topic 840 based on the accounting standards originally in effect for such periods.
As part of the adoption, the Company has elected to utilize practical expedients including the package of practical expedients
permitted under the transition guidance within the new standard, which among other things, allowed the Company to: 1) carry
forward the historical determination of contracts as leases, lease classification and not reassess initial direct costs for historical
lease arrangements, 2) not separate non-lease components from lease components and instead to account for each separate lease
component and the non-lease components associated with that lease component as a single lease component (the Company elected
to apply this practical expedient to all underlying asset classes), 3) not apply the recognition requirements in ASC 842 to short-
term leases, and 4) not record an ROU asset or ROU liability for leases with an asset or liability balance that would be considered
immaterial. Upon adoption, the Company recorded an operating lease liability with a corresponding operating lease ROU asset of
$11.3 million. The adoption did not have a material impact on the consolidated results of operations, stockholder's equity, and cash
flows for the twelve months ended December 31, 2019. As the Company is not a lessor, the aspects of the new guidance pertaining
to lessors was not applicable for the Company.
In February 2018, the FASB issued ASU 2018-02, "Income Statement — Reporting Comprehensive Income (Topic 220):
Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income". This standard permits the reclassification
of tax effects stranded in other comprehensive income as a result of tax reform to retained earnings related to the change in federal
tax rate in addition to other stranded effects that relate to the 2017 Tax Act but do not directly relate to the change in the federal
rate. ASU 2018-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal
years with early adoption permitted for periods for which financial statements have not yet been issued or made available for
issuance. The Company adopted this guidance on January 1, 2019 and elected not to reclassify the tax effects in other comprehensive
income related to the 2017 Tax Act, as these amounts were immaterial. The adoption of the guidance did not have a material impact
on the consolidated financial statements and accompanying notes.
In June 2018, the FASB issued ASU 2018-07, "Compensation — Stock Compensation (Topic 718), Improvements to
(cid:1)onemployee Share-Based Payment Accounting". This standard expands the scope of ASC 718 to include share-based payments
154
PTC Therapeutics, Inc.
(cid:1)otes to consolidated financial statements (Continued)
December 31, 2019
(In thousands except share and per share amount)
granted to nonemployees in exchange for goods or services used or consumed in the entity’s own operations and supersedes the
guidance in ASC 505-50. The ASU retains the existing cost attribution guidance, which requires entities to recognize compensation
cost for nonemployee awards in the same period and in the same manner they would if they paid cash for the goods or services,
but it moves the guidance to ASC 718. ASU 2018-07 is effective for fiscal years beginning after December 15, 2018, including
interim periods within those fiscal years with early adoption permitted for periods for which financial statements have not yet been
issued or made available for issuance. The Company adopted this guidance on January 1, 2019. The adoption of the guidance did
not have a material impact on the consolidated financial statements and accompanying notes.
3. Acquisitions
BioElectron Asset Acquisition
On October 25, 2019, the Company completed the acquisition of substantially all of the assets of BioElectron pursuant
to the Asset Acquisition Agreement by and between the Company and BioElectron, dated October 1, 2019. BioElectron was a
private company with a pipeline focused on inflammatory and central nervous system (C(cid:1)S) disorders. The lead program, PTC743,
is pivotal trial ready for C(cid:1)S disorders with substantial unmet need and significant commercial opportunity that are complementary
to PTC’s existing pipeline.
Upon the closing of the Asset Acquisition, the Company paid to BioElectron total upfront consideration of $10.0 million ,
funded with cash on hand, less (i) transaction expenses incurred by BioElectron, (ii) the amount of outstanding indebtedness of
BioElectron including a $4.0 million loan advance to BioElectron plus accrued and unpaid interest thereon and (iii) $1.5 million
held in an escrow account to secure potential indemnification obligations owed to the Company. Subject to the terms and conditions
of the Asset Acquisition Agreement, BioElectron may become entitled to receive contingent milestone payments of up to $200.0
million (in cash or in shares of the Company’s common stock, as determined by the Company) from the Company based on the
achievement of certain regulatory and net sales milestones. Subject to the terms and conditions of the Asset Acquisition Agreement,
BioElectron may also become entitled to contingent payments based on a percentage of net sales of certain products.
The Company concluded that the transaction included inputs and processes that did not constitute a business under the
revised guidance of ASU 2017-01, which allows for a screen to evaluate if substantially all of the fair value of the gross assets
acquired is concentrated in a single identifiable asset or group of similar identifiable assets. If the screen is met, the transaction is
accounted for as an asset acquisition. The Company determined that substantially all of the fair value is concentrated in PTC743
and accounted for the transaction as an asset acquisition under ASC 805-50.
The purchase price consisted of upfront consideration of $10.0 million in cash and approximately $0.5 million of
acquisition costs, resulting in $10.5 million of total consideration transferred. As PTC743 is an IPR&D asset, the Company
concluded that it did not have any alternative future use, and accordingly, the fair value amount allocated to the IPR&D asset of
$10.0 million was expensed to research and development during the twelve month period ended December 31, 2019 and included
within operating activities in the statement of cash flows. The remaining assets acquired and liabilities assumed were immaterial.
Additionally, as noted above, BioElectron may be entitled to receive contingent milestone payment and contingent royalty payments.
The Company will record the milestone and royalty payments if and when they become payable, in accordance with the applicable
guidance. These payments will be capitalized and amortized over their expected useful lives.
Agilis Acquisition
On August 23, 2018, the Company completed its acquisition of Agilis pursuant to the Merger Agreement. Agilis was a
privately-held biotechnology company advancing an innovative gene therapy platform for rare monogenic diseases that affect the
central nervous system. Upon completion of the Merger, the Company acquired Agilis's lead product candidate, PTC-AADC, for
the treatment of AADC deficiency, as well as three other gene therapies.
Upon the closing of the Merger, the Company paid to Agilis equityholders total upfront consideration comprised of $49.2
million in cash and 3,500,907 shares of the Company’s common stock (the “Closing Stock Consideration”). The Closing Stock
Consideration was determined by dividing $150.0 million by the volume-weighted average price per share of the Company’s
common stock on (cid:1)asdaq for the 10 consecutive trading-day period ending on the second trading-day immediately preceding the
closing of the Merger. The fair value of the stock on the acquisition date was determined to be $155.9 million.
155
PTC Therapeutics, Inc.
(cid:1)otes to consolidated financial statements (Continued)
December 31, 2019
(In thousands except share and per share amount)
Pursuant to the Merger Agreement, Agilis equityholders may become entitled to receive contingent consideration payments
from the Company based on (i) the achievement of certain development milestones up to an aggregate maximum amount of $60.0
million, (ii) the achievement of certain regulatory approval milestones together with a milestone payment following the receipt of
a priority review voucher up to an aggregate maximum amount of $535.0 million, (iii) the achievement of certain net sales milestones
up to an aggregate maximum amount of $150.0 million, and (iv) a percentage of annual net sales for Friedreich Ataxia and Angelman
Syndrome during specified terms, ranging from 2%-6%. The fair value of the contingent consideration payments at the acquisition
date was estimated to be $290.5 million. Under the Merger Agreement, the Company is required to pay $40.0 million of the
development milestone payments mentioned above upon the passing of the second anniversary of the closing of the Merger,
regardless of whether the applicable milestones have been achieved. The fair value of the deferred consideration payments at the
closing date was estimated to be $38.1 million. Refer to Footnote 4 for further fair value considerations.
The Company evaluated the acquisition of Agilis under ASU 2017-01, Business Combinations: Clarifying the Definition
of a Business. Because the business contained both inputs and processes necessary to manage products and provide economic
benefits directly to its owners and substantially all the value of the acquisition did not relate to a similar group of assets, it was
determined that the acquisition represents a business combination. Therefore, the transaction has been accounted for using the
acquisition method of accounting. Under the acquisition method of accounting, the total purchase price of the acquisition is allocated
to the net tangible and identifiable intangible assets acquired and liabilities assumed based on their fair values as of the date of
acquisition.
The fair value of consideration totaled approximately $533.7 million summarized as follows:
Cash consideration
Fair value of PTC common stock issued
Estimated fair value of deferred consideration payable
Estimated fair value of contingent consideration payable
Total consideration
$
$
Fair Value
49,221
155,860
38,100
290,500
533,681
The Company recorded the assets acquired and liabilities assumed as of the date of acquisition based on the information
available at that time. The Company finalized its accounting for the Merger during the three month period ended December 31,
2018. The following table presents the preliminary allocation of the purchase price to the estimated fair values of the assets acquired
and liabilities assumed as of the acquisition date of August 23, 2018, the measurement period adjustments recorded during the
period from the acquisition date through December 31, 2018, and the final allocation of the purchase price as of December 31,
2018.
156
PTC Therapeutics, Inc.
(cid:1)otes to consolidated financial statements (Continued)
December 31, 2019
(In thousands except share and per share amount)
Preliminary
Allocation as of the
acquisition date of
August 23, 2018
Measurement Period
Adjustments
Cash and cash equivalents
Prepaid expenses and other current assets
Fixed assets
Other assets
Intangible assets - IPR&D
Accounts payable and accrued expenses
Deferred tax liability
Fair value of net assets acquired
Goodwill
Total purchase price
$
$
$
328
181
153
38
480,000
(3,828)
(115,200)
361,672
100,309
461,981
$
$
$
Final Allocation as of
December 31, 2018
328
— $
—
—
—
96,500
—
(6,832)
89,668
(17,968)
71,700
$
$
181
153
38
576,500
(3,828)
(122,032)
451,340
82,341
533,681
The Company incurred approximately $1.7 million in acquisition related expenses which were included in selling, general
and administrative expenses in the consolidated statement of operations as of December 31, 2018 . The results of Agilis’s operations
have been included in the consolidated statements of operations beginning on the acquisition date of August 23, 2018. The net
loss of Agilis included in the consolidated statement of operations for the period August 23, 2018 through December 31, 2018 was
$8.7 million.
The fair value of the IPR&D was capitalized as of the acquisition date and accounted for as indefinite-lived intangible
assets until disposition of the assets or completion or abandonment of the associated research and development efforts. Accordingly,
during the development period after the completion of the acquisition, these assets will not be amortized into earnings; rather,
these assets will be subject to periodic impairment testing. Upon successful completion of the development efforts, the useful lives
of the IPR&D assets will be determined and the assets will be considered definite-lived intangible assets and amortized over their
expected useful lives to cost of sales.
The goodwill recorded is the excess of the purchase price of the net assets acquired net of any deferred tax adjustments.
The Company currently has a deferred tax liability for the indefinite lived IPR&D intangible assets, which have no tax basis and,
therefore, will not result in a future tax deduction. The goodwill is not deductible for income tax purposes.
Pro-Forma Financial Information Associated with the Agilis Acquisition (Unaudited)
The following table summarizes certain supplemental pro forma financial information for the twelve-month periods ended
December 31, 2018 and 2017 as if the Merger had occurred as of January 1, 2017. The unaudited pro-forma financial information
for the twelve-month period ended December 31, 2018 reflects adjustments of $1.7 million related to acquisition fees that are non-
recurring in nature. There were no adjustments related to the twelve-month period ended December 31, 2017.
Revenues
(cid:1)et loss attributable to common stockholders
Twelve Months Ended December 31,
2018
2017
$
$
264,734 $
(138,083) $
194,392
(93,333)
Emflaza Acquisition
On April 20, 2017, the Company completed its previously announced acquisition of all rights to Emflaza pursuant to an
Asset Purchase Agreement, dated March 15, 2017, and amended on April 20, 2017, by and between the Company and Marathon.
The assets acquired by the Company in the Transaction include intellectual property rights related to Emflaza, inventories of
157
PTC Therapeutics, Inc.
(cid:1)otes to consolidated financial statements (Continued)
December 31, 2019
(In thousands except share and per share amount)
Emflaza, and certain contractual rights related to Emflaza. The Company assumed certain liabilities and obligations in the
Transaction arising out of, or relating to, the assets acquired in the Transaction.
The Company concluded that the Transaction included inputs and processes that did not constitute a business under the
revised guidance of ASU 2017-01, which allows for a screen to evaluate if substantially all of the fair value of the gross assets
acquired is concentrated in a single identifiable asset or group of similar identifiable assets. If the screen is met, the transaction is
accounted for as an asset acquisition. The Company determined that substantially all of the fair value is concentrated in the Emflaza
rights intangible asset and accounted for the Transaction as an asset acquisition under ASC 805-50.
The purchase price consisted of total upfront consideration comprised of $75.0 million in cash and 6,683,598 shares of
the Company's common stock with a fair value of $75.2 million. In addition, the Company incurred approximately $2.2 million
of acquisition costs, which are capitalized in an asset acquisition and included in the total consideration transferred.
Marathon is entitled to receive contingent payments from the Company based on annual net sales of Emflaza beginning
in 2018, up to a specified aggregate maximum amount over the expected commercial life of the asset. In addition, Marathon has
the opportunity to receive a single $50.0 million sales-based milestone. In accordance with the guidance for an asset acquisition,
the Company will record the milestone payment when it becomes payable to Marathon and increase the cost basis for the Emflaza
rights intangible asset. Refer to (cid:1)ote 18 for further details.
The following tables present the total purchase consideration and the final allocation of the purchase consideration for
the Transaction as of April 20, 2017 (the “Acquisition Date”):
Cash consideration
Fair value of PTC common stock issued to Marathon (6,683,598 shares)
Acquisition costs
Total consideration transferred
Purchase price
Total fair value of tangible assets acquired and liabilities assumed:
Inventory
Emflaza rights
$
$
$
$
75,000
75,190
2,163
152,353
152,353
3,980
148,373
The Emflaza rights intangible asset is being amortized to cost of product sales over its expected useful life of approximately
seven years. Given the inherent uncertainty of the Company's sales projections, the Company amortizes the asset on a straight line
basis. Refer to (cid:1)ote 18 for further details.
4. Fair value of financial instruments and investments
Fair value of certain investments is based upon market prices using quoted prices in active markets for identical assets
quoted on the last day of the year. In establishing the estimated fair value of the remaining investments, the Company used the
fair value as determined by its investment advisors using observable inputs other than quoted prices.
The Company reviews its available for sale debt investments on a periodic basis for other-than-temporary impairments. This
review is subjective, as it requires management to evaluate whether an event or change in circumstances has occurred in that period
that may have a significant adverse effect on the fair value of the investment.
In May 2019, the Company purchased $4.0 million of shares of ClearPoint (cid:1)euro, Inc.’s (“ClearPoint”) (formerly MRI
Interventions, Inc.) common stock, at a purchase price of $3.10 per share, in connection with a securities purchase agreement that
the Company entered into with ClearPoint, a publicly traded medical device company. The Company determined that the equity
investment represents a financial instrument and therefore, recorded it at fair value, which is readily determinable. The equity
investment is a component of deposits and other assets on the consolidated balance sheet. During the year ended December 31,
158
PTC Therapeutics, Inc.
(cid:1)otes to consolidated financial statements (Continued)
December 31, 2019
(In thousands except share and per share amount)
4. Fair value of financial instruments and investments (Continued)
2019, the Company recorded an unrealized gain of $2.2 million, which is a component of other (income) expense, net within the
consolidated statement of operations. The fair value of the equity investment was $6.2 million as of December 31, 2019. The
Company classifies its equity investment in ClearPoint as a Level 1 asset within the fair value hierarchy, as the value is based on
a quoted market price in an active market, which is not adjusted.
