2020 Annual Report
HERE FOR you
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.
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.
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.
RARE RESOLVE FOR RARE DISEASE
Our people choose to work here because they believe in the moments that we build—
in the labs and for our patients.
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
2020 was a year like no other in our
lifetime. It was marked by a global
pandemic that impacted all of us and
made life more challenging on both
personal and professional levels. Even
in the face of these issues, however, I
am pleased to report that PTC rose to
the occasion, making 2020 an incredibly
productive and successful year. Having
just celebrated our 23rd anniversary, I
am proud that our company is better
positioned to drive innovation and
capitalize on our diversified and robust
scientific platforms and programs.
Even at the beginning of the pandemic,
PTC was able to pivot quickly and adjust
the way we worked in the “new normal”
environment. We recognized the potential
issues that a pandemic would cause
and closed our facilities earlier than
almost any other company, stopping
all non-essential business travel in late
February and subsequently went to fully
remote operations within the first week
of March last year. We created several
task forces to deal with multiple aspects
of the crisis, with the emphasis on
continuing to be productive and to ensure
patients would still receive their therapies.
New approaches to communicate
with employees were developed, with
weekly video messages and constant
and consistent transparent public
discussions. The safety of our employees
and our patients was paramount in all the
decisions we made.
Clinical trials became a particular
challenge, but we had an advantage
because most of our therapies in
development are small molecule drugs
that are orally administered. This means
no injection or infusion is needed, so that
dangerous trips to hospitals overwhelmed
Stuart W. Peltz, Ph.D., Chief Executive Officer
with the COVID-19 response were not
necessary. Therefore overall, we were
uniquely positioned to ensure the
continuation of our clinical trials even in
these most difficult times. We were able
to initiate five clinical trials, including three
registration-directed trials, of which two
are from our Bio-e platform.
We have had substantial revenue
growth this year and have increased
our capabilities to discover, develop and
commercialize our diversified pipeline.
As the pandemic unfolded, we suspended
the financial guidance for the year.
Nonetheless, I am proud to report that
revenues for the year were in line with
our pre-pandemic estimates, with 14
percent year-over-year growth, and total
net product revenue was $331 million.
The increased revenue was driven by our
Duchenne muscular dystrophy franchise
consisting of Translarna™ (ataluren)
and Emflaza® (deflazacort). Of note,
revenue for Emflaza increased 38 percent
year-over-year. Translarna’s growth
was driven by new patients in existing
geographies, geographic expansion, and
label updates driving broader access.
The revenue generated helps drive the
continued investment in developing
new treatments for patients with high
unmet need.
I am incredibly proud of how we
weathered the storm. It is a testament
to our employees -- their ingenuity and
“Having just celebrated
our 23rd anniversary,
I am proud that our
company is better
positioned to drive
innovation and
capitalize on our
diversified and robust
scientific platforms
and programs.”
>>
PTC 2020 ANNUAL REPORT 1
DRIVING results
CONTINUED STRONG DMD FRANCHISE GROWTH
(USD MILLIONS)
Emflaza® Net Sales
Translarna™ Net Sales
81
34
+58%
263
174
29
145
291
101
190
92
171
331
139
192
2015
2016
2017
2018
2018
2020
MULTIPLE PLATFORMS PROVIDE OPPORTUNITY
TO TREAT OVER 500,000 PATIENTS BY 2030
PTC-AADC
DMD SMA AADC
~50K
ME
~20K
PKU
~58K
FA
~25K
HD
~135K
GBA-PD
~190K
AS
~75K
2021
2030
2
PTC 2020 ANNUAL REPORT 3
Shareholder’s Letter Continued
perseverance in the face of multiple
challenges; their resilience and adaptability
as circumstances changed; and their
passion for our mission to provide
innovative treatments to patients with
debilitating rare diseases that have few or
no treatment options. PTC has emerged a
stronger and more resilient company.
Perhaps the most significant milestone
achieved in 2020 was in August with the
FDA approval of Evrysdi™ (risdiplam),
the first at-home, orally administered
treatment for spinal muscular atrophy
(SMA) in adults and children two
months and older. SMA is a devastating
neuromuscular disease that is the leading
genetic cause of death in infants and
young children. Evrysdi was discovered
from PTC’s splicing platform and was
developed in collaboration with Roche
and the SMA Foundation.
The development of Evrysdi provides
an example of the level of dedication
and perseverance that is a hallmark of
PTC. Back in 2005, the SMA Foundation
approached us to develop therapies for
SMA. One program was the identification
of molecules that selectively and
specifically affect splicing. We screened
our compound library of more than
300,000 molecules. The program
had well over fifty scientists including
biologists, chemists, pharmacologists,
and toxicologists. It also took enormous
resources and dedication from our
collaboration partners, including the
SMA Foundation and in 2011 F. Hoffmann
La Roche Ltd. (Roche), who joined us in
this effort.
More recently, the European Commission
approved Evrysdi for SMA patients two
months and older. Roche has stated
publicly that Evrysdi is expected to
become the treatment of choice for SMA
patients in the United States in 2021,
and we are pleased to have brought such
a game-changing therapy to market.
While our journey was not always
straightforward, we believe that the results
of bringing such an important therapy to
patients with such high unmet need are a
testament to all that makes PTC great.
We continue to build on our splicing
platform and have multiple programs
based on this technology. I am happy to
report that another development candidate
from our splicing platform, PTC518,
has moved into clinical development
in 2020. PTC518 is being developed as
a potential treatment for Huntington’s
disease. PTC518 alters huntingtin (HTT)
splicing that causes the reduction of HTT
levels, which is critically important for
treating Huntington’s disease. We recently
shared our preliminary results from the
phase 1 healthy volunteer trial. We are
pleased to report that PTC518 treatment
resulted in dose-dependent reduction of
HTT messenger RNA levels. PTC518 was
well-tolerated at all dose levels with no
safety findings observed. Like risdiplam,
it is a small molecule that distributes
to all tissues in the body and therefore
PTC518 is able to get to all tissues in the
brain. This is a critical attribute of PTC518
because of the neurodegenerative nature
of Huntington’s disease. We feel confident
that, with our experience with SMA drug
development, we are well positioned for
success to drive PTC518 development to
treat Huntington’s Disease.
Let me turn to our gene therapy platform
to treat rare monogenic diseases. Our
most advanced gene therapy product,
PTC-AADC, is a gene therapy for the
treatment of Aromatic L-Amino Acid
Decarboxylase, or AADC deficiency.
In 2020, we submitted a marketing
authorization application to European
regulatory authorities and expect an
opinion from the EMA’s Committee for
“I am incredibly
proud of how we
weathered the storm.
It is a testament
to our employees
-- their ingenuity
and perseverance in
the face of multiple
challenges.”
>>
PTC 2020 ANNUAL REPORT 3
Global Geographic Presence
Supports Growing Product Portfolio
OFFICES IN
20COUNTRIES
FOOTPRINT IN
MORE THAN
50COUNTRIES
1KEMPLOYEES
Significant Execution
& Value Creation In 2020
CLINICAL
• Initiated two potential
registrational trials
with vatiquinone in
Mitochondrial Epilepsy
& Friedreich ataxia.