The following represents the fair value using the hierarchy described in (cid:1)ote 2 for the Company’s financial assets and
liabilities that are required to be measured at fair value on a recurring basis as of December 31, 2019 and 2018:
Marketable securities
Equity Investment
Stock appreciation rights liability
Deferred consideration payable
Contingent consideration payable- development
and regulatory milestones - Agilis
Contingent consideration payable- net sales
milestones and royalties - Agilis
Marketable securities
Stock appreciation rights liability
Deferred consideration payable
Contingent consideration payable- development
and regulatory milestones- Agilis
Contingent consideration payable- net sales
milestones and royalties- Agilis
Total
398,535
6,194
3,186
40,000
290,500
65,800
Total
58,088
3,814
37,700
257,040
53,200
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
December 31, 2019
Quoted prices
in active
markets for
identical assets
(level 1)
Significant
other
observable
inputs
(level 2)
Significant
unobservable
inputs
(level 3)
—
—
3,186
—
398,535
$
— $
— $
$
40,000
— $
290,500
— $
65,800
6,194
— $
$
— $
— $
— $
— $
December 31, 2018
Quoted prices
in active
markets for
identical assets
(level 1)
Significant
other
observable
inputs
(level 2)
— $
— $
— $
58,088
$
— $
$
37,700
Significant
unobservable
inputs
(level 3)
—
3,814
—
— $
— $
257,040
— $
— $
53,200
The Company uses the market approach to measure fair value for its financial assets. The market approach uses prices and
other relevant information generated by market transactions involving identical or comparable assets. The Company’s marketable
securities investments classified as Level 2 primarily utilize broker quotes in a nonactive market to value these securities. (cid:1)o
transfers of assets between Level 1 and Level 2 of the fair value measurement hierarchy occurred during the years ended
December 31, 2019 and 2018.
The following is a summary of marketable securities accounted for as available-for-sale securities at December 31, 2019
and 2018:
159
PTC Therapeutics, Inc.
(cid:1)otes to consolidated financial statements (Continued)
December 31, 2019
(In thousands except share and per share amount)
4. Fair value of financial instruments and investments (Continued)
Commercial paper
Corporate debt securities
Asset-backed securities
Total
Commercial paper
Corporate debt securities
Total
December 31, 2019
Gross
Unrealized
Gains
Losses
$
162
576
49
Amortized
Cost
157,936
$
188,778
51,062
397,776
$
787
$
Fair
Value
158,098
189,334
51,103
398,535
— $
(20)
(8)
(28) $
December 31, 2018
Gross
Unrealized
Gains
Losses
43
—
43
$
$
Fair
Value
31,699
26,389
58,088
(1) $
(10)
(11) $
Amortized
Cost
31,657
26,399
58,056
$
$
$
$
$
$
Unrealized gains and losses are reported as a component of accumulated other comprehensive (loss) income in stockholders’
equity. During the year ended December 31, 2019, the Company did not have any realized gains or losses from the sale of marketable
securities. The cost of securities sold is based on the specific identification method. The Company evaluates investments with
unrealized losses to determine if the losses are other than temporary. At December 31, 2019, the Company held securities with an
unrealized loss position that were not considered to be other-than-temporarily impaired as the Company has the ability and intent
to hold such investments until recovery of their amortized cost bases, which may be maturity. The Company has determined that
it is not more likely than not that the Company will be required to sell the investments before such recovery.
In addition, the Company considered the financial condition, credit ratings and near-term prospects of the issuers, and the
magnitude of the losses as compared to the cost and the length of time the investments have been in an unrealized loss position
when determining if the losses are other than temporary.
The unrealized losses and fair values of available-for-sale securities that have been in an unrealized loss position for a
period of less than and greater than 12 months as of December 31, 2019 are as follows:
December 31, 2019
Securities in an unrealized loss
position less than 12 months
Securities in an unrealized loss
position greater than 12 months
Total
Unrealized
losses
Fair Value
Unrealized
losses
Fair Value
Unrealized
losses
Fair Value
Corporate debt securities
Asset-backed Securities
Total
$
$
(20) $
(8)
(28) $
71,779
24,211
95,990
$
$
— $
—
— $
— $
—
— $
(20) $
(8)
(28) $
71,779
24,211
95,990
160
PTC Therapeutics, Inc.
(cid:1)otes to consolidated financial statements (Continued)
December 31, 2019
(In thousands except share and per share amount)
4. Fair value of financial instruments and investments (Continued)
The unrealized losses and fair values of available-for-sale securities that have been in an unrealized loss position for a
period of less than and greater than 12 months as of December 31, 2018 are as follows:
December 31, 2018
Securities in an unrealized loss
position less than 12 months
Securities in an unrealized loss
position greater than 12 months
Total
Unrealized
losses
Fair Value
Unrealized
losses
Fair Value
Unrealized
losses
Fair Value
Commercial paper
Corporate debt securities
Total
$
$
(1) $
(7)
(8) $
1,993
14,230
16,223
$
$
— $
(3)
(3) $
— $
10,087
10,087
$
(1) $
(10)
(11) $
1,993
24,317
26,310
Marketable securities on the balance sheet at December 31, 2019 and 2018 mature as follows:
Commercial paper
Corporate debt securities
Asset-backed Securities
Total Marketable securities
Commercial paper
Corporate debt securities
Total Marketable securities
December 31, 2019
Less Than
12 Months
More Than
12 Months
158,098
$
139,596
44,724
342,418
$
—
49,738
6,379
56,117
December 31, 2018
Less Than
12 Months
More Than
12 Months
31,699
26,389
58,088
$
$
—
—
—
$
$
$
$
The Company classifies all of its securities as current as they are all available for sale and are available for current operations.
Convertible senior notes
In August 2015, the Company issued $150.0 million of 3.0% convertible senior notes due August 15, 2022 (the “2022
Convertible (cid:1)otes”). In September 2019, the Company issued $287.5 million of 1.5% convertible senior notes due September 15,
2026 (the “2026 Convertible (cid:1)otes,” together with the “2022 Convertible (cid:1)otes,” the “Convertible (cid:1)otes”). The Company
separately accounted for the liability and equity components of the Convertible (cid:1)otes by allocating the proceeds between the
liability component and equity component, as further discussed in (cid:1)ote 8. The fair value of the Convertible (cid:1)otes, which differs
from their carrying values, is influenced by interest rates, the Company’s stock price and stock price volatility and is determined
by prices for the Convertible (cid:1)otes observed in market trading which are Level 2 inputs. The estimated fair value of the 2022
Convertible (cid:1)otes at December 31, 2019 and 2018 was $171.2 million and $146.6 million, respectively. The estimated fair value
of the 2026 Convertible (cid:1)otes at December 31, 2019 was $335.0 million.
The carrying amounts reported in the consolidated balance sheets for cash and cash equivalents, accounts receivable,
accounts payable and borrowings under the credit and security agreement with MidCap Financial Trust and other financial
institutions (as further discussed in (cid:1)ote 8) approximate fair value because of the immediate or short-term maturity of these
financial instruments. The carrying amounts for the credit and security agreement approximate fair value based on market activity
for other debt instruments with similar characteristics and comparable risk.
Deferred consideration payable
Pursuant to the Merger Agreement, Agilis equityholders may become entitled to receive contingent consideration payments
from the Company based on the achievement of certain development milestones up to an aggregate maximum amount of $60.0
161
PTC Therapeutics, Inc.
(cid:1)otes to consolidated financial statements (Continued)
December 31, 2019
(In thousands except share and per share amount)
4. Fair value of financial instruments and investments (Continued)
million and the achievement of certain regulatory approval milestones together with a milestone payment following the receipt of
a priority review voucher up to an aggregate maximum amount of $535.0 million. The Company is required to pay $40.0 million
of development milestone payments upon the passing of the second anniversary of the closing of the Merger, regardless of whether
the applicable milestones have been achieved. The fair value of the deferred consideration payable at December 31, 2019 was
$40.0 million. The Company did not apply a discount, as the milestones will be paid within one calendar year. Accordingly, as of
December 31, 2019, the $40.0 million of the deferred consideration payable was classified as current on the balance sheet.
Level 3 valuation
The stock appreciation rights (SARs) liability is classified in Other current liabilities on the Company’s consolidated balance
sheets. The SARs liability is marked-to-market each reporting period with the change in fair value recorded as compensation
expense on the Company’s consolidated statements of operations until the SARS vest. The fair value of the SARs liability is
determined at each reporting period by utilizing the Black-Scholes option pricing model.
The contingent consideration payable is fair valued each reporting period with the change in fair value recorded as a gain or
loss in the consolidated statements of operations. The fair value of the development and regulatory milestones are estimated utilizing
a probability adjusted, discounted cash flow approach. The discount rates are estimated utilizing Corporate B rated bonds maturing
in the years of expected payments based on the Company’s estimated development timelines for the acquired product candidate.
The fair value of the net sales milestones and royalties is determined utilizing an option pricing model with Monte Carlo simulation
to simulate a range of possible payment scenarios, and the average of the payments in these scenarios is then discounted to calculate
present fair value.
The table presented below is a summary of changes in the fair value of the Company’s Level 3 valuation for the SARs
the years ended December 31, 2019, and 2018:
the contingent consideration payables
for
liability and
Level 3 liabilities
Contingent
consideration
payable-
development and
regulatory
milestones - Agilis
Contingent
consideration
payable- net sales
milestones and
royalties - Agilis
Beginning balance as of December 31, 2017
Additions
Change in fair value
Payments
Ending balance as of December 31, 2018
Additions
Change in fair value
Payments
Ending balance as of December 31, 2019
$
$
$
SARs
1,665
$
—
4,140
(1,991) $
3,814
—
3,187
(3,815)
3,186
— $
263,500
(6,460)
— $
257,040
—
33,460
—
$
290,500
$
—
27,000
26,200
—
53,200
—
12,600
—
65,800
The following significant unobservable inputs were used in the valuation of the SARs liability and the contingent consideration
payables for the years ended December 31, 2019 and 2018:
162
PTC Therapeutics, Inc.
(cid:1)otes to consolidated financial statements (Continued)
December 31, 2019
(In thousands except share and per share amount)
4. Fair value of financial instruments and investments (Continued)
Fair Value
Valuation Technique
Unobservable Input
Range
December 31, 2019
Volatility
Risk free interest rate
28.93%
0.19%
SARs
$3,186
Option-pricing model
Strike price
$6.76 - $30.86
Fair value of common stock
$48.03
Expected life
Potential development and
regulatory milestones
0.01 years
$0 - $555 million
$290,500
Probability-adjusted
discounted cash flow
Probabilities of success
Discount rates
25% - 94%
2.2% - 4.7%
Contingent consideration
payable- development
and regulatory
milestones
Projected years of
payments
Potential net sales
milestones
Contingent considerable
payable- net sales
milestones and royalties
$65,800
Option-pricing model
with Monte Carlo
simulation
Probabilities of success
Potential percentage of net
sales for royalties
Discount rate
Projected years of
payments
2020 - 2026
$0 - $150 million
25% - 89%
2% - 6%
14.5%
2021 - 2038
Fair Value
Valuation Technique
Unobservable Input
Range
December 31, 2018
SARs
$3,814
Option-pricing model
Strike price
Volatility
Risk free interest rate
46.53% - 59.59%
2.44% - 2.63%
$6.76 - $30.86
Contingent consideration
payable- development
and regulatory
milestones
$257,040
Probability-adjusted
discounted cash flow
Contingent considerable
payable- net sales
milestones and royalties
$53,200
Option-pricing model
with Monte Carlo
simulation
163
Fair value of common stock
$34.32
Expected life
Potential development and
regulatory milestones
0.01 - 1.01 years
$0 - $555 million
Probabilities of success
Discount rates
Projected years of payments
Potential net sales
milestones
Probabilities of success
Potential percentage of net
sales for royalties
Discount rate
25% - 94%
5.8% - 8.0%
2020 - 2026
$0 - $150 million
25% - 89%
2% - 6%
14.0%
Projected years of payments
2021 - 2038
PTC Therapeutics, Inc.
(cid:1)otes to consolidated financial statements (Continued)
December 31, 2019
(In thousands except share and per share amount)
4. Fair value of financial instruments and investments (Continued)
The contingent consideration payables are classified Level 3 liabilities as their valuation requires substantial judgment
and estimation of factors that are not currently observable in the market. If different assumptions were used for the various inputs
to the valuation approaches, including but not limited to, assumptions involving probability adjusted sales estimates for the gene
therapy platform and estimated discount rates, the estimated fair value could be significantly higher or lower than the fair value
determined.
5. Fixed assets
Fixed assets, net were as follows at December 31, 2019 and 2018:
Leasehold improvements
Computer equipment and software
Furniture, fixtures, machinery and lab equipment
Assets in process
Less accumulated depreciation and amortization
Total
December 31,
2019
2018
$
5,039
$
8,069
17,033
3,232
33,373
(11,824)
21,549
$
$
2,384
4,609
9,965
3,219
20,177
(7,483)
12,694
Depreciation expense was approximately $4.7 million, $2.6 million, and $2.3 million for the years ended December 31,
2019, 2018, and 2017, respectively.
6.
Leases
The Company leases office space in South Plainfield, (cid:1)ew Jersey for its principal office under three noncancelable operating leases
through May 2022 and August 2024, in addition to office space in various countries for international employees primarily through
workspace providers. The Company also leases certain vehicles, lab equipment, and office equipment under operating leases. The
Company’s operating leases have remaining lease terms ranging from 0.1 years to 6.5 years and certain of the leases include
renewal options to extend the lease for up to 10 years. Rent expense was approximately $6.0 million, $2.7 million, and $2.2 million
for the years ended December 31, 2019, 2018, and 2017.
The components of lease expense were as follows:
Operating Lease Cost
Fixed lease cost
Variable lease cost
Short-term lease cost
Total operating lease cost
Twelve Months Ended
December 31, 2019
$
$
4,929
694
350
5,973
Total operating lease cost is a component of operating expenses on the consolidated statements of operations.
Supplemental balance sheet information related to leases was as follows:
164
PTC Therapeutics, Inc.
(cid:1)otes to consolidated financial statements (Continued)
December 31, 2019
(In thousands except share and per share amount)
Operating lease ROU asset
Operating lease liabilities- current
Operating lease liabilities- noncurrent
Total operating lease liability
December 31, 2019
$
$
$
13,693
5,153
9,018
14,171
Operating lease ROU asset is a component of deposits and other assets on the consolidated balance sheet. The current portion of
operating lease liability is a component of other current liabilities on the consolidated balance sheet. The long term portion of
operating lease liabilities is a component of other long term liabilities on the consolidated balance sheet.
Supplemental lease term and discount rate information related to leases was as follows:
Weighted-average remaining lease terms - operating leases (years)
Weighted-average discount rate - operating leases
3.38
7.33%
December 31, 2019
Supplemental cash flow information related to leases was as follows:
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases
Right-of-use assets obtained in exchange for lease obligations:
Operating leases
$
$
4,466
17,389
Twelve Months Ended
December 31, 2019
Future minimum lease payments under non-cancelable leases as of December 31, 2019 were as follows:
2020
2021
2022
2023
2024 and thereafter
Total lease payments
Less: Imputed Interest
Total
$
$
Operating Leases
5,997
4,144
2,465
1,931
1,446
15,983
1,812
14,171
In conjunction with the Asset Acquisition, the Company acquired BioElectron’s lease in Mountainview, California. As substantially
all of the fair value of the gross assets acquired was related to PTC743, the relative fair value allocated to the right of use asset
and corresponding lease liability for the Mountainview lease was determined to be immaterial, and accordingly is not included in
165
PTC Therapeutics, Inc.
(cid:1)otes to consolidated financial statements (Continued)
December 31, 2019
(In thousands except share and per share amount)
the tables above. The future minimum lease payments for the Mountainview lease are $1.8 million, $1.8 million, and $1.4 million
for 2020, 2021, and 2022, respectively.
As of December 31, 2019, the Company had one operating lease that had not yet commenced, and accordingly, is not reflected in
the tables above. On August 4, 2019, the Company and Bristol-Myers Squibb Company, (the “Landlord”), entered into a Lease
Agreement (the “Lease”), relating to the lease of approximately 185,000 square feet of office, manufacturing and laboratory space
at a facility located in Hopewell Township, (cid:1)ew Jersey (the “Campus”).
The rental term of the Lease is currently estimated to commence on July 1, 2020 (the “Commencement Date”). Upon the
Commencement Date, the Lease has an initial term of 15 years (the “Initial Term”), with two consecutive 10 years renewal periods
at the Company’s option.
The aggregate rent for the Initial Term will be approximately $88.1 million. The rental rate for the renewal periods will be 95%
of the Prevailing Market Rate (as defined in the Lease) and determined at the time of the exercise of the renewal. The Company
is also responsible for maintaining certain insurance and the payment of proportional taxes, utilities and common area operating
expenses. The Lease contains customary events of default, representations, warranties and covenants.