• Completed Translarna™
dystrophin trial
for potential US
accelerated approval
• Initiated trial of
PTC518 in healthy
volunteers for
Huntington’s
disease program
REGULATORY
• Evrysdi™ approval
in US and multiple
additional countries
• Submitted MAA to
EMA for gene therapy
to treat AADC deficiency
• Translarna™ label
modification related
to non-ambulatory
patients
COMMERCIAL
• Broader patient
access and continued
geographic growth
of Translarna™
• Strong Emflaza® growth:
38% year-over-year
• Evrysdi™ strong
commercial launch
FINANCIAL
• Strengthened balance
sheet; over $1B
cash position
• $333M Net
Product Revenue
• $331 DMD Franchise
Net Product Revenue
• $42.5M Roche
Collaboration Revenue
associated with Evrysdi™
regulatory and sales
milestones
4
PTC 2020 ANNUAL REPORT 5
Shareholder’s Letter Continued
Medicinal Products for Human Use
(CHMP). We are also preparing a biologics
license application for PTC-AADC for
the treatment of AADC deficiency in the
United States.
We had been concerned with the issues
that have arisen because of the pandemic.
We recognized the devastation of the
lost jobs and economic havoc that the
pandemic was causing, which included
the impact of the constricted job market
on recent university graduates. To address
this problem, we launched an intern
program for recent graduates. We hired 53
interns with diverse backgrounds, and they
are currently working across all aspects
of the company. They are doing important
work and have shown enthusiasm,
commitment, and passion. It has been
inspiring to watch them grow. We are
proud to help support the next generation
of intelligent and highly motivated
individuals who can become the next
generation leaders in the biotech industry.
We also looked within our pipeline to
determine whether we have potential
therapies to treat COVID-19 patients.
PTC299, a dihydroorotate dehydrogenase
(DHODH) inhibitor, was shown to be a
potential treatment. PTC299 targets
two key elements of the virus infection,
viral replication and the uncontrolled
inflammatory response. Another benefit is
that DHODH is a cellular enzyme, making
it less likely to elicit drug resistance and
not be limited by the variants. While
great strides have been made in vaccine
development, the lack of effective
COVID-19 treatments has significantly
hampered our ability to resume normal life.
In 2020, we were able to rapidly initiate a
Phase 2/3 registrational trial of PTC299
for COVID-19.
The progress made in 2020 is a testament
to PTC’s culture and its people. We strive
to create a culture based on trust, respect,
and inclusion. Our employees behaved
as “one PTC”—a team that is passionate
about purpose and focused on bold action.
Their commitment pushes us to always do
better, and to be better. In fact, at a time
where employees could have disengaged
with their jobs and the company, we
saw record engagement that surpassed
standards observed across our industry. It
is a testament to our commitment and a
desire to want to do great things for all our
stakeholders.
We now have employees in over 20
countries around the globe, making
diversity a natural element of our culture.
We continue to foster our diverse and
talented group of professionals and
develop them so that they can continue
to grow and tackle new responsibilities.
In 2020, we formalized our Equality,
Diversity and Inclusion (ED&I) initiatives
and hired a dynamic leader who will bring
our efforts even further, bringing new
opportunities to women, minorities, and
other underrepresented groups early and
often, through education, mentorship, and
career flexibility which is core to our focus.
This, too, is part of what makes PTC the
company it is, and why I believe, building
on our success in 2020, we are poised for
an even brighter future.
Sincerely,
Stuart W. Peltz, PhD
Chief Executive Officer
“The progress made
in 2020 is
a testament to
PTC’s culture
and its people.
We strive to create
a culture based
on trust, respect,
and inclusion.”
PTC 2020 ANNUAL REPORT 5
PTC THERAPEUTICS
2020 CORPORATE
RESPONSIBILITY
PTC’s commitment to ESG focuses
on five key areas: our patients,
our people, our community,
our values and the environment.
PTC 2020 ANNUAL REPORT 7
PTC’S COMMITMENT
TO ESG FOCUSES ON
FIVE KEY AREAS: OUR
PATIENTS, OUR PEOPLE,
OUR COMMUNITY,
OUR VALUES AND
THE ENVIRONMENT.