7. Accounts payable and accrued expenses
Accounts payable and accrued expenses at December 31, 2019 and 2018 consist of the following:
December 31,
2019
2018
Employee compensation, benefits, and related accruals
$
38,889
$
12,969
3,562
41,155
42,997
10,324
9,380
27,629
11,267
5,574
29,417
31,874
6,001
16,437
$
159,276
$
128,199
Consulting and contracted research
Professional fees
Sales allowances and other related costs
Royalties and rebates
Accounts payable
Other
Total
8. Debt
2017 Credit Facility
In May 2017, the Company entered into a credit and security agreement (the "Credit Facility") with MidCap Financial
Trust, a Delaware statutory trust (“MidCap”), as administrative agent and MidCap and certain other financial institutions as lenders
thereunder (the “Credit Agreement”) that provides for a senior secured term loan facility of $60.0 million, of which $40.0 million
was drawn by the Company on May 5, 2017. The Company’s ability to draw on the remaining $20.0 million under the senior
secured term loan facility expired on December 31, 2018. The Company capitalized approximately $0.4 million of debt issuance
costs, which were netted against the carrying value of the Credit Facility and will be amortized over the term of the Credit Facility
using the effective interest rate method. As of December 31, 2019, the Company made loan repayments of $11.7 million on the
Credit Facility. The remaining balance of the Credit Facility as of December 31, 2019 was $28.3 million, $20.0 million of which
was classified as current portion of long term debt and $8.3 million was included within long term debt on the consolidated balance
sheet.
166
PTC Therapeutics, Inc.
(cid:1)otes to consolidated financial statements (Continued)
December 31, 2019
(In thousands except share and per share amount)
Borrowings under the Credit Agreement bear interest at a rate per annum equal to LIBOR (with a LIBOR floor rate of
1.00%) plus 6.15%. The Company is obligated to make interest only payments (payable monthly in arrears) through April 30,
2019. Commencing on May 1, 2019 and continuing for the remaining twenty-four months of the facility, the Company will be
required to make monthly interest payments and monthly principal payments. The principal payments are to be made based on
straight-line amortization of the principal over the twenty-four month period. The maturity date of the Credit Agreement is May
1, 2021, unless terminated earlier.
The Credit Facility is subject to certain financial covenants. As of December 31, 2019, the Company was in compliance
with all required covenants.
2026 Convertible (cid:1)otes
In September 2019, the Company issued, at par value, $287.5 million aggregate principal amount of 1.50% convertible
senior notes due 2026, which included an option to purchase up to an additional $37.5 million in aggregate principal amount of
the 2026 Convertible (cid:1)otes, which was exercised in full by the initial purchasers. The 2026 Convertible (cid:1)otes bear cash interest
at a rate of 1.50% per year, payable semi-annually on March 15 and September 15 of each year, beginning on March 15, 2020.
The 2026 Convertible (cid:1)otes will mature on September 15, 2026, unless earlier repurchased or converted. The net proceeds to the
Company from the offering were $279.3 million after deducting the initial purchasers’ discounts and commissions and the offering
expenses payable by the Company.
The 2026 Convertible (cid:1)otes are governed by an indenture (the "2026 Convertible (cid:1)otes Indenture") with U.S Bank
(cid:1)ational Association as trustee (the "2026 Convertible (cid:1)otes Trustee").
Holders of the 2026 Convertible (cid:1)otes may convert their 2026 Convertible (cid:1)otes at their option at any time prior to the
close of business on the business day immediately preceding March 15, 2026 only under the following circumstances:
· during any calendar quarter commencing on or after December 31, 2019 (and only during such calendar quarter), if the
last reported sale price of the Company’s common stock for at least 20 trading days (whether or not consecutive) during
a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is
greater than or equal to 130% of the conversion price on each applicable trading day;
· during the five business day period after any five consecutive trading day period (the “measurement period”) in which
the trading price (as defined in the 2026 Convertible (cid:1)otes Indenture) per $1,000 principal amount of 2026 Convertible
(cid:1)otes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of
the Company’s common stock and the conversion rate on each such trading day;
· during any period after the Company has issued notice of redemption until the close of business on the scheduled trading
day immediately preceding the relevant redemption date; or
· upon the occurrence of specified corporate events.
On or after March 15, 2026, until the close of business on the business day immediately preceding the maturity date,
holders may convert their 2026 Convertible (cid:1)otes at any time, regardless of the foregoing circumstances. Upon conversion, the
Company will pay or deliver, as the case may be, cash, shares of the Company's common stock or any combination thereof at the
Company's election.
The conversion rate for the 2026 Convertible (cid:1)otes was initially, and remains, 19.0404 shares of the Company’s common
stock per $1,000 principal amount of the 2026 Convertible (cid:1)otes, which is equivalent to an initial conversion price of
approximately $52.52 per share of the Company’s common stock. The conversion rate may be subject to adjustment in some events
but will not be adjusted for any accrued and unpaid interest.
The Company is not permitted to redeem the 2026 Convertible (cid:1)otes prior to September 20, 2023. The Company may
redeem for cash all or any portion of the 2026 Convertible (cid:1)otes, at its option, if the last reported sale price of its common stock
has been at least 130% of the conversion price then in effect on the last trading day of, and for at least 19 other trading days (whether
or not consecutive) during, any 30 consecutive trading day period ending on, and including, the trading day immediately preceding
the date on which the Company provides notice of redemption, at a redemption price equal to 100% of the principal amount of
167
PTC Therapeutics, Inc.
(cid:1)otes to consolidated financial statements (Continued)
December 31, 2019
(In thousands except share and per share amount)
the 2026 Convertible (cid:1)otes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. (cid:1)o sinking
fund is provided for the 2026 Convertible (cid:1)otes, which means that the Company is not required to redeem or retire the 2026
Convertible (cid:1)otes periodically.
If the Company undergoes a “fundamental change” (as defined in the 2026 Convertible (cid:1)otes Indenture), subject to
certain conditions, holders of the 2026 Convertible (cid:1)otes may require the Company to repurchase for cash all or part of their 2026
Convertible (cid:1)otes at a repurchase price equal to 100% of the principal amount of the 2026 Convertible (cid:1)otes to be repurchased,
plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.
The 2026 Convertible (cid:1)otes represent senior unsecured obligations and will rank senior in right of payment to the
Company’s future indebtedness that is expressly subordinated in right of payment to the notes, equal in right of payment to the
Company’s existing and future unsecured indebtedness that is not so subordinated, effectively junior in right of payment to any
of the Company’s secured indebtedness to the extent of the value of the assets securing such indebtedness, and structurally
subordinated to all existing and future indebtedness and other liabilities (including trade payables) incurred by the Company’s
subsidiaries. The 2026 Convertible (cid:1)otes Indenture contains customary events of default with respect to the 2026 Convertible
(cid:1)otes, including that upon certain events of default (including the Company’s failure to make any payment of principal or interest
on the 2026 Convertible (cid:1)otes when due and payable) occurring and continuing, the 2026 Convertible (cid:1)otes Trustee by notice to
the Company, or the holders of at least 25% in principal amount of the outstanding 2026 Convertible (cid:1)otes by notice to the
Company and the Convertible (cid:1)otes Trustee, may, and the 2026 Convertible (cid:1)otes Trustee at the request of such holders (subject
to the provisions of the 2026 Convertible (cid:1)otes Indenture) shall, declare 100% of the principal of and accrued and unpaid interest,
if any, on all the 2026 Convertible (cid:1)otes to be due and payable. In case of certain events of bankruptcy, insolvency or reorganization,
involving the Company or a significant subsidiary, 100% of the principal of and accrued and unpaid interest on the 2026 Convertible
(cid:1)otes will automatically become due and payable. Upon such a declaration of acceleration, such principal and accrued and unpaid
interest, if any, will be due and payable immediately.
In accounting for the issuance of the 2026 Convertible (cid:1)otes, the Company separated the 2026 Convertible (cid:1)otes into
liability and equity components. The carrying amount of the liability component was calculated by measuring the fair value of a
similar liability that does not have an associated convertible feature. The carrying amount of the equity component representing
the conversion option was determined by deducting the fair value of the liability component from the par value of the 2026
Convertible (cid:1)otes as a whole. The excess of the principal amount of the liability component over its carrying amount, referred to
as the debt discount, is amortized to interest expense over the seven-year term of the 2026 Convertible (cid:1)otes. The equity component
is not re-measured as long as it continues to meet the conditions for equity classification. The equity component recorded at issuance
related to the 2026 Convertible (cid:1)otes is $123.0 million and was recorded in additional paid-in capital.
In accounting for the transaction costs related to the issuance of the 2026 Convertible (cid:1)otes, the Company allocated the
total costs incurred to the liability and equity components of the 2026 Convertible (cid:1)otes based on their relative values. Transaction
costs attributable to the liability component are amortized to interest expense over the seven-year term of the 2026 Convertible
(cid:1)otes, and transaction costs attributable to the equity component are netted with the equity components in stockholders’ equity.
Additionally, the Company initially recorded a net deferred tax liability of $25.3 million in connection with the 2026 Convertible
(cid:1)otes.
The 2026 Convertible (cid:1)otes consist of the following:
Liability component
Principal
Less: Debt issuance costs
Less: Debt discount, net(1)
(cid:1)et carrying amount
December 31, 2019
$
$
287,500
(4,567)
(119,350)
163,583
(1) Included in the consolidated balance sheets within convertible senior notes (due 2026) and amortized to interest expense over
the remaining life of the 2026 Convertible (cid:1)otes using the effective interest rate method.
As of December 31, 2019, the remaining contractual life of the 2026 Convertible (cid:1)otes is approximately 6.7 years.
168
PTC Therapeutics, Inc.
(cid:1)otes to consolidated financial statements (Continued)
December 31, 2019
(In thousands except share and per share amount)
The following table sets forth total interest expense recognized related to the 2026 Convertible (cid:1)otes:
Contractual interest expense
Amortization of debt issuance costs
Amortization of debt discount
Total
Effective interest rate of the liability component
2022 Convertible (cid:1)otes
Year ended
December 31,
2019
1,220
140
3,659
5,019
10.2%
$
$
$
In August 2015, the Company issued, at par value, $150.0 million aggregate principal amount of 3.00% convertible senior
notes due 2022. The Convertible (cid:1)otes bear cash interest at a rate of 3.00% per year, payable semi-annually on February 15 and
August 15 of each year, beginning on February 15, 2016. The 2022 Convertible (cid:1)otes will mature on August 15, 2022, unless
earlier repurchased or converted. The net proceeds to the Company from the offering were $145.4 million after deducting the
initial purchasers’ discounts and commissions and the offering expenses payable by the Company.
The 2022 Convertible (cid:1)otes are governed by an indenture (the “2022 Convertible (cid:1)otes Indenture”) with U.S Bank (cid:1)ational
Association as trustee (the “2022 Convertible (cid:1)otes Trustee”).
Holders of the 2022 Convertible (cid:1)otes may convert their 2022 Convertible (cid:1)otes at their option at any time prior to the
close of business on the business day immediately preceding February 15, 2022 only under the following circumstances:
•
•
•
during any calendar quarter commencing on or after September 30, 2015 (and only during such calendar quarter), if the
last reported sale price of the Company’s common stock for at least 20 trading days (whether or not consecutive) during
a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is
greater than or equal to 130% of the conversion price on each applicable trading day;
during the five business day period after any five consecutive trading day period (the “measurement period”) in which
the trading price (as defined in the Convertible (cid:1)otes Indenture) per $1,000 principal amount of Convertible (cid:1)otes for
each trading day of the measurement period was less than 98% of the product of the last reported sale price of the
Company’s common stock and the conversion rate on each such trading day;
during any period after the Company has issued notice of redemption until the close of business on the scheduled trading
day immediately preceding the relevant redemption date; or
•
upon the occurrence of specified corporate events.
On or after February 15, 2022, until the close of business on the business day immediately preceding the maturity date,
holders may convert their 2022 Convertible (cid:1)otes at any time, regardless of the foregoing circumstances. Upon conversion, the
Company will pay cash up to the aggregate principal amount of the 2022 Convertible (cid:1)otes to be converted and deliver shares of
its common stock in respect of the remainder, if any, of its conversion obligation in excess of the aggregate principal amount of
Convertible (cid:1)otes being converted.
The conversion rate for the 2022 Convertible (cid:1)otes was initially, and remains, 17.7487 shares of the Company’s common
stock per $1,000 principal amount of the 2022 Convertible (cid:1)otes, which is equivalent to an initial conversion price of approximately
$56.34 per share of the Company’s common stock.
The Company was not permitted to redeem the 2022 Convertible (cid:1)otes prior to August 20, 2018. As of August 20, 2018,
the Company may redeem for cash all or any portion of the Convertible (cid:1)otes, at its option, if the last reported sale price of its
common stock has been at least 130% of the conversion price then in effect on the last trading day of, and for at least 19 other
trading days (whether or not consecutive) during, any 30 consecutive trading day period ending on, and including, the trading day
immediately preceding the date on which the Company provides notice of redemption, at a redemption price equal to 100% of the
169
PTC Therapeutics, Inc.
(cid:1)otes to consolidated financial statements (Continued)
December 31, 2019
(In thousands except share and per share amount)
principal amount of the 2022 Convertible (cid:1)otes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption
date. (cid:1)o sinking fund is provided for the 2022 Convertible (cid:1)otes, which means that the Company is not required to redeem or
retire the 2022 Convertible (cid:1)otes periodically. There have been no redemptions to date.
If the Company undergoes a “fundamental change” (as defined in the 2022 Convertible (cid:1)otes Indenture), subject to certain
conditions, holders of the 2022 Convertible (cid:1)otes may require the Company to repurchase for cash all or part of their 2022
Convertible (cid:1)otes at a repurchase price equal to 100% of the principal amount of the 2022 Convertible (cid:1)otes to be repurchased,
plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.
The 2022 Convertible (cid:1)otes represent senior unsecured obligations and will rank senior in right of payment to the Company’s
future indebtedness that is expressly subordinated in right of payment to the notes, equal in right of payment to the Company’s
existing and future unsecured indebtedness that is not so subordinated, effectively junior in right of payment to any of the Company’s
secured indebtedness to the extent of the value of the assets securing such indebtedness, and structurally subordinated to all existing
and future indebtedness and other liabilities (including trade payables) incurred by the Company’s subsidiaries. The 2022
Convertible (cid:1)otes Indenture contains customary events of default with respect to the 2022 Convertible (cid:1)otes, including that upon
certain events of default (including the Company’s failure to make any payment of principal or interest on the 2022 Convertible
(cid:1)otes when due and payable) occurring and continuing, the 2022 Convertible (cid:1)otes Trustee by notice to the Company, or the
holders of at least 25% in principal amount of the outstanding 2022 Convertible (cid:1)otes by notice to the Company and the Convertible
(cid:1)otes Trustee, may, and the 2022 Convertible (cid:1)otes Trustee at the request of such holders (subject to the provisions of the 2022
Convertible (cid:1)otes Indenture) shall, declare 100% of the principal of and accrued and unpaid interest, if any, on all the 2022
Convertible (cid:1)otes to be due and payable. In case of certain events of bankruptcy, insolvency or reorganization, involving the
Company or a significant subsidiary, 100% of the principal of and accrued and unpaid interest on the 2022 Convertible (cid:1)otes will
automatically become due and payable. Upon such a declaration of acceleration, such principal and accrued and unpaid interest,
if any, will be due and payable immediately.
In accounting for the issuance of the 2022 Convertible (cid:1)otes, the Company separated the 2022 Convertible (cid:1)otes into
liability and equity components. The carrying amount of the liability component was calculated by measuring the fair value of a
similar liability that does not have an associated convertible feature. The carrying amount of the equity component representing
the conversion option was determined by deducting the fair value of the liability component from the par value of the 2022
Convertible (cid:1)otes as a whole. The excess of the principal amount of the liability component over its carrying amount, referred to
as the debt discount, is amortized to interest expense over the seven-year term of the 2022 Convertible (cid:1)otes. The equity component
is not re-measured as long as it continues to meet the conditions for equity classification. The equity component recorded at issuance
related to the 2022 Convertible (cid:1)otes is $57.5 million and was recorded in additional paid-in capital.
In accounting for the transaction costs related to the issuance of the 2022 Convertible (cid:1)otes, the Company allocated the total
costs incurred to the liability and equity components of the Convertible (cid:1)otes based on their relative values. Transaction costs
attributable to the liability component are amortized to interest expense over the seven-year term of the Convertible (cid:1)otes, and
transaction costs attributable to the equity component are netted with the equity components in stockholders’ equity. Additionally,
the Company initially recorded a net deferred tax liability of $22.3 million in connection with the (cid:1)otes.