OUR PATIENTS
PTC was founded with the mission
of discovering, developing and
commercializing therapies for
diseases with high unmet medical
need. Today, we have multiple
products on the market that are
making a difference in the lives of
patients and their families, and many
more product candidates in our
pipeline. Examples of our commitment
to patients include:
• We continue to invest both internally
and externally in cutting-edge
research programs to search for
treatments for patients suffering
from diseases with little to no
treatment options.
• We have doubled the number of
scientists we employ over the last
year and have significantly increased
the number of internal research
programs to search for drugs to treat
rare diseases.
• We are also supporting external
research programs for next
generation rare disease therapies.
We recently announced a
regenerative medicine collaboration
with the SMA Foundation to give
grants to investigators exploring
new approaches to promote muscle
regeneration in patients with rare
genetic disorders. This collaboration
will fund six programs; three were
funded in 2020 and three will be
funded in 2021.
• We have made commitments to
patients that they will continue
to receive our investigational
therapies beyond their clinical trial.
For example, in the United States,
we have been treating over 150
Duchenne muscular dystrophy
patients with ataluren for free for
over a decade.
• We have a long-standing
commitment to work with and
support patient advocacy groups,
which are incredibly important
assets to rare disease patients and
their families. We have relationships
globally with approximately 200
patient advocacy groups. We have
committed significant funding
through unsolicited grants to support
patients through their patient
advocacy groups.
• Over the last six years we have
built a robust grant program
called STRIVE for patient advocacy
groups and have awarded over 30
grants to patient-focused groups
through an independently governed
review process.
- An example of a recent recipient
was the group called Cure Rare
Disease, a patient organization
based in Boston that will use the
STRIVE funding to create a student
life science immersion program
that exposes school-age children to
rare diseases to develop a greater
sense of empathy for patients.
- Other examples of recent STRIVE
awards can be found at https://
www.ptcbio.com/our-company/
grants-and-donations/strive/
• We support programs to ensure
patients in the United States
can receive treatment despite
insurance co-payment expenses. In
2020, PTC donated $2.2 million to
organizations that assist patients
with co-payment expenses.
• PTC has been a leader in providing
diagnostic capabilities to healthcare
professionals globally. We have
invested in teaching physicians
and healthcare providers to identify
symptoms that are then diagnosed
specifically – some of which can
be treated by PTC with a current or
future treatment option.
OUR PEOPLE
From our beginnings 23 years ago, and
as a founder-led startup in New Jersey,
we have grown to be a global company
with over 1,000 employees. We take
great pride in our corporate culture.
Our employees share our sense of
purpose and our goal of bringing
life-changing therapies to patients in
need. We support the growth of our
employees in many ways, including:
• Regular use of the Gallup® Q12 survey
to measure employee engagement,
with a transparent process for
discussing results and improving
engagement. We work hard to ensure
that employees are engaged.
- In a recent pulse survey designed
to assess our progress during
the global pandemic, our scores
(already above average for our
industry) continued to increase
even during the pandemic.
• Based on research, we evolved
our management style to a
coaching approach, focusing
on employee strengths.