The 2022 Convertible (cid:1)otes consist of the following:
Liability component
Principal
Less: Debt issuance costs
Less: Debt discount, net (1)
(cid:1)et carrying amount
Year ended
December 31,
2019
150,000
(1,329)
(26,686)
121,985
$
$
2018
150,000
(1,746)
(35,054)
113,200
$
$
(1) Included in the consolidated balance sheets within convertible senior notes (due 2022) and amortized to interest
expense over the remaining life of the 2022 Convertible (cid:1)otes using the effective interest rate method.
As of December 31, 2019, the remaining contractual life of the 2022 Convertible (cid:1)otes is approximately 2.6 years.
170
PTC Therapeutics, Inc.
(cid:1)otes to consolidated financial statements (Continued)
December 31, 2019
(In thousands except share and per share amount)
The following table sets forth total interest expense recognized related to the 2022 Convertible (cid:1)otes:
Contractual interest expense
Amortization of debt issuance costs
Amortization of debt discount
Total
Effective interest rate of the liability component
9. Capital structure
Common stock
Year ended
December 31,
2019
2018
$
$
4,500
$
417
8,368
4,500
375
7,518
13,285
$
12,393
11.0%
11.0%
In January 2019, the Company closed an underwritten public offering of its common stock pursuant to a registration
statement on Form S-3. The Company issued and sold an aggregate of 7,563,725 shares of common stock under the registration
statement at a public offering price of $30.20 per share, including 843,725 shares issued upon exercise by the underwriter of its
option to purchase additional shares in February 2019. The Company received net proceeds of $224.2 million after deducting
underwriting discounts and commissions and other offering expenses payable by the Company.
In August 2019, the Company entered into an At the Market Offering Sales Agreement (the “Sales Agreement”) with
Cantor Fitzgerald and RBC Capital Markets, LLC (together, the “Sales Agents”), pursuant to which, the Company may offer and
sell shares of its common stock, having an aggregate offering price of up to $125.0 million from time to time through the Sales
Agents by any method that is deemed to be an “at the market offering” as defined in Rule 415(a)(4) promulgated under the Securities
Act of 1933, as amended, pursuant to a registration statement on Form S-3. During the twelve month period ending December 31,
2019, the Company issued and sold an aggregate of 63,926 shares of common stock pursuant to the Sales Agreement at a weighted
average public offering price of $46.60 per share. The Company received net proceeds of $2.6 million after deducting agent
discounts and commissions and other offering expenses payable by the Company.
In September 2019, the Company closed an underwritten public offering of its common stock pursuant to a registration
statement on Form S-3. The Company issued and sold an aggregate of 2,475,248 shares of common stock under the registration
statement at a public offering price of $40.40 per share. The offering included an option to purchase up to an additional 371,287
shares for a period of 30 days following the offering. This option was not exercised by the underwriter. The Company received
net proceeds of $97.0 million after deducting underwriting discounts and commissions and other offering expenses payable by the
Company.
In April 2018, the Company closed an underwritten public offering of its common stock pursuant to a registration statement
on Form S-3. The Company issued and sold an aggregate of 4,600,000 shares of common stock under the registration statement
at a public offering price of $27.04 per share, including 600,000 shares issued upon exercise by the underwriters of their option
to purchase additional shares. The Company received net proceeds of approximately $117.9 million after deducting underwriting
discounts and commissions and other offering expenses payable by the Company.
As of December 31, 2019, the Company’s number of authorized shares of common stock was 125,000,000.
Warrants
During the year ended December 31, 2019, all of the Company’s outstanding warrants expired, and the Company wrote
off the remaining liability, which was immaterial. All of the Company’s outstanding warrants are classified as liabilities as of
December 31, 2018 because they contain non-standard antidilution provisions. The fair value of the warrants as of December 31,
2018 was immaterial.
171
PTC Therapeutics, Inc.
(cid:1)otes to consolidated financial statements (Continued)
December 31, 2019
(In thousands except share and per share amount)
The following is a summary of the Company’s outstanding warrants as of December 31, 2018:
Common stock
Common stock
10. Earnings per share
Warrant shares
7,030
130
$
$
Exercise price
Expiration
128
2,520
September 2019
August 2019
Basic earnings per share is computed by dividing net loss available to common stockholders by the weighted-average number
of common shares outstanding. Diluted earnings per share is computed by dividing net loss available to common stockholders by
the weighted-average number of common shares plus the effect of dilutive potential common shares outstanding during the period.
The following table sets forth the computation of basic and diluted earnings per share for common stockholders:
(cid:1)umerator
(cid:1)et loss
Denominator
Denominator for basic and diluted net loss per share
(cid:1)et loss per share:
Year ended December 31,
2019
2018
2017
$
(251,576)
$
(128,081)
$
(79,000)
58,863,185
46,576,313
39,183,073
Basic and diluted
$
(4.27) * $
(2.75) * $
(2.02) *
* For the years ended December 31, 2019, 2018, and 2017, the Company experienced a net loss and therefore did not report
any dilutive share impact.
The following table shows historical dilutive common share equivalents outstanding, which are not included in the above
historical calculation, as the effect of their inclusion is anti-dilutive during each period.
Stock Options
Unvested restricted stock
Total
11. Stock award plan
As of December 31,
2019
11,054,439
642,419
11,696,858
2018
8,534,358
571,479
9,105,837
2017
6,448,642
393,011
6,841,653
In 2009, the Company’s shareholders approved the 2009 Equity and Long-Term Incentive Plan, which provides for the
granting of stock option awards, restricted stock awards, and other stock-based and cash-based awards, subject to certain adjustments
and annual increases.
On March 5, 2013, the Company’s Board of Directors approved the 2013 Stock Incentive Plan, which provides for the
granting of stock option awards, stock appreciation rights, restricted stock, restricted stock units and other stock-based awards in
the aggregate of 739,937 shares of common stock. On March 5, 2013, the Board approved a grant of 735,324 shares of restricted
stock and 4,613 stock options. There are no additional shares available for issuance under this plan.
In May 2013, the Company’s Board of Directors and stockholders increased by 2,500,000 the number of shares authorized
under the 2009 Equity and Long Term Incentive Plan, which provides for the granting of stock option awards, restricted stock
awards, and other stock-based and cash-based awards. There are no additional shares available for issuance under this plan.
172
PTC Therapeutics, Inc.
(cid:1)otes to consolidated financial statements (Continued)
December 31, 2019
(In thousands except share and per share amount)
In May 2013, the Company’s Board of Directors and stockholders approved the 2013 Long Term Incentive Plan, which
became effective upon the closing of the Company’s IPO. The 2013 Long Term Incentive Plan provides for the grant of incentive
stock options, nonstatutory stock options, restricted stock awards and other stock-based awards. The number of shares of common
stock reserved for issuance under the 2013 Long Term Incentive Plan is the sum of (1) 122,296 shares of common stock available
for issuance under the Company’s 2009 Equity and Long Term Incentive Plan and 2013 Stock Incentive Plan, (2) the number of
shares (up to 3,040,444 shares) equal to the sum of the number of shares of common stock subject to outstanding awards under
the Company’s 1998 Employee, Director and Consultant Stock Option Plan, 2009 Equity and Long Term Incentive Plan and 2013
Stock Incentive Plan that expire, terminate or are otherwise surrendered, cancelled, forfeited or repurchased by the Company at
their original issuance price pursuant to a contractual repurchase right plus (3) an annual increase, to be added on the first day of
each fiscal year until the expiration of the 2013 Long Term Incentive Plan, equal to the lowest of 2,500,000 shares of common
stock, 4% of the number of shares of common stock outstanding on the first day of the fiscal year and an amount determined by
the Company’s Board of Directors. As of December 31, 2019, awards for 467,808 shares of common stock were available for
issuance.
The Board of Directors has the authority to select the individuals to whom options are granted and determine the terms of
each option, including (i) the number of shares of common stock subject to the option; (ii) the date on which the option becomes
exercisable; (iii) the option exercise price, which, in the case of incentive stock options, must be at least 100% (110% in the case
of incentive stock options granted to a stockholder owning in excess of 10% of the Company’s stock) of the fair market value of
the common stock as of the date of grant; and (iv) the duration of the option (which, in the case of incentive stock options, may
not exceed ten years). Options typically vest over a three- or four-year period.
Inducement stock option awards
Pursuant to the (cid:1)asdaq inducement grant exception, during the year ended December 31, 2019, the Company issued options
to purchase an aggregate of 1,675,075 shares of common stock to certain new hire employees at a weighted-average exercise price
of $39.23 per share. An aggregate of 250,153 of options previously granted as inducement awards were forfeited during the year
ended December 31, 2019 in connection with employee separations from the Company.
A summary of stock option activity is as follows:
Outstanding at December 31, 2016
Granted
Exercised
Forfeited
Outstanding at December 31, 2017
Granted
Exercised
Forfeited
Outstanding at December 31, 2018
Granted
Exercised
Forfeited
Outstanding at December 31, 2019
Vested or expected to vest at December 31, 2019
Exercisable at December 31, 2019
(cid:1)umber of
options
5,854,316
$
1,913,873
$
(202,085) $
(1,117,462) $
$
6,448,642
3,181,623
$
(633,973) $
(461,934) $
$
8,534,358
3,977,995
$
(949,887) $
(518,527) $
$
11,043,939
5,370,703
5,242,221
$
$
173
Weighted-
average
exercise
price
Weighted-
average
remaining
contractual
term
Aggregate
intrinsic
value
(in thousands)
34.71
12.34
10.80
33.65
29.00
26.64
18.61
35.36
28.58
35.81
19.25
35.27
31.67
31.62
31.37
7.34 years $
192,350
8.83 years $
5.70 years $
88,165
98,781
PTC Therapeutics, Inc.
(cid:1)otes to consolidated financial statements (Continued)
December 31, 2019
(In thousands except share and per share amount)
The fair values of grants made in the years ended December 31, 2019, 2018 and 2017 were contemporaneously estimated
on the date of grant using the following assumptions:
Risk-free interest rate
Expected volatility
Expected term
2019
1.58% - 2.63%
62% - 92%
5.75 - 6.11 years
2018
2.25% - 3.10%
64% - 90%
5.03 - 10.00 years
2017
1.84% - 2.45%
76% - 81%
5.04 - 10.00 years
The Company assumed no expected dividends for all grants. The weighted average grant date fair value of options granted
during the years ended December 31, 2019, 2018 and 2017 was $23.05, $17.48, and $8.45 per share, respectively.
Restricted Stock Awards and Restricted Stock Units—Restricted stock awards and Restricted stock units are granted subject
to certain restrictions, including in some cases service conditions (restricted stock). The grant-date fair value of restricted stock
awards, which has been determined based upon the market value of the Company’s shares on the grant date, is expensed over the
vesting period.
The following table summarizes information on the Company’s restricted stock awards and units:
Unvested at December 31, 2018
Granted
Vested
Forfeited
Unvested at December 31, 2019
Restricted Stock Awards and Units
Weighted
Average
Grant
Date Fair
Value
17.61
32.97
17.56
23.14
24.50
(cid:1)umber of
Shares
571,479
$
306,549
$
(181,327) $
(54,282) $
$
642,419
Stock Appreciation Rights—Stock appreciation rights (SARs) entitle the holder to receive, upon exercise, an amount of the
Company’s common stock or cash (or a combination thereof) determined by reference to appreciation, from and after the date of
grant, in the fair market value of a share of the Company’s common stock over the measurement price based on the exercise date.
In May 2016, a total of 897,290 SARs were granted to non-executive employees (the 2016 SARs). The 2016 SARs will vest
annually in equal installments over four years and will be settled in cash on each vest date, requiring the Company to remeasure
the SARs at each reporting period until vesting occurs. For the period ending December 31, 2019, the Company recorded $3.2
million in compensation expense related to the 2016 SARs.
Employee Stock Purchase Plan—In June 2016, the Company established an Employee Stock Purchase Plan (ESPP or the
Plan) for certain eligible employees. The Plan is administered by the Company’s Board of Directors or a committee appointed by
the Board. The total number of shares available for purchase under the Plan is one million shares of the Company’s common stock.
Employees may participate over a six-month period through payroll withholdings and may purchase, at the end of the six-month
period, the Company’s common stock at a purchase price of at least 85% of the closing price of a share of the Company’s common
stock on the first business day of the offering period or the closing price of a share of the Company’s common stock on the last
business day of the offering period, whichever is lower. (cid:1)o participant will be granted a right to purchase the Company’s common
stock under the Plan if such participant would own more than 5% of the total combined voting power of the Company or any
subsidiary of the Company after such purchase. For the period ending December 31, 2019, the Company recorded $1.3 million in
compensation expense related to the ESPP.
The Company recorded share-based compensation expense in the statement of operations related to incentive stock options,
nonstatutory stock options, restricted stock awards, restricted stock units and the ESPP as follows:
174
PTC Therapeutics, Inc.
(cid:1)otes to consolidated financial statements (Continued)
December 31, 2019
(In thousands except share and per share amount)
Research and development
Selling, general and administrative
Total
Year ended December 31,
2019
20,836
21,298
42,134
$
$
2018
16,096
17,156
33,252
$
$
2017
15,456
15,103
30,559
$
$
As of December 31, 2019, there was approximately $111.5 million of total unrecognized compensation cost related to
unvested share-based compensation arrangements granted under the Company’s Plans. This cost is expected to be recognized as
compensation expense over the weighted average remaining service period of approximately 3.00 years.
12. Other comprehensive income (loss) and accumulated other comprehensive items
Other comprehensive income (loss) includes changes in equity that are excluded from net loss, such as unrealized gains and
losses on marketable securities.
The following table summarizes other comprehensive income (loss) and the changes in accumulated other comprehensive
items, by component, for the years ended December 31, 2019, 2018, and 2017, respectively.
Unrealized
(Losses)/Gains
On
Marketable
Securities, net of tax
Foreign
Currency
Translation
Total
Accumulated
Other
Comprehensive
Items
Balance at December 31, 2016
$
Other comprehensive income before reclassifications
Amounts reclassified from other comprehensive items
(203) $
225
—
225
(1,282) $
5,229
—
5,229
Other comprehensive income
Balance at December 31, 2017
$
22
$
3,947
$
Other comprehensive income (loss) before
reclassifications
Amounts reclassified from other comprehensive items
Other comprehensive income (loss)
Balance at December 31, 2018
Other comprehensive income (loss) before
reclassifications
$
Amounts reclassified from other comprehensive items
Other comprehensive income (loss)
Balance at December 31, 2019
$
9
—
9
31
724
—
724
755
$
$
(2,516)
—
(2,516)
1,431
$
(12,770)
—
(12,770)
(11,339) $
(1,485)
5,454
—
5,454
3,969
(2,507)
—
(2,507)
1,462
(12,046)
—
(12,046)
(10,584)
13. Revenue recognition
(cid:1)et product sales
The Company views its operations and manages its business in one operating segment. During the twelve months ended
December 31, 2019, 2018, and 2017, net product sales in the United States were $101.0 million, $92.0 million, and $28.8 million
respectively, consisting solely of Emflaza, and net product sales not in the United States were $190.3 million, $171.0 million, and
$145.2 million respectively, consisting of Translarna and Tegsedi. Three of the Company’s distributors each accounted for over
10% of the Company’s net product sales for the twelve months ended December 31, 2019, 2018, and 2017.
175
PTC Therapeutics, Inc.
(cid:1)otes to consolidated financial statements (Continued)
December 31, 2019
(In thousands except share and per share amount)
The Company’s contract liabilities balances as of December 31, 2019 and 2018 were $11.7 million and $12.9 million, respectively.
The Company did not have any contract assets for the twelve months ended December 31, 2019 and 2018. During the twelve
months ended December 31, 2019 and 2018, the Company recognized revenues of $3.9 million and $0.0 million, respectively,
related to amounts included in contract liability balance at the beginning of each period. The Company has not made significant
changes to the judgments made in applying ASC Topic 606 for the twelve months ended December 31, 2019 and 2018.
Remaining performance obligations
Remaining performance obligations represent the transaction price for goods the Company has yet to provide. As of December 31,
2019 and 2018, the aggregate amount of transaction price allocated to remaining performance obligations relating to Translarna
net product revenue was $11.7 million and $12.9 million, respectively. The Company expects to recognize revenue over the next
one to two years as the specific timing for satisfying the performance obligations is contingent upon a number of factors, including
customers’ needs and schedules.
Collaboration revenue
In (cid:1)ovember 2011, the Company and the Spinal Muscular Atrophy Foundation (SMA Foundation) entered into a licensing and
collaboration agreement with F. Hoffman-La Roche Ltd and Hoffman- La Roche Inc. (collectively, Roche) for a spinal muscular
atrophy program. Under the terms of the agreement, Roche acquired an exclusive worldwide license to the Company’s spinal
muscular atrophy program, which includes three compounds currently in preclinical development, as well as potential back-up
compounds. The Company received a nonrefundable upfront cash payment of $30.0 million during the research term, which was
terminated effective December 31, 2014, after which Roche provided the Company with funding, based on an agreed- upon full-
time equivalent rate, for an agreed-upon number of full- time equivalent employees that the Company contributed to the research
program.
The Company identified two material promises in the collaboration agreement, the license and the research activities. The Company
evaluated whether these material promises are distinct and determined that the license does not have standalone functionality and
there is a significant integration of the license and research activities. As such, both promises were bundled into one distinct
performance obligation. As a result, the Company deferred the $30.0 million upfront payment which was recognized over the
estimated performance period of two years, which was the contracted research period. As of adoption of ASC Topic 606 on January
1, 2018, all performance obligations had been satisfied and the balance of the remaining deferred upfront payment was fully
recognized.
Under the agreement, the Company is eligible to receive additional payments from Roche if specified events are achieved with
respect to each licensed product, including up to $135.0 million in research and development event milestones, up to $325.0 million
in sales milestones upon achievement of certain sales events, and up to double digit royalties on worldwide annual net sales of a
commercial product.
In August 2013, a lead development compound, RG7800, was selected to move into I(cid:1)D-enabling studies, which triggered a
milestone payment to the Company from Roche of $10.0 million. Under ASC Topic 605, the Company considered this milestone
event substantive because the applicable criteria of its revenue recognition policy would be satisfied and recorded it as collaboration
revenue for the year ended December 31, 2013.
In January 2014, the Company announced the initiation of a Phase 1 clinical program in its SMA collaboration with Roche and
the SMA Foundation which triggered a $7.5 million milestone payment from Roche. Under ASC Topic 605, the Company considered
this milestone event substantive because the applicable criteria of its revenue recognition policy would be satisfied and recorded
it as collaboration revenue for the year ended December 31, 2014.
In (cid:1)ovember 2014, the Company announced the initiation of a Phase 2 study in adult and pediatric patients in its SMA collaboration
with Roche and the SMA Foundation which triggered a $10.0 million payment from Roche. Under ASC Topic 605, the Company
considered this milestone event substantive because the applicable criteria of its revenue recognition policy would be satisfied and
recorded it as collaboration revenue for the year ended December 31, 2014.
In October 2017, the Company announced that the Sunfish, a two-part clinical trial in pediatric and adult type 2 and type 3 SMA
initiated in the fourth quarter of 2016 with Roche and SMA Foundation, had transitioned into the pivotal second part of its study.
176
PTC Therapeutics, Inc.
(cid:1)otes to consolidated financial statements (Continued)
December 31, 2019
(In thousands except share and per share amount)
The achievement of this milestone triggered a $20.0 million payment to the Company from Roche. Under ASC Topic 605, the
Company considered this milestone event substantive because the applicable criteria of its revenue recognition policy would be
satisfied and recorded it as collaboration revenue for the year ended December 31, 2017.
In (cid:1)ovember 2019, the Company announced the filing of an (cid:1)DA in the United States, which triggered a $15.0 million payment
to the Company from Roche. Under ASC Topic 606, the acceptance of the (cid:1)DA filing by the FDA resolved the uncertainty of
whether the milestone was probable of being achieved, and the Company recorded it as collaboration revenue for the year ended
December 31, 2019.
The remaining potential research and development event milestones that can be received as of December 31, 2019 is $72.5 million.
The remaining potential sales milestones as of December 31, 2019 is $325.0 million upon achievement of certain sales events. In
addition, the Company is eligible to receive up to double digit royalties on worldwide annual net sales of a commercial product.
For the twelve months ended December 31, 2019, 2018, and 2017, the Company recognized revenue related to the licensing and
collaboration agreement with Roche of $15.2 million, $0.2 million, and $20.3 million, respectively.
14. Income taxes
The loss from operations before tax (expense) benefit consisted of the following for the years ended December 31, 2019,
2018, and 2017:
Domestic
Foreign
Total
2019
(231,915) $
(8,011)
(239,926) $
2018
2017
(68,461) $
(59,649)
(128,110) $
(54,588)
(23,077)
(77,665)
$
$
The Income Tax Provision consisted of the following for the years ended December 31, 2019, 2018 and 2017:
Current:
U.S. Federal
U.S. State and Local
Foreign
Deferred:
U.S. Federal
U.S. State and Local
Foreign
Total tax benefit (expense)
2019
2018
2017
$
$
— $
(61)
(2,041)
—
(8,812)
(736)
(11,650) $
— $
(38)
(669)
—
—
736
29
$
—
(6)
(1,131)
(198)
—
—
(1,335)
177
PTC Therapeutics, Inc.
(cid:1)otes to consolidated financial statements (Continued)
December 31, 2019
(In thousands except share and per share amount)
A reconciliation of the U.S. statutory income tax rate to the Company’s effective tax rate is as follows:
Federal income tax provision at statutory rate
State income tax provision, net of federal benefit
Permanent differences
Research and development
Change in valuation allowances
Change in deferred tax assets
Foreign tax rate differential
Benefit allocated from other comprehensive income
Tax rate change
Other
Effective income tax rate
December 31,
2019
2018
2017
21.00 %
21.00%
34.00 %
1.08
(6.17)
4.38
(35.49)
15.89
(1.88)
—
(3.67)
—
(4.86)%
0.05
(6.41)
6.49
2.20
(14.22)
(9.10)
—
—
0.01
0.02%
(1.01)
(8.48)
19.53
29.10
(64.12)
(10.33)
(0.26)
—
(0.15)
(1.72)%
Accounting for income taxes under U.S. GAAP requires that individual tax-paying entities of the company offset all deferred
tax liabilities and assets within each particular tax jurisdiction and present them as a noncurrent deferred tax liability or asset.
Amounts in different tax jurisdictions cannot be offset against each other. The noncurrent deferred income tax asset is recorded
within deposits and other assets on the balance sheet. The amount of deferred income taxes are as follows:
Assets:
(cid:1)oncurrent deferred income taxes
Liabilities:
(cid:1)oncurrent deferred income taxes
Deferred income taxes - net
2019
2018
— $
736
(130,862)
(130,862) $
(122,032)
(121,296)
$
$
178
PTC Therapeutics, Inc.
(cid:1)otes to consolidated financial statements (Continued)
December 31, 2019
(In thousands except share and per share amount)
The significant components of the Company’s deferred tax assets and liabilities at December 31, 2019 and 2018 are as
follows:
Deferred tax assets:
Accrued expense
Amortization
Depreciation
Federal tax credits
State tax credits
Federal net operating losses
State net operating losses
Foreign net operating losses
Capitalized research and development costs
Share based compensation and other
Other comprehensive loss
Total gross deferred tax assets
Less valuation allowance
Total deferred tax assets, net of valuation allowance
Deferred tax liabilities:
Convertible debt
Indefinite lived intangible
Total gross deferred tax liabilities
(cid:1)et deferred tax assets (liabilities)
2019
2018
$
2,588
$
78,291
991
99,421
6,489
91,010
1,360
1,056
1,274
16,425
1,512
714
5,148
1,601
89,070
5,473
62,159
165
736
2,093
21,411
—
300,417
(267,131)
33,286
$
188,570
(180,481)
8,089
(33,286) $
(130,862)
(164,148)
(130,862) $
(7,353)
(122,032)
(129,385)
(121,296)
$
$
$
At December 31, 2019 and 2018, the Company recorded valuation allowance against its net deferred tax assets of approximately
$267.1 million and $180.5 million, respectively. The change in the valuation allowance during the years ended December 31, 2019
and 2018 was approximately $86.7 million and $2.8 million, respectively. A valuation allowance has been recorded since, in the
judgment of management, these assets are not more likely than not to be realized. The ultimate realization of deferred tax assets
is dependent upon the generation of future taxable income during periods in which those temporary differences and carryforwards
become deductible or are utilized. As of December 31, 2019, the Company incurred approximately $433.3 million, $224.4 million,
$8.4 million of federal, state, and foreign net operating loss carryforwards, respectively. As a result of the adoption of ASU 2016-09,
the Company no longer excludes tax benefits that arose directly from equity compensation in excess of compensation recognized
for financial reporting in its U.S. federal and U.S. state net operating loss carryforwards.
During 2018, the Company acquired IPR&D as part of the acquisition of Agilis. This asset is currently considered an indefinite-
lived intangible with no related book amortization and tested for impairment, annually. As the IPR&D has no tax basis and is an
indefinite-lived intangible, the deferred tax liability created at the time of acquisition is not considered positive evidence of future
income and is presented as a deferred tax liability in the balance sheet.
As of December 31, 2019, research and development credit carryforwards for federal and state purposes are approximately
$14.2 million and $6.2 million, respectively. In addition, the Orphan Drug Credit Carryover available as of December 31, 2019 is
approximately $85.2 million. As a result of U.S. tax reform legislation, federal net operating losses generated in 2018 carryforward
indefinitely, however, the Company has federal net operating losses that pre-date U.S. tax reform legislation which begin to expire
in 2021 and federal credit carryforwards that begin to expire in 2019. State net operating loss carryforwards begin to expire in
2030, and the state credit carryforwards began to expire in 2016. Sections 382 and 383 of the Internal Revenue Code of 1986
subject the future utilization of net operating losses and certain other tax attributes, such as research and development tax credits,
to an annual limitation in the event of certain ownership changes, as defined. The Company has undergone an ownership change
179
PTC Therapeutics, Inc.
(cid:1)otes to consolidated financial statements (Continued)
December 31, 2019
(In thousands except share and per share amount)
and has determined that a “change in ownership” as defined by IRC Section 382 of the Internal Revenue Code of 1986, as amended,
and the rules and regulations promulgated thereunder, did occur in June of 2013. Accordingly, about $231.5 million of the Company’s
(cid:1)OL carryforwards are limited and the Company can only use $16.7 million for the first five years from the ownership change
and $5.7 million per year going forward. Therefore, $169.2 million of the (cid:1)OL’s will be freed up over the next 20 years and $62.3
million are expected to expire unused which are not included in the deferred tax assets listed above. In summary, including the
(cid:1)OLs expected to expire, there are $495.7 million of (cid:1)OLs available, out of which $231.5 million are limited by IRC Section 382.
At December 31, 2019, there is $333.2 million available for immediate use and an additional $5.7 million will free up in 2020.
The income tax expense for the years ended December 31, 2019 and 2018 differed from the amounts computed by applying
the U.S. federal income tax rate of 21% to loss before tax expense as a result of changes in state effective tax rates, foreign taxes,
nondeductible expenses, tax credits generated, true up of net operating loss carryforwards, and increase in the Company’s valuation
allowance. The Company applies the elements of FASB ASC 740-10 regarding accounting for uncertainty in income taxes. This
clarifies the accounting for uncertainty in income taxes recognized in financial statements and required impact of a tax position
to be recognized in the financial statements if that position is more likely than not of being sustained by the taxing authority. As
of December 31, 2019 the Company did not have any unrecognized tax benefits and has not accrued any interest or penalties
through 2019. The Company does not expect to have any unrecognized tax benefits within the next twelve months. The Company’s
policy is to recognize interest and penalties related to tax matters within the income tax provision. Tax years beginning in 2014
are generally subject to examination by taxing authorities, although net operating losses from all years are subject to examinations
and adjustments for at least three years following the year in which the attributes are used. The Company concluded in 2018 the
examination from the United States Internal Revenue Service for tax year 2014 noting adjustments to the U.S. federal net operating
loss carryforwards and research and development credit carryforwards. The Company is currently under a tax audit in Switzerland
for tax years 2014 through 2018. Although the outcome of tax audits is always uncertain, the company does not expect any
adjustment to result for these years as of December 31, 2019.
For all years through December 31, 2016, the Company generated research credits but has not conducted a study to document
the qualified activities. This study may result in an adjustment to the Company’s research and development credit carryforwards;
however, until a study is completed and any adjustment is known, no amounts are being presented as an uncertain tax position. A
full valuation allowance has been provided against the Company’s research and development credits and, if an adjustment is
required, this adjustment would be offset by an adjustment to the deferred tax asset established for the research and development
credit carryforwards and the valuation allowance.
As a result of U.S. tax reform legislation, distributions of profits from non-U.S. subsidiaries are not expected to cause a
significant incremental U.S. tax impact in the future. However, distributions may be subject to non-U.S. withholding taxes if profits
are distributed from certain jurisdictions. U.S. federal income taxes have not been provided on undistributed earnings of our
international subsidiaries as it is our intention to reinvest any earnings into the respective subsidiaries. It is not practicable to
estimate the amount of tax that might be payable if some or all of such earnings were to be repatriated due to the legal structure
and complexity of U.S. and local tax laws. As of December 31, 2019 and December 31, 2018 there are no undistributed earnings.
The Company has completed its accounting for the income tax effects of U.S. tax reform legislation and included measurement
period adjustments in 2018. As a result of the reduction in the U.S. corporate income tax rate, the Company revalued its ending
net deferred tax assets as of December 31, 2017. In the fourth quarter of 2018, the Company completed its analysis to determine
the effect of the Tax Act and recorded no further adjustments.
PTC Therapeutics International Limited (PTC International) and PTC Therapeutics Holdings Corp. Limited (PTC
Bermuda) entered into an intra-entity asset transfer on October 1, 2019, for which PTC Bermuda sold beneficial rights to the
Translarna Intellectual Properly to PTC International in exchange for an interest-free loan note of $556.7 million. (cid:1)o deferred tax
asset was recognized for the excess of PTC International’s tax basis over the carrying amount in the consolidated financial statements
because the Company provided for a valuation allowance on its deferred tax assets.
15. Commitments and contingencies
Under various agreements, the Company will be required to pay royalties and milestone payments upon the successful
development and commercialization of products. The Company has entered into funding agreements with The Wellcome Trust
Limited (Wellcome Trust) for the research and development of small molecule compounds in connection with its oncology and
180
PTC Therapeutics, Inc.
(cid:1)otes to consolidated financial statements (Continued)
December 31, 2019
(In thousands except share and per share amount)
antibacterial programs. As the Company has discontinued development under its antibacterial program, it no longer expects that
milestone and royalty payments from the Company to Wellcome Trust will apply under that agreement, resulting in a change to
the total amount of development and regulatory milestone payments the Company may become obligated to pay for this program.
Under the oncology program funding agreement, to the extent that the Company develops and commercializes program intellectual
property on a for-profit basis itself or in collaboration with a partner (provided the Company retains overall control of worldwide
commercialization), the Company may become obligated to pay to Wellcome Trust development and regulatory milestone payments
and single-digit royalties on sales of any research program product. The Company’s obligation to pay such royalties would continue
on a country-by-country basis until the longer of the expiration of the last patent in the program intellectual property in such country
covering the research program product and the expiration of market exclusivity of such product in such country. The Company
made the first development milestone payment of $0.8 million to Wellcome Trust under the oncology program funding agreement
during the second quarter of 2016. Additional milestone payments up to an aggregate of $22.4 million may become payable by
the Company to Wellcome Trust under this agreement.
The Company has also entered into a collaboration agreement with the SMA Foundation. The Company may become
obligated to pay the SMA Foundation single- digit royalties on worldwide net product sales of any collaboration product that is
successfully developed and subsequently commercialized or, if the Company outlicenses rights to a collaboration product, a
specified percentage of certain payments the Company receives from its licensee. The Company is not obligated to make such
payments unless and until annual sales of a collaboration product exceed a designated threshold. The Company’s obligation to
make such payments would end upon its payment to the SMA Foundation of a specified amount.