>>
PTC 2020 ANNUAL REPORT 7
G
S
E
KEY CORPORATE
RESPONSIBILITY METRICS
OUR PATIENTS
• PTC invested 66%* in R&D to continue to find and develop
treatments for patients with unmet need
OUR COVID-19
RESPONSE
• To date, over 18,000 free genetic tests have been distributed to
support accurate diagnosis for rare disease patients
• Partnership with over 200 global patient advocacy groups
to support patients with rare diseases
• Since 2015, PTC has provided hundreds of millions of dollars of
our treatments at no cost
• 5 programs in place to enable patients to be able to access PTC approved
therapies regardless of financial or insurance status (PTC-ACTS+)
• Established program that allows siblings of our DMD patients to have free
access to our medicines
• Initiated Talented Pipeline Program providing 53 recent
graduates on-the-job work experience through one year internships
• Stopped all non-essential travel in February 2020 before the
initiation of global lockdowns
• Established 3 COVID Taskforce teams
- Team developing and monitoring safety protocols to protect our
workers as well as business essential operations team focused on
return to long term planning
- Team focused on monitoring supply chain, development and commercial
needs during pandemic and transition to remote working
• 100% of research and tech facilities open during the pandemic
through optimized resource allocation
• Initiated clinical trial for a potential COVID-19 treatment
* As a percentage of Business Opearation Expenses (R&D + SG&A)
8
PTC 2020 ANNUAL REPORT 9
2020 OUR VALUES
THE
ENVIRONMENT
OUR PEOPLE
• Support local STEM programs as part of our Adopt a School initiative
• 100% participation in compliance training
• Formalized ED&I program; Hired Leader to expand program
• Chartered a woman’s leadership group and black empowerment council
• Supported programs for the advancement of underprivileged women
• $1.8M donated in 2020 through educational grants and donations
• 20% of our electricity is from green sources
• Installed charging stations for electric cars at our Corporate Headquarters
• Reduced radioactive waste generation with new scientific approaches
• 36% of our total waste was recycled
• Reduced landfill waste by 65 tons
• Increased our employee Gallup engagement scores
in every category; despite being in a pandemic
- 96% of our employees responded to the survey
• Increased employee education opportunities by over 300%
- Hosted 54 PTC University learning sessions covering topics from personal
wellness to scientific discovery
• Global employee demographics
- 48.5% female
- 45.5% male
- 6% not declared
• Launched Gallup’s Clifton Strength Finders & HDBI
(Herrmann Brian Dominance Instrument) assessments with coaching
to support employee development
- 100% of employees participated in Gallup Strength Finders
• Launched Gallup Boss to Coach training to mentor and support the
development of our leaders
• Free access to a digital on-demand career and management
learning solutions platform for all employees
8
PTC 2020 ANNUAL REPORT 9
2020 G
S
E
ESG Continued
- We use company-wide analytic
• We have always had a strong culture
and coaching tools to assess each
employee’s strengths.
- We utilize the Gallup®
CliftonStrengths assessment
and the Herrmann Brain
Dominance Instrument (HBDI®)
assessment to identify each
person’s top strengths and
behavioral styles.
of equity and diversity within the
organization. In 2020, we formally
established a global Equality,
Diversity, and Inclusion (ED&I)
program and named a Chief Culture
& Community Officer. We also
brought on board an experienced
ED&I professional to spearhead
our efforts.
• We were awarded the Great Place
to Work certificate in Brazil, our
headquarters in Latin America.
• The sustained effort and success of
these programs were recognized by
the Gallup organization by receiving
the 2021 “Don Clifton Strengths-
Based Culture Award” from Gallup.
PTC was one of six companies
selected by an independent panel of
judges to receive this award, which
recognizes organizations with strong
workplace cultures that get the best
out of their employees.
• We have built a strong talent
management program for leadership
training throughout the organization.
We also have built programs to groom
high performing employees with
training and mentorships to be the
next generation company leaders.
- Our talent management program
includes regular assessments by
managers and peers, individual
development plans at multiple
levels, comprehensive succession
planning, targeted retention
programs, and a formal mentorship
process to develop talented
employees within the company.
• We have an overarching human
resource business partner structure
to implement these programs
into practice. This represents both a
financial investment in our workforce
and a strong commitment to grow
and develop our people.
• We have also recognized and
appreciated the importance of
being intentional about our diversity
efforts. We have established multiple
diversity groups within PTC that
allow people to come together to
discuss issues in a comfortable and
safe setting. The ED&I groups meet
regularly and interact with the CEO
and Executive Committee. We have
monthly programs to accentuate our
diverse culture, each managed by a
member of the Executive Committee.
• We have established a Global
Outreach Steering Committee to
focus on company-wide volunteer
and giving opportunities. They focus
on a strategy, identify volunteer
opportunities, and target charities
based on input from our employees.
• We offer employees an extensive
range of educational benefits
and opportunities, including a
tuition reimbursement program, a
company-wide education program
(“PTC University”) which showcases
internal and external experts on a
wide variety of topics, and support
for membership in professional
associations and attendance at
educational conferences.
• We provide global training through
a centralized learning management
system for all employees tailored
to their roles and responsibilities
at PTC, including GxP training for
appropriate employees.
• We manage our corporate goals and
performance through the system
of “OKRs,” or “Objectives and
Key results,” pioneered at Intel by
Andy Grove and widely used in the
technology industry. All OKRs from
the CEO on down are transparent
to all employees through an
internal system we developed and
are refreshed and assessed on a
quarterly basis.
• As PTC has been in a high growth
mode for several years, we
have developed an exceptional
capability of attracting, recruiting,
and onboarding talent globally,
processes monitored by the
Executive Committee.
• During the COVID-19 pandemic, PTC
was one of the first companies to
analyze public data on the virus and
then reacted ahead of government
guidance to ensure a safe and healthy
environment. We established a Task
Force with senior leaders which has
been working 24/7 for more than a
year to ensure appropriate onsite
safety standards; we provide testing,
conduct our own contact tracing, and
now support the vaccine scheduling
process. The result has been a safe
and healthy work force both onsite
and at home, with no interruptions
to our business, and overall great
business success.
OUR COMMUNITY
At PTC, we believe in paying it forward.
On our journey from startup to a global
commercial life sciences company, we
overcame many obstacles. We have
always given back to the communities
in which we live and operate. We want
to help others, both individuals and
companies, see their own potential
through our example. Some of the
actions we are taking to further this
goal are:
10
PTC 2020 ANNUAL REPORT 11
• We have launched a robust global
internship program called the Talent
Pipeline Program or TPP, during the
COVID-19 pandemic to provide recent
graduates real-world experience in
the biopharmaceutical industry and
related professions. TPP is a paid,
one year-long program that provides
on the job training, career planning
and leadership development.
- Our recruiting included a focus on
colleges that historically served the
African American community in the
United States as well as colleges for
students from low-income families.
We are proud of the diversity of the
interns in this program.
Academy of Science & Engineering
programs, our scientists present at
programs and career fairs in these
schools, and we financially support
these educational programs. We also
support STEM and the life sciences
programs through funding and other
contributions and volunteer efforts
by our employees.
• We believe in communicating all
we are doing within our community,
as exemplified by posts on social
media and on our corporate website
sharing our work with the larger
community: https://www.ptcbio.
com/news-resources/newsroom/
• We work with local high schools in
urban and underprivileged areas to
expose them to the idea of a career
in the life sciences. We support the
Students2Science and the Passaic
OUR VALUES
PTC knows our financial stakeholders
expect us to conduct ourselves
appropriately in terms of governance.
In addition to having a robust
Board of Directors that has access
to the appropriate people and
resources to oversee the Company,
this includes assessing risks and
working to ensure ethical behavior
by our employees and business
partners globally. Examples of our
commitments in this area include:
• We have a formal Board committee
structure for oversight and risk
management, including independent
chair and CEO roles. Since our initial
public offering in 2013, we have
added four new Board members
and propose to add a fifth this year.
If the directors proposed for election
this year receive approval from our
shareholders, PTC’s Board will meet
the proposed NASDAQ requirements
for Board diversity and will include
four women (on a Board of
10 directors).
>>
PTC 2020 ANNUAL REPORT 11
10
G
S
E
ESG Continued
• We have a fully developed
• We routinely conduct audits of
Global Compliance Program
that incorporates the elements
of an effective compliance
program in accordance with the
“Compliance Program Guidance for
Pharmaceutical Manufacturers,”
developed by the United States
Department of Health and Human
Services, Office of Inspector
General (“OIG”) and other laws and
regulations that govern our industry.
Key aspects of our program include
written policies and procedures,
general and role specific-company-
wide training, training of business
partners, regular auditing and
monitoring, third party due diligence
and where necessary disciplinary
actions and corrective measures.
• Our Chief Compliance Officer
manages our compliance program
with a global team, including
representatives in Europe and Latin
America, and has direct access and
dotted line reporting to our CEO and
Board members.
• Our Code of Business Conduct
and Ethics and related compliance
policies and procedures are
prominently posted on our Company
Intranet. Select policies and
procedures are available to the public
via our corporate website: https://
www.ptcbio.com/our-company/
about/global-compliance-program/.
• Our employees have access to
multiple channels to report areas
of concern, including our
confidential whistleblower hotline
via an external vendor.
our global offices and our global
partners, either using our internal
compliance audit team or our
external audit partner (a big four
accounting firm).
• We employ a formal diligence
process to assess potential new
distributors and other key business
partners, including use of an external
vendor for background checks.
• Our global distribution partners are
required to have in place or adopt
an anti-corruption policy and related
training and audit obligations as part
of our standard agreement form.
ENVIRONMENT
As a science-based company, we
understand the impact people have
on the environment. We, as well as
our employees care about the world
we live in and have a stead-fast
commitment to maintaining the
environment. We have always ensured
our actions were compliant with
environmental requirements and
regulations and have encouraged
employee actions which are
environmentally friendly.
• Our laboratories meet all
environmental standards and have
consistently passed inspections by
multiple government authorities.
• We have installed charging stations
for electric vehicles at our corporate
headquarters.
• We have replaced lightbulbs in
all buildings at our corporate
headquarters with LED lighting.
• We have utilized innovative scientific
approaches to reduce generation of
radioactive waste.
• 36% percent of PTC’s total waste
in 2020 was recycled, reducing
landfill waste by 65 tons.
• We have a strong company-
wide recycling program and
seek to maximize our use of
recycled materials.
• We have filtered water coolers in all
facilities to encourage the use of tap
water in lieu of using bottled water.
• We encourage our employees to use
reusable water bottles and cups,
plates and silverware to reduce the
use of paper or plastic cups.
• We have replaced older air handlers
with more energy efficient units to
utilize non-CFC refrigerants.
• We have incorporated Hazardous
Waste Minimization procedures in
our laboratory operations.
• We have organized a “Green Team”
committee that takes action through
recycling and reduction of food
waste programs, as well as other
environmentally sound programs.
12
PTC 2020 ANNUAL REPORT 13
PTC has built a strong, sustainable
company to execute on our mission
Providing patients
access to transformative
treatments
OPERATIONAL
EXCELLENCE
& CULTURE
Proven
groundbreaking
science
Enduring
innovation
engine
PTC Expectations
EVER
BETTER
We are always raising the bar.
We act with a focus on quality
and a sense of urgency.
PASSIONATE ABOUT
PURPOSE
We are more than a company;
we work for a cause.
We make decisions based
on patients’ needs.
CHAMPION INCLUSION,
TRUST & RESPECT
We leverage the strength of
our diversity. We require a fair
and ethical environment where
employees can flourish.
BE
BOLD
We challenge.
We adapt.
WORK AS
ONE PTC
THINK LIKE
AN ENTREPRENEUR
BE
KIND
We are a dynamic, global
network of empowered, high
performing teams that achieve
extraordinary results. We partner
openly to bring out the best in
ourselves and maximize talent.
We are energized by solving
difficult problems, bringing
innovation & creativity to our
work. We are tenacious &
tireless in our quest for
breakthrough solutions.
We go beyond
just being nice.
We are friendly,
considerate and
helpful. We care
about each other.