Pursuant to the Asset Purchase Agreement with Marathon, Marathon is entitled to receive contingent payments from the
Company based on annual net sales of Emflaza up to a specified aggregate maximum amount over the expected commercial life
of the asset. In addition, Marathon has the opportunity to receive a single $50.0 million sales-based milestone.
Pursuant to the Merger Agreement with Agilis, Agilis equityholders may become entitled to receive contingent
consideration payments from the Company based on (i) the achievement of certain development milestones up to an aggregate
maximum amount of $60.0 million, (ii) the achievement of certain regulatory approval milestones together with a milestone
payment following the receipt of a priority review voucher up to an aggregate maximum amount of $535.0 million, (iii) the
achievement of certain net sales milestones up to an aggregate maximum amount of $150.0 million, and (iv) a percentage of annual
net sales for Friedreich Ataxia and Angelman Syndrome during specified terms, ranging from 2%-6%. The Company is required
to pay $40.0 million of the development milestone payments upon the passing of the second anniversary of the closing of the
Merger, regardless of whether the applicable milestones have been achieved.
Subject to the terms and conditions of the Asset Acquisition Agreement, BioElectron may become entitled to receive
contingent milestone payments of up to $200.0 million (in cash or in shares of the Company’s common stock, as determined by
the Company) from the Company based on the achievement of certain regulatory and net sales milestones. Subject to the terms
and conditions of the Asset Acquisition Agreement, BioElectron may also become entitled to receive contingent payments based
on a percentage of net sales of certain products.
The Company also has a Collaboration and License Agreement with Akcea Therapeutics, Inc. ("Akcea") for the
commercialization of Tegsedi and Waylivra, and products containing those compounds in countries in Latin America and the
Caribbean. Pursuant to the agreement, the Company paid Akcea an upfront licensing fee, which included an initial payment of
$12.0 million. In 2019, a $6.0 million milestone was paid upon receipt of regulatory approval of Waylivra from the EMA and a
$4.0 million milestone was paid upon regulatory approval of Tegsedi from A(cid:1)VISA, the Brazilian health regulatory authority. In
addition, Akcea is eligible to receive an additional milestone payment of $4.0 million upon receipt of regulatory approval for
Waylivra from A(cid:1)VISA. Akcea is also entitled to receive royalty payments subject to certain terms set forth in the Akcea
Collaboration and License Agreement.
During the twelve months ended December 31, 2019, the Company entered into a purchase commitments with Aldevron,
LLC to secure good manufacturing practices capacity for the Company’s gene therapy portfolio. As of December 31, 2019, the
commitment was for $6.9 million, which will be paid in fiscal year 2020.
The Company has employment agreements with certain employees which require the funding of a specific level of
payments, if certain events, such as a change in control or termination without cause, occur. Additionally, the Company has royalty
181
PTC Therapeutics, Inc.
(cid:1)otes to consolidated financial statements (Continued)
December 31, 2019
(In thousands except share and per share amount)
payments associated with Translarna and Emflaza product net sales, payable quarterly or annually in accordance with the terms
of the related agreements.
From time to time in the ordinary course of its business, the Company is subject to claims, legal proceedings and disputes.
The Company is not currently aware of any material legal proceedings against it.
16. Geographic information
The Company views its operations and manages its business in one operating segment. The following table presents
financial information based on the geographic location of the facilities of the Company as of and for the years ended:
Total assets
Property and equipment, net
Revenue
Total assets
Property and equipment, net
Revenue
17. 401(k) plan
Year Ended December 31, 2019
United States
(cid:1)on-US
1,508,055
19,656
116,676
$
$
$
115,727
1,893
190,304
$
$
$
Year Ended December 31, 2018
United States
(cid:1)on-US
1,013,977
10,497
93,694
$
$
$
105,245
2,197
171,040
$
$
$
$
$
$
$
$
$
Total
1,623,782
21,549
306,980
Total
1,119,222
12,694
264,734
The Company maintains a 401(k) plan for its employees. Employee contributions are voluntary. The Company may match
employee contributions in amounts to be determined at the Company’s sole discretion. The Company provided an 100%, 92% and
84% matching contribution for up to the first 6% of each contributing employee’s base salary contributions for the years ended
December 31, 2019, 2018 and 2017, respectively. The Company made matching contributions to the 401(k) plan and recorded
expense of approximately $3.5 million, $2.2 million and $1.6 million for the years ended December 31, 2019, 2018 and 2017,
respectively.
18. Intangible assets and goodwill
Definite-lived intangibles
On April 20, 2017, the Company completed its previously announced acquisition of all rights to Emflaza pursuant to the Asset
Purchase Agreement, dated March 15, 2017, and amended on April 20, 2017, by and between the Company and Marathon. The
assets acquired by the Company in the Transaction include intellectual property rights related to Emflaza, inventories of Emflaza,
and certain contractual rights related to Emflaza. In accordance with ASU 2017-01, the Company determined that substantially
all of the fair value is concentrated in the Emflaza rights intangible asset and as such accounted for the transaction as an asset
acquisition under ASC 805-50 and recorded an intangible asset of $148.4 million, which is being amortized to cost of product
sales over its expected useful life of approximately seven years on a straight line basis.
Marathon is entitled to receive contingent payments from the Company based on annual net sales of Emflaza beginning in 2018,
up to a specified aggregate maximum amount over the expected commercial life of the asset. In accordance with the guidance for
an asset acquisition, the Company will record the milestone payment when it becomes payable to Marathon and increase the cost
basis for the Emflaza rights intangible asset. For the twelve month period ended December 31, 2019 and 2018, milestones payments
of $27.1 million and $14.4 million were recorded, respectively. These payments are being amortized over the remaining useful
life of the Emflaza rights asset on a straight line basis. As of December 31, 2019, a milestone payable to Marathon of $11.4 million
was recorded on the balance sheet within accounts payable and accrued expenses.
182
PTC Therapeutics, Inc.
(cid:1)otes to consolidated financial statements (Continued)
December 31, 2019
(In thousands except share and per share amount)
Pursuant to the Akcea Collaboration and License Agreement, in May 2019 the Company made a $6.0 million milestone payment
to Akcea upon regulatory approval of Waylivra from the EMA. The payment was recorded as an intangible asset and is being
amortized to cost of product sales over its expected useful life of approximately ten years on a straight line basis. Additionally, in
December 2019, the Company made a $4.0 million milestone payment to Akcea upon regulatory approval of Tegsedi from
A(cid:1)VISA. The payment was recorded as an intangible asset and is being amortized to cost of product sales over its expected useful
life of approximately ten years on a straight line basis.
Akcea is also entitled to receive royalty payments subject to certain terms set forth in the Akcea Collaboration and License
Agreement related to sales of Waylivra. In accordance with the guidance for an asset acquisition, the Company will record royalty
payments when they become payable to Akcea and increase the cost basis for the Waylivra intangible asset.
For the twelve month periods ended December 31, 2019, 2018, and 2017, the Company recognized amortization expense of $27.7
million, $22.9 million, and $15.4 million respectively, related to the Emflaza rights, Waylivra, and Tegsedi intangible assets,
resulting in accumulated amortization of $65.9 million as of December 31, 2019. The estimated future amortization of the Emflaza
rights, Waylivra, and Tegsedi intangible assets is expected to be as follows:
2020
2021
2022
2023
2024 and thereafter
Total
As of December 31, 2019
31,139
$
31,139
31,139
31,139
9,444
134,000
$
The weighted average remaining amortization period of the definite-lived intangibles as of December 31, 2019 was 4.5 years.
Indefinite-lived intangibles
In connection with the acquisition of the Company’s gene therapy platform from Agilis ((cid:1)ote 3), the Company acquired rights to
PTC-AADC, for the treatment of AADC deficiency. AADC deficiency is a rare C(cid:1)S disorder arising from reductions in the enzyme
AADC that result from mutations in the dopa decarboxylase gene. The gene therapy platform also includes an asset targeting
Friedreich ataxia, a rare and life-shortening neurodegenerative disease caused by a single defect in the FX(cid:1) gene which causes
reduced production of the frataxin protein. Additionally, the gene therapy platform includes two other programs targeting C(cid:1)S
disorders, including Angelman syndrome, a rare, genetic, neurological disorder characterized by severe developmental delays.
In accordance with the acquisition method of accounting, the Company allocated the acquisition cost for the Merger to the underlying
assets acquired and liabilities assumed, based upon the estimated fair values of those assets and liabilities at the date of acquisition.
The Company classified the fair value of the acquired IPR&D as indefinite lived intangible assets until the successful completion
or abandonment of the associated research and development efforts. The value allocated to the indefinite lived intangible assets
was $576.5 million. There have been no changes to the balance of the indefinite-lived intangibles since the Merger. The Company
performed a qualitative annual impairment test for its indefinite-lived intangible assets as of October 1, 2019 and concluded that
no impairment exists as of December 31, 2019.
Goodwill
As a result of the Merger on August 23, 2018, the Company recorded $82.3 million of goodwill, which included a measurement
period adjustment of $18.0 million recorded during the three month period ended December 31, 2018. This adjustment was related
to the finalization of the fair values assigned to the intangible assets and corresponding deferred tax liability, the contingent
consideration, and the deferred consideration. Refer to (cid:1)ote 3 for further details. There have been no changes to the balance of
goodwill since the date of the Merger. Accordingly, the goodwill balance as of December 31, 2018 and 2019 was $82.3 million.
The Company performed an annual impairment test for goodwill as of October 1, 2019 and concluded that no impairment exists
as of December 31, 2019.
183
PTC Therapeutics, Inc.
(cid:1)otes to consolidated financial statements (Continued)
December 31, 2019
(In thousands except share and per share amount)
Collaboration and Licensing Agreement
On August 1, 2018, the Company entered into a Collaboration and License Agreement with Akcea for the commercialization of
Tegsedi and Waylivra, and products containing those compounds in countries in Latin America and the Caribbean. Pursuant to the
agreement, the Company paid Akcea an upfront licensing fee, which included an initial payment of $12.0 million and a second
payment of $6.0 million that was paid after Waylivra received regulatory approval from the the EMA in May 2019. The Company
evaluated the agreement under the guidance in ASC 730 and concluded that the acquired rights to commercialize the products had
no alternative future use as of the date of the Merger. Accordingly, the $12.0 million was charged to research and development
expense in the consolidated statements of operations for the twelve month period ended December 31, 2018. As denoted above,
the $6.0 million milestone payment to Akcea upon regulatory approval of Waylivra from the EMA was recorded as an intangible
asset in 2019 as the product was now approved and thus capable of providing future benefit.
19. Subsequent events
The Company has evaluated all subsequent events and transactions through the filing date. There were no material events
that impacted the audited consolidated financial statements or disclosures.
20. Selected quarterly financial data (Unaudited)
The following financial information reflects all normal recurring adjustments, which are, in the opinion of management,
necessary for a fair statement of the results of the interim periods. Summarized quarterly data for 2019 and 2018 are as follows:
For the quarters ending (1)
March 31
June 30
September 30
December 31
2019:
(cid:1)et product revenue
Collaboration and grant revenue
Operating expenses
Loss income from operations
(cid:1)et loss
Basic and diluted net loss per common share(1)
2018:
(cid:1)et product revenue
Collaboration and grant revenue
Operating expenses
Loss from operations
(cid:1)et loss
$
53,054
$
85,476
$
71,369
$
529
122,723
(69,140)
(72,113)
46
124,280
(38,758)
(41,789)
47
131,891
(60,475)
(59,997)
(1.29) $
(0.75) $
(1.06) $
81,407
15,052
169,243
(72,784)
(77,677)
(1.37)
55,981
$
68,170
$
53,021
$
85,833
81
72,805
(16,743)
(19,263)
573
74,317
(5,574)
(9,520)
(0.21) $
570
101,821
(48,230)
(50,969)
(1.06) $
505
131,476
(45,138)
(48,330)
0.96
$
$
Basic and diluted net loss per common share(1)
$
(0.46) $
(1) The amounts were computed independently for each quarter and the sum of the quarters may not total the annual
amounts.
184
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
(cid:1)one.
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer (principal executive officer) and Chief Financial Officer
(principal financial officer), evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2019. The
term “disclosure controls and procedures”, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of
1934, as amended, or the Exchange Act, means controls and other procedures of a company that are designed to ensure that
information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded,
processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and
procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a
company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s
management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding
required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can
provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating
the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures
as of December 31, 2019, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure
controls and procedures were effective at the reasonable assurance level.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting for our company.
Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Exchange Act as a process
designed by, or under the supervision of, the company’s principal executive and principal financial officers and effected by the
company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with GAAP and includes those
policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that
receipts and expenditures of our company are being made only in accordance with authorizations of management and directors
of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use,
or disposition of our company’s assets that could have a material effect on the financial statements.
Internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements prepared for external purposes in accordance with generally accepted accounting
principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Our management, with the participation of our Chief Executive Officer (principal executive officer) and Chief Financial Officer
(principal financial officer), assessed the effectiveness of our internal control over financial reporting as of December 31, 2019.
In making this assessment, our management used the criteria set forth in the Internal Control—Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on its assessment, management
concluded that our internal control over financial reporting was effective as of December 31, 2019 based on those criteria.
The effectiveness of our internal control over financial reporting as of December 31, 2019, has been audited by Ernst & Young LLP,
an independent registered public accounting firm, as stated in their report which appears herein.
Changes in Internal Control over Financial Reporting
In the first quarter of 2019, we implemented an enterprise resource planning (“ERP”) system, Oracle, on a worldwide basis, which
is expected to improve the efficiency of certain financial and related transactional processes. We have completed the implementation
of certain processes, including the financial consolidation and reporting, sales order to cash, fixed assets, supplier management
and indirect procure-to-pay processes, and have revised and updated the related controls. These changes did not materially affect
our internal control over financial reporting for the twleve months ended December 31, 2019. As we implement the remaining
functionality under this ERP system over the next several years, we will continue to assess the impact on our internal control over
financial reporting. (cid:1)o other changes in our internal control over financial reporting occurred during the year ended December
31, 2019 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
185
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of PTC Therapeutics, Inc.
Opinion on Internal Control over Financial Reporting
We have audited PTC Therapeutics, Inc.’s internal control over financial reporting as of December 31, 2019, based on criteria
established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (2013 framework) (the COSO criteria). In our opinion, PTC Therapeutics, Inc. (the Company) maintained, in all
material respects, effective internal control over financial reporting as of December 31, 2019, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the accompanying consolidated balance sheets of the Company as of December 31, 2019 and 2018, the related
consolidated statements of operations, comprehensive loss, stockholders' equity and cash flows for each of the three years in the
period ended December 31, 2019, and the related notes and our report dated March 2, 2020 expressed an unqualified opinion
thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment
of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal
Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial
reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with
respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities
and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material
respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness
exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing
such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for
our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain
to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets
of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that
could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because
of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Iselin, (cid:1)ew Jersey
March 2, 2020
186
Item 9B. Other Information.
(cid:1)one.
187
PART III
Item 10. Directors, Executive Officers and Corporate Governance
The information required by this item as set forth under the captions “Proposal 1—Election of Directors”, “Executive Officers”,
“Delinquent Section 16(a) Reports”, “Corporate Governance—Code of Conduct”, “Corporate Governance—Director
(cid:1)ominations”, “Corporate Governance—Board Committees and Audit Committee”, and “Stockholder Proposals and (cid:1)ominations
for Director” in our Proxy Statement for the 2020 Annual Meeting of Shareholders is incorporated in this Annual Report on
Form 10-K by reference.
Code of Ethics
We have adopted a written Code of Business Conduct and Ethics, which is a code of ethics that applies to our directors, officers
and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, or
persons performing similar functions. We have posted a current copy of the Code of Business Conduct and Ethics on the Corporate
Governance page of the Investors section of our website, www.ptcbio.com, and it is available in print to any person who requests
it. We intend to post on our website all disclosures that are required by applicable law, the rules of the Securities and Exchange
Commission or the (cid:1)asdaq Global Select Market concerning any amendment to, or waiver from, any provision of the Code of
Business Conduct and Ethics.