12
PTC 2020 ANNUAL REPORT 13
MAKING GREAT
progress
Deflazacort
LatAM
Commercial
Nonsense
Mutation
Splicing
Gene
Therapy
Bio-e
Metabolic
Oncology
Virology
SCIENTIFIC PLATFORMS and RESEARCH
COMMERCIAL
US
DYSTROPHIN
vatiquinone ME
PTC923 PKU
PTC596 DIPG
PTC299
COVID-19
PTC-AADC
CLINICAL
PTC518 HD
vatiquinone FA
PTC596 LMS
PTC857 GBA-PD
PTC299 AML
RESEARCH
SCA-3
PTC-FA
Undisclosed
MAP-Tau
PTC-AS
IRDs
Cog Disorders
As of April 15, 2021. AADC, aromatic L-amino acid decarboxylase deficiency; AML; acute myeloid leukemia; COVID-19, coronavirus disease 2019; DIPG, diffuse intrinsic pontine glioma; FA,
Friedreich’s ataxia; GBA, glucocerebrosidase; HD, Huntington‘s disease; IRD, inherited retinal dystrophy; LMS, leiomyosarcoma; ME, Mitochondrial Epilepsy; PD, Parkinson’s disease; PKU,
phenylketonuria; SCA-3, spinocerebellar ataxia type 3.
14
PTC 2020 ANNUAL REPORT 15
INAUGURAL AADC DEFICIENCY AWARENESS DAY
On October 23, 2020, PTC was
honored to present the AADC Family
Network-sponsored inaugural AADC
Deficiency Awareness Day for the
Commonwealth of Massachusetts.
We broadcasted a live discussion of
this official designation on the PTC
Therapeutics Facebook channel
(facebook.com/ptctherapeutics).
This event successfully achieved
more than one million impressions
on social media channels, helping to
raise awareness of this rare disease,
and to enable caregivers, health care
professionals and patient advocates
in sharing resources. The live
broadcast featured presentations by
then MassBio President & CEO Bob
Coughlin, Boston Children’s Hospital
neurologist Irina Anselm, MD, and
PTC’s Chief Development Officer,
Matthew B. Klein, MD, MS FACS. The
featured speaker was Kelly Heger,
founder of the AADC Family Network
and an AADC deficiency parent
herself. Kelly’s heartfelt recounting
of her family’s experience raising
Jillian, a young woman with AADC
deficiency, received overwhelming
encouragement from public
comments on Facebook, during and
since the broadcast.
This event was coordinated by
members of PTC’s Government
Relations, Patient Engagement and
Corporate Communications teams.
“We are endlessly inspired by the
strength and courage exhibited
by the Heger Family – and by the
love they show Jillian,” explains
project leader Ted Piper. “Our team
channeled this inspiration into an
amazing example of teamwork and
collaboration to help Kelly mark an
awareness day and raise awareness
of AADC deficiency across the globe.”
STRIVE AWARDS PROGRAM
2020 marked the 6th year of PTC’s
STRIVE (Strategies to Realize
Innovation, Vision and Empowerment)
Awards Program for Duchenne
muscular dystrophy.
The STRIVE program provides grants
to patient advocacy organizations
globally to realize meaningful projects
that address the unmet needs of the
rare disease community. Since its
launch in 2015, the STRIVE Award has
supported 32 patient groups whose
programs have made a positive
impact through increased awareness
or diagnosis of Duchenne, advanced
education, improved quality of life of
patients, improved patient access to
medical care or fostering of future
patient advocates.
With the unprecedented events of this
year the role of patient organizations
has been more vital than ever in
providing support and keeping rare
disease communities connected.
In 2020, we were proud to
recognize four winning initiatives
and communities who have
continued to show uninterrupted
resilience for the Duchenne
community around the world:
• Argentina: Associacion
Distrofia Muscular
Project that includes an online
platform to improve peer-to-peer
connections
• Hungary: The Healing
Goodwill Foundation
Project that involves a series
of events designed to connect
Duchenne families with healthcare
professionals
• Russia: GAOORDI
‘Not Alone’ program that will
support families navigate the
emotional journey of living a rare
disease diagnosis