Item 11. Executive Compensation
The information required by this item as set forth in under the captions “Executive Compensation”, “2019 Director Compensation”,
“Corporate Governance—Risk Oversight” and “Corporate Governance—Compensation Committee Interlocks and Insider
Participation” in our Proxy Statement for the 2020 Annual Meeting of Shareholders is incorporated in this Annual Report on
Form 10-K by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this item as set forth under the captions “Equity Compensation Plan Information” and “Principal
Stockholders” in our Proxy Statement for the 2020 Annual Meeting of Shareholders is incorporated in this Annual Report on
Form 10-K by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this item as set forth under the captions “Corporate Governance—Policies and Procedures for Related
Person Transactions”, “Corporate Governance—Related Person Transactions”, and “Corporate Governance—Director
Independence” in our Proxy Statement for the 2020 Annual Meeting of Shareholders is incorporated in this Annual Report on
Form 10-K by reference.
Item 14. Principal Accountant Fees and Services
The information required by this item as set forth under the caption “Proposal 2—Ratification of Election of Independent Registered
Public Accounting Firm” in our Proxy Statement for the 2020 Annual Meeting of Shareholders is incorporated in this Annual
Report on Form 10-K by reference.
188
Item 15. Exhibits and Financial Statement Schedules
Financial Statements
PART IV
The following statements and supplementary data are included in Part II, Item 8. of the Annual Report on Form 10-K.
Reports of independent registered public accounting firm
Consolidated Balance Sheets as of December 31, 2019 and 2018
Consolidated Statements of Operations for the years ended December 31, 2019, 2018 and 2017
Consolidated Statements of Comprehensive Loss for the years ended December 31, 2019, 2018 and 2017
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2019, 2018 and 2017
Consolidated Statements of Cash Flows for the years ended December 31, 2019, 2018 and 2017
(cid:1)otes to Consolidated Financial Statements
•
•
•
•
•
•
•
Exhibits
Those exhibits required to be filed by Item 601 of Regulation S-K are listed in the Exhibit Index immediately preceding
the exhibits hereto and such listing is incorporated herein by reference.
Exhibit Index
Exhibit
(cid:1)umber
2.1†
2.2
2.3†
2.4†
3.1
3.2
Description of Exhibit
Asset Purchase Agreement, dated March 15, 2017, between PTC Therapeutics, Inc. and Complete Pharma
Holdings, LLC (f/k/a Marathon Pharmaceuticals, LLC) (incorporated by reference to Exhibit 2.1 to the
Current Report on Form 8-K filed by the Registrant on March 16, 2017)
Amendment to Asset Purchase Agreement, dated April 20, 2017, between PTC Therapeutics, Inc. and
Complete Pharma Holdings, LLC (f/k/a Marathon Pharmaceuticals, LLC) (incorporated by reference to
Exhibit 2.1 to the Current Report on Form 8-K filed by the Registrant on April 20, 2017)
Agreement and Plan of Merger, dated July 19, 2018, by and among PTC Therapeutics, Inc., Agility Merger
Sub, Inc., Agilis Biotherapeutics, Inc. and, solely in its capacity as equityholder representative, Shareholder
Representative Services LLC (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K
filed by the Registrant on July 19, 2018)
Asset Purchase Agreement by and between PTC Therapeutics, Inc. and BioElectron Technology
Corporation, dated October 1, 2019 (incorporated by reference to Exhibit 2.1 to the Current Report on Form
8-K filed by the Registrant on October 30, 2019)
Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.3 to the
Registration Statement on Form S-1, as amended (File (cid:1)o. 333-188657), of the Registrant)
Amended and Restated Bylaws of the Registrant (incorporated by reference to Exhibit 3.1 to the Current
Report on Form 8-K filed by the Registrant on April 21, 2017)
4.1
Description of Registered Securities
4.2
4.3
4.4
Specimen Stock Certificate evidencing the shares of common stock (incorporated by reference to Exhibit 4.1
to the Registration Statement on Form S-1, as amended (File (cid:1)o. 333-188657), of the Registrant)
Indenture (including Form of (cid:1)otes), dated as of August 14, 2015, by and between PTC Therapeutics, Inc.
and U.S. Bank (cid:1)ational Association, a national banking association, as trustee (incorporated by reference to
Exhibit 4.1 to the Current Report on Form 8-K filed by the Registrant on August 14, 2015)
Indenture (including Form of (cid:1)otes), dated as of September 20, 2019, by and between PTC Therapeutics,
Inc. and U.S. Bank (cid:1)ational Association, a national banking association, as trustee (incorporated by
reference to Exhibit 4.1 to the Current Report on Form 8-K filed by the Registrant on September 20, 2019)
189
Exhibit
(cid:1)umber
Description of Exhibit
10.1+ 1998 Employee, Director and Consultant Stock Option Plan, as amended (incorporated by reference to
Exhibit 10.1 to the Registration Statement on Form S-1, as amended (File (cid:1)o. 333-188657), of the
Registrant)
10.2+ Form of Incentive Stock Option Certificate under 1998 Employee, Director and Consultant Stock Option
Plan (incorporated by reference to Exhibit 10.2 to the Registration Statement on Form S-1, as amended (File
(cid:1)o. 333-188657), of the Registrant)
10.3+ Form of (cid:1)on-Qualified Stock Option Certificate under 1998 Employee, Director and Consultant Stock
Option Plan (incorporated by reference to Exhibit 10.3 to the Registration Statement on Form S-1, as
amended (File (cid:1)o. 333-188657), of the Registrant)
10.4+ 2009 Equity and Long Term Incentive Plan, as amended (incorporated by reference to Exhibit 10.4 to the
Registration Statement on Form S-1, as amended (File (cid:1)o. 333-188657), of the Registrant)
10.5+ Form of (cid:1)otice of Award for Incentive Stock Option under 2009 Equity and Long Term Incentive Plan
(incorporated by reference to Exhibit 10.5 to the Registration Statement on Form S-1, as amended (File
(cid:1)o. 333-188657), of the Registrant)
10.6+ Form of (cid:1)otice of Award for (cid:1)onstatutory Stock Option under 2009 Equity and Long Term Incentive Plan
(incorporated by reference to Exhibit 10.6 to the Registration Statement on Form S-1, as amended (File
(cid:1)o. 333-188657), of the Registrant)
10.7+ Form of Restricted Stock Agreement under 2009 Equity and Long Term Incentive Plan (incorporated by
reference to Exhibit 10.19 to the Registration Statement on Form S-1, as amended (File (cid:1)o. 333-188657), of
the Registrant)
10.8+ 2013 Stock Incentive Plan (incorporated by reference to Exhibit 10.7 to the Registration Statement on
Form S-1, as amended (File (cid:1)o. 333-188657), of the Registrant)
10.9+ Form of Restricted Stock Agreement under 2013 Stock Incentive Plan (incorporated by reference to
Exhibit 10.8 to the Registration Statement on Form S-1, as amended (File (cid:1)o. 333-188657), of the
Registrant)
10.10+ Form of (cid:1)onstatutory Stock Option Agreement under 2013 Stock Incentive Plan (incorporated by reference
to Exhibit 10.9 to the Registration Statement on Form S-1, as amended (File (cid:1)o. 333-188657), of the
Registrant)
10.11+ 2013 Long Term Incentive Plan (incorporated by reference to Exhibit 10.10 to the Registration Statement on
Form S-1, as amended (File (cid:1)o. 333-188657), of the Registrant)
10.12+ Form of Incentive Stock Option Agreement under 2013 Long Term Incentive Plan—2013/2014
(incorporated by reference to Exhibit 10.11 to the Registration Statement on Form S-1, as amended (File
(cid:1)o. 333-188657), of the Registrant)
10.13+ Form of (cid:1)onstatutory Stock Option Agreement under 2013 Long Term Incentive Plan—2013/2014
(incorporated by reference to Exhibit 10.12 to the Registration Statement on Form S-1, as amended (File
(cid:1)o. 333-188657), of the Registrant)
10.14+ Form of (cid:1)onqualified Stock Option Agreement Inducement Grant Agreement—2014-2020 (incorporated by
reference to Exhibit 10.14 to the Annual Report on Form 10-K filed by the Registrant on March 2, 2015)
10.15+ Form of Incentive Stock Option Agreement under 2013 Long Term Incentive Plan—2014-2020
(incorporated by reference to Exhibit 10.15 to the Annual Report on Form 10-K filed by the Registrant on
March 2, 2015)
10.16+ Form of (cid:1)onstatutory Stock Option Agreement under 2013 Long Term Incentive Plan—2014-2020
(incorporated by reference to Exhibit 10.16 to the Annual Report on Form 10-K filed by the Registrant on
March 2, 2015)
10.17+ Form of (cid:1)onstatutory Stock Option Agreement under 2013 Long Term Incentive Plan—(cid:1)on-employee
Director (incorporated by reference to Exhibit 10.31 to the Annual Report on Form 10-K filed by the
Registrant on February 29, 2016)
10.18+ Form of Restricted Stock Unit Agreement under 2013 Long Term Incentive Plan —2016-2020 (incorporated
by reference to Exhibit 10.32 to the Annual Report on Form 10-K filed by the Registrant on February 29,
2016)
190
Exhibit
(cid:1)umber
Description of Exhibit
10.19+ Form of Restricted Stock Agreement under 2013 Long Term Incentive Plan —2017-2020 (incorporated by
reference to Exhibit 10.19 to the Annual Report on Form 10-K filed by the Registrant on March 16, 2017)
10.20+
Form of (cid:1)onqualified Restricted Stock Award Agreement Inducement Grant Agreement-2018 (incorporated
by reference to Exhibit 99.3 to the Registration Statement on Form S-8 (File (cid:1)o. 333-229126), of the
Registrant)
10.21
Lease Agreement, dated as of July 11, 2000, as amended, between the Registrant and 46.24 Associates L.P.
(incorporated by reference to Exhibit 10.13 to the Registration Statement on Form S-1, as amended (File
(cid:1)o. 333-188657), of the Registrant)
10.22† License and Collaboration Agreement, dated as of (cid:1)ovember 23, 2011, as amended, by and among the
Registrant, F. Hoffmann-La Roche Ltd and Hoffmann-La Roche, Inc. and Spinal Muscular Atrophy
Foundation (incorporated by reference to Exhibit 10.14 to the Registration Statement on Form S-1, as
amended (File (cid:1)o. 333-188657), of the Registrant)
10.23† Sponsored Research Agreement, as amended dated as of June 1, 2006, by and between the Registrant and
Spinal Muscular Atrophy Foundation (incorporated by reference to Exhibit 10.15 to the Registration
Statement on Form S-1, as amended (File (cid:1)o. 333-188657), of the Registrant)
10.24† Funding Agreement, dated as of December 21, 2011, by and between the Registrant and The Wellcome Trust
Limited (incorporated by reference to Exhibit 10.17 to the Registration Statement on Form S-1, as amended
(File (cid:1)o. 333-188657), of the Registrant)
10.25+ Amended and Restated Employment Agreement between the Registrant and Stuart W. Peltz (incorporated by
reference to Exhibit 10.20 to the Registration Statement on Form S-1, as amended (File (cid:1)o. 333-188657), of
the Registrant)
10.26+ Amended and Restated Employment Agreement between the Registrant and Mark E. Boulding (incorporated
by reference to Exhibit 10.22 to the Registration Statement on Form S-1, as amended (File
(cid:1)o. 333-188657), of the Registrant)
10.27+ Amended and Restated Employment Agreement between the Registrant and (cid:1)eil Almstead (incorporated by
reference to Exhibit 10.24 to the Registration Statement on Form S-1, as amended (File (cid:1)o. 333-188657), of
the Registrant)
10.28†
10.29†
10.30
10.31
10.32
10.33
10.34
Exclusive License and Supply Agreement, dated as of May 12, 2015, as amended, by and between Faes
Farma, S.A. and Complete Pharma Holdings, LLC (f/k/a Marathon Pharmaceuticals, LLC), as assigned by
Complete Pharma Holdings, LLC to the Registrant on April 20, 2017 (incorporated by reference to
Exhibit 10.1 to the Quarterly Report on Form 10-Q filed by the Registrant on August 9, 2017)
Commercial Manufacturing Agreement, dated as of September 18, 2015, as amended, by and between
Alcami Corporation (f/k/a/ AAI Pharma Services Corp.) and Complete Pharma Holdings, LLC (f/k/a
Marathon Pharmaceuticals, LLC), as assigned by Complete Pharma Holdings, LLC to the Registrant on
April 20, 2017 (incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q filed by the
Registrant on August 9, 2017)
Credit and Security Agreement, dated May 5, 2017, by and among PTC Therapeutics Inc., MidCap Financial
Trust and the additional lenders thereto (incorporated by reference to Exhibit 10.1 to the Current Report on
Form 8-K filed by the Registrant on May 8, 2017)
Amendment (cid:1)o. 1 and Limited Consent to Credit and Security Agreement, dated of as July 19, 2018, by and
among PTC Therapeutics, Inc., MidCap Financial Trust, and the Lenders as defined therein (incorporated by
reference to Exhibit 10.2 to the Current Report on Form 8-K filed by Registrant on July 19, 2018)
Amendment (cid:1)o. 2 to Credit and Security Agreement, dated as of August 7, 2019, by and among PTC
Therapeutics, Inc., MidCap Financial Trust and the Lenders as defined therein (incorporated by reference to
Exhibit 10.1 to the Quarterly Report on Form 10-Q filed by the Registrant on October 30, 2019)
Amendment (cid:1)o. 3 to Credit and Security Agreement, dated as of August 29, 2019, by and among PTC
Therapeutics, Inc., MidCap Financial Trust and the Lenders as defined therein (incorporated by reference to
Exhibit 10.2 to the Quarterly Report on Form 10-Q filed by the Registrant on October 30, 2019)
Amendment (cid:1)o. 4 to Credit and Security Agreement, dated as of September 17, 2019, by and among PTC
Therapeutics, Inc., MidCap Financial Trust and the Lenders as defined therein (incorporated by reference to
Exhibit 10.3 to the Quarterly Report on Form 10-Q filed by the Registrant on October 30, 2019)
191
Exhibit
(cid:1)umber
10.35
10.36
10.37
10.38+
10.39+
10.40†
10.41†
Description of Exhibit
Omnibus Amendment (cid:1)o. 5 and Joinder to Credit and Security Agreement and Amendment and Joinder to
Pledge Agreement, dated as of October 1, 2019, by and among PTC Therapeutics, Inc., each of the
subsidiaries listed therein as a (cid:1)ew Borrower, MidCap Financial Trust and the Lenders as defined therein
(incorporated by reference to Exhibit 10.4 to the Quarterly Report on Form 10-Q filed by the Registrant on
October 30, 2019)
Pledge Agreement, dated May 5, 2017, by and among PTC Therapeutics Inc., each of the subsidiaries listed
thereto as pledgers and MidCap Financial Trust (incorporated by reference to Exhibit 10.2 to the Current
Report on Form 8-K filed by the Registrant on May 8, 2017)
Intellectual Property Security Agreement, dated May 5, 2017, by and among PTC Therapeutics Inc. and
MidCap Financial Trust (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed
by the Registrant on May 8, 2017)
Employment Agreement, as amended, between the Registrant and Marcio Souza (incorporated by reference
to Exhibit 10.6 to the Quarterly Report on Form 10-Q filed by the Registrant on August 9, 2017)
Employment Agreement, as amended, between the Registrant and Christine Utter (incorporated by reference
to Exhibit 10.2 to the Quarterly Report on Form 10-Q filed by the Registrant on August 6, 2019)
Collaborative Research Agreement, dated September 30, 2015, as amended, by and between (cid:1)ational
Taiwan University and Agilis Biotherapeutics, Inc. (formerly Agilis Biotherapeutics, LLC) (incorporated by
reference to Exhibit 10.3 on Form 10-Q filed by Registrant on (cid:1)ovember 5, 2018)
License and Technology Transfer Agreement, dated December 23, 2015, by and among (cid:1)ational Taiwan
University, Professor Wuh-Lian(Paul) Hwu and Agilis Biotherapeutics, Inc. (formerly Agilis
Biotherapeutics, LLC) (incorporated by reference to Exhibit 10.3 on Form 10-Q filed by Registrant on
(cid:1)ovember 5, 2018)
10.42*
License and Technology Transfer Agreement Amendment (cid:1)o. 2, dated December 1, 2019, by and among
(cid:1)ational Taiwan University, Professor Wu-Lian (Paul) Hwu and PTC Therapeutics GT, Inc.
10.43†
Collaboration and License Agreement, dated August 1, 2018, by and between PTC Therapeutics
International Limited and Akcea Therapeutics, Inc. (incorporated by reference to Exhibit 10.3 on Form 10-Q
filed by Registrant on (cid:1)ovember 5, 2018)
10.44
2016 Employee Stock Purchase Plan (incorporated by reference to Exhibit A to the Definitive Proxy
Statement on Schedule 14A filed by the Registrant on April 28, 2016)
10.45+
10.46*
10.47
10.48+
10.49+
10.50+
Employment Agreement, as amended, between the Registrant and Emily Hill (incorporated by reference to
Exhibit 10.1 to the Quarterly Report on Form 10-Q filed by the Registrant on August 6, 2019)
Lease Agreement dated as of August 3, 2019, by and between Bristol-Myers Squibb Company and PTC
Therapeutics, Inc. (incorporated by reference to Exhibit 10.5 to the Quarterly Report on Form 10-Q filed by
the Registrant on October 30, 2019)
Irrevocable Standby Letter of Credit, dated September 3, 2019, issued by HSBC Bank USA, (cid:1).A. in favor
of Bristol-Myers Squibb Company for the Account of PTC Therapeutics, Inc., as amended (incorporated by
reference to Exhibit 10.6 to the Quarterly Report on Form 10-Q filed by the Registrant on October 30, 2019)
2020 Inducement Stock Incentive Plan (incorporated by reference to Exhibit 99.3 to the Registration
Statement on Form S-8 (File (cid:1)o. 333-235823), of the Registrant)
Form of Inducement Option Agreement under the 2020 Inducement Stock Incentive Plan (incorporated by
reference to Exhibit 99.4 to the Registration Statement on Form S-8 (File (cid:1)o. 333-235823), of the
Registrant)
Form of Inducement Restricted Stock Agreement under the 2020 Inducement Stock Incentive Plan
(incorporated by reference to Exhibit 99.5 to the Registration Statement on Form S-8 (File (cid:1)o. 333-235823),
of the Registrant)
10.51*
First Amendment to Lease Agreement dated as of October 7, 2019 by and between Bristol-Myers Squibb
Company and PTC Therapeutics, Inc.
21.1
Subsidiaries of the Registrant
23.1
Consent of Independent Registered Public Accounting Firm
192
Exhibit
(cid:1)umber
Description of Exhibit
24.1
Power of attorney (included on the signature page to this Form 10-K)
31.1
31.2
32.1
32.2
Certification of Principal Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities
Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification of Principal Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities
Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
101.I(cid:1)S
Inline XBRL Instance Document
101.SCH Inline XBRL Taxonomy Extension Schema Document
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Database
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document
104
Cover Page Interactive Data File (formatted Inline XBRL and contained in Exhibit 101)
†
+
*
Confidential treatment has been granted for certain portions that are omitted from this exhibit. The omitted information
has been filed separately with the U.S. Securities and Exchange Commission (the “SEC”) pursuant to the registrant’s
application for confidential treatment. In addition, schedules have been omitted from this exhibit pursuant to Item 601(b)
(2) of Regulation S-K. A copy of any omitted schedule will be furnished supplementally to the SEC upon request;
provided, however, that the registrant may request confidential treatment for any document so furnished.
Management contract, compensatory plan or arrangement.
Portions of this exhibit have been omitted pursuant to Item 601(b)(10)(iv) of Regulation S-K.
Stockholders may obtain (without charge) a copy of this Annual Report on Form 10-K (including the financial statements
and financial statement schedules) and a copy of any exhibit thereto (upon payment of a fee limited to our reasonable
expenses in furnishing such exhibit) by writing to PTC Therapeutics, Inc., 100 Corporate Court, South Plainfield, (cid:1)ew
Jersey 07080.
Item 16. Form 10-K Summary
(cid:1)one.
193
Pursuant to the requirements to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIG(cid:1)ATURES
Date: March 2, 2020
By:
/s/ STUART W. PELTZ
Stuart W. Peltz, Ph.D.
Chief Executive Officer
(Principal Executive Officer)
PTC THERAPEUTICS, I(cid:1)C.
POWER OF ATTOR(cid:1)EY
We, the undersigned officers and directors of PTC Therapeutics, Inc., hereby severally constitute and appoint Stuart W. Peltz
and Mark E. Boulding, and each of them singly (with full power to each of them to act alone), our true and lawful attorneys-in-
fact and agents, with full power of substitution and resubstitution in each of them for him and in his name, place and stead, and
in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits
thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-
in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite or necessary
to be done in and about the premises, as full to all intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements to the requirements of the Securities Exchange Act of 1934, this report has been signed below
by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Dated: March 2, 2020
Dated: March 2, 2020
Dated: March 2, 2020
Dated: March 2, 2020
Dated: March 2, 2020
Dated: March 2, 2020
Dated: March 2, 2020
/s/ STUART W. PELTZ
Stuart W. Peltz
Chief Executive Officer and Director
/s/ EMILY HILL
Emily Hill
Chief Financial Officer
(Principal Financial Officer)
/s/ CHRISTI(cid:1)E UTTER
Christine Utter
Chief Accounting Officer
(Principal Accounting Officer)
/s/ MICHAEL SCHMERTZLER
Michael Schmertzler
Director
/s/ ALLA(cid:1) JACOBSO(cid:1)
Allan Jacobson
Director
/s/ STEPHA(cid:1)IE S. OKEY
Stephanie S. Okey
Director
/s/ EMMA REEVE
Emma Reeve
Director
By:
By:
By:
By:
By:
By:
By:
194
Dated: March 2, 2020
Dated: March 2, 2020
Dated: March 2, 2020
Dated: March 2, 2020
By:
By:
By:
By:
/s/ DAVID P. SOUTHWELL
David P. Southwell
Director
/s/ GLE(cid:1)(cid:1) D. STEELE
Glenn D. Steele
Director
/s/ DAW(cid:1) SVORO(cid:1)OS
Dawn Svoronos
Director
/s/ JEROME B. ZELDIS
Jerome B. Zeldis
Director
195
Exhibit 21.1
Significant Subsidiaries of PTC Therapeutics, Inc.
PTC Therapeutics International Limited
Jurisdiction of Incorporation or Organization
Ireland
Exhibit 23.1
CO(cid:1)SE(cid:1)T OF I(cid:1)DEPE(cid:1)DE(cid:1)T REGISTERED PUBLIC ACCOU(cid:1)TI(cid:1)G FIRM
We consent to the incorporation by reference in the following Registration Statements:
(1) Registration Statement (Form S-8 (cid:1)o. 333-194323) pertaining to the 2013 Long Term
Incentive Plan, and the Inducement Stock Option Award,
(2) Registration Statement (Form S-8 (cid:1)o. 333-189962) pertaining to the 2013 Long Term
Incentive Plan, the 2013 Stock Incentive Plan, the 2009 Equity and Long Term Incentive Plan,
as amended, and the 1998 Employee, Director and Consultant Stock Option Plan, as amended,
(3) Registration Statement (Form S-8 (cid:1)o. 333-203485) pertaining to the Inducement Stock Option
Awards (April 2014 - January 2015),
(4) Registration Statement (Form S-8 (cid:1)o. 333-208830) pertaining to the 2013 Long Term
Incentive Plan and Inducement Stock Option Awards (February 2015 – October 2015),
(5) Registration Statement (Form S-8 (cid:1)o. 333-211997) pertaining to the 2016 Employee Stock
Purchase Plan and the Inducement Stock Option Awards (December 2015 – April 2016),
(6) Registration Statement (Form S-8 (cid:1)o. 333-215407) pertaining to the 2013 Long Term
Incentive Plan and the Inducement Stock Option Awards (September 2016 – December 2016),
(7) Registration Statement (Form S-3 (cid:1)o. 333-220151) of PTC Therapeutics Inc.,
(8) Registration Statement (Form S-8 (cid:1)o. 333-222391) pertaining to the 2013 Long Term
Incentive Plan and the Inducement Stock Option Awards (January 2017 – December 2017),
(9) Registration Statement (Form S-8 (cid:1)o. 333-229126) pertaining to the 2013 Long Term
Incentive Plan and the Inducement Grant Awards (January 2018 – December 2018),
(10) Registration Statement (Form S-8 (cid:1)o. 333-235823) pertaining to the 2013 Long Term
Incentive Plan, the Inducement Grant Awards (January 2019 – December 2019) and the 2020
Inducement Stock Incentive Plan.
of our reports dated March 2, 2020, with respect to the consolidated financial statements of PTC
Therapeutics, Inc. and the effectiveness of internal control over financial reporting of PTC
Therapeutics, Inc. included in this Annual Report (Form 10-K) of PTC Therapeutics, Inc. for the
year ended December 31, 2019.
/s/ Ernst & Young LLP
Iselin, (cid:1)ew Jersey
March 2, 2020
Exhibit 31.1
I, Stuart W. Peltz, certify that:
CERTIFICATIO(cid:1)S
1.
2.
3.
4.
I have reviewed this Annual Report on Form 10-K of PTC Therapeutics, Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and
for, the periods presented in this report;
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting
(as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
(b)
(c)
(d)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period
in which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred
during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control
over financial reporting; and
5.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or
persons performing the equivalent functions):
(a)
(b)
All significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role
in the registrant's internal control over financial reporting.
Date: March 2, 2020
By:
/s/ STUART W. PELTZ
Stuart W. Peltz
Chief Executive Officer
(Principal Executive Officer)
Exhibit 31.2
I, Emily Hill, certify that:
CERTIFICATIO(cid:1)S
1.
2.
3.
4.
I have reviewed this Annual Report on Form 10-K of PTC Therapeutics, Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and
for, the periods presented in this report;
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting
(as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
(b)
(c)
(d)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period
in which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred
during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control
over financial reporting; and
5.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or
persons performing the equivalent functions):
(a)
(b)
All significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role
in the registrant's internal control over financial reporting.
Date: March 2, 2020
By:
/s/ EMILY HILL
Emily Hill
Chief Financial Officer
(Principal Financial Officer)
CERTIFICATIO(cid:1) PURSUA(cid:1)T TO 18 U.S.C. SECTIO(cid:1) 1350,
AS ADOPTED PURSUA(cid:1)T TO
SECTIO(cid:1) 906 OF THE SARBA(cid:1)ES-OXLEY ACT OF 2002
Exhibit 32.1
In connection with the Annual Report on Form 10-K of PTC Therapeutics, Inc. (the "Company") for the period ended
December 31, 2019 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned,
Stuart W. Peltz, Chief Executive Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, that to his
knowledge:
(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act
of 1934; and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition
and results of operations of the Company.
Date: March 2, 2020
By:
/s/ STUART W. PELTZ
Stuart W. Peltz
Chief Executive Officer
(Principal Executive Officer)
CERTIFICATIO(cid:1) PURSUA(cid:1)T TO 18 U.S.C. SECTIO(cid:1) 1350,
AS ADOPTED PURSUA(cid:1)T TO
SECTIO(cid:1) 906 OF THE SARBA(cid:1)ES-OXLEY ACT OF 2002
Exhibit 32.2
In connection with the Annual Report on Form 10-K of PTC Therapeutics, Inc. (the "Company") for the period ended
December 31, 2019 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned,
Emily Hill, Principal Financial Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, that to her
knowledge:
(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act
of 1934; and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition
and results of operations of the Company.
Date: March 2, 2020
By:
/s/ EMILY HILL
Emily Hill
Chief Financial Officer
(Principal Financial Officer)
[This page intentionally left blank.]
BOARD OF DIRECTORS
Michael Schmertzler
Chairman of the Board
PTC Therapeutics, Inc.
Allan Jacobson, Ph.D.
Gerald L. and Zelda S.
Haidak Distinguished
Professor of Cell Biology
University of
Massachusetts
Medical School
Stephanie Okey
Senior Vice President,
Head of North America,
Rare Diseases &
U.S. General Manager,
Rare Disease Business Unit
Genzyme
Stuart W. Peltz, Ph.D.
Chief Executive Officer
PTC Therapeutics, Inc.
Emma Reeve
Chief Financial Officer
Constellation
Pharmaceuticals, Inc.
David P. Southwell
Chief Executive Officer
TScan Therapeutics, Inc.
Glenn D. Steele, Jr.,
M.D., Ph.D.
Chairman
GSteele Health Solutions
Dawn Svoronos
Former President of
Europe/Canada
Merck
Jerome B. Zeldis,
M.D., Ph.D.
Chief Medical Officer &
President of
Clinical Development
Sorrento Therapeutics, Inc.
STOCK PERFORMANCE GRAPH*
The following graph illustrates a comparison of the total cumulative stockholder return
on the Common Stock of PTC Therapeutics’ Stock from investing on January 1, 2014
through December 31, 2019, in two indices: the NASDAQ Biotechnology Index (NBI) and
the NASDAQ Composite Index (IXIC). Data for the NASDAQ Biotechnology Index (NBI) and the
NASDAQ Composite Index (IXIC) assume reinvestment of dividends. The stockholder return
shown in the graph below is not necessarily indicative of future performance, and we do not
make or endorse any predictions as to future stockholder returns.
$250.00
$200.00
$150.00
$100.00
$50.00
$0.00
4/22/20
PTCT
PTCT
NASDAQ Composite
NASDAQ Composite
NASDAQ Biotech
NASDAQ Biotech
* The information contained in this Stock Performance Graph shall not be deemed “soliciting material” or to be
“filed” with the SEC, for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or the
Exchange Act, or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorpo-
rated by reference into any filing of under the Securities Act of 1933 or Securities Exchange Act of 1934, each
as amended, except to the extent that we specifically incorporate it by reference into such filing.
$100 Investment
in Stock or Index
Dec 31,
2014
Dec 31,
2015
Dec 31,
2016
Dec 31,
2017
Dec 31,
2018
Dec 31,
2019
PTC Therapeutics, Inc.
(PTCT)
NASDAQ Composite
(IXIC)
$ 100
$ 63
$ 21
$ 32
$ 66
$ 93
$ 100
$ 106
$ 114
$ 146
$ 140
$ 189
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NASDAQ Biotechnology
Index (NBI)
$ 100
$ 112
$ 87
$ 106
$ 95
$ 119
EXECUTIVE
COMMITTEE
Stuart W. Peltz, Ph.D.
Chief Executive Officer
Neil Almstead, Ph.D.
Chief Technical Operations Officer
Mark E. Boulding
Executive Vice President
and Chief Legal Officer
Tim Dyer
Vice President, Chief of Staff to the CEO
and Global Facilities Manager
Mary Frances Harmon
Senior Vice President
Corporate and Patient Relations
Emily Hill
Chief Financial Officer
Matthew Klein, M.D.
Chief Development Officer
Eric Pauwels
Chief Business Officer
Mark J. Pykett, V.M.D., Ph.D.
Chief Scientific Officer
Martin Rexroad
Senior Vice President
Human Resources
Christine Utter
Senior Vice President, Chief Accounting
Officer and Head of People Services
STOCKHOLDER
INFORMATION
Market Information
PTC’s common stock trades on
the NASDAQ Global Market under
the ticker symbol PTCT.
Global Corporate Headquarters
PTC Therapeutics, Inc.
100 Corporate Court
South Plainfield, NJ 07080
PTC Therapeutics
International Limited
5th Floor
3 Grand Canal Plaza
Grand Canal Street Upper
Dublin D04 EE70 Ireland
Annual Meeting
The Annual Meeting of the Stockholders
will be held on Wed., June 10th at 9am.
Due to uncertainties of the novel Covid-19
pandemic and health restrictions, please
check the the company website for the
location 2 weeks before the meeting.
Transfer Agent
American Stock Transfer
6201 15th Avenue
Brooklyn, NY 11219
Independent Registered
Public Accounting Firm
Ernst and Young
99 Wood Avenue South
Iselin, NJ 08830
Global Corporate Headquarters
PTC Therapeutics, Inc.
100 Corporate Court
South Plainfield, NJ 07080 USA
PTC Therapeutics International Limited
5th Floor
3 Grand Canal Plaza
Grand Canal Street Upper
Dublin DO4 EE70 Ireland
For more information visit
www.ptcbio.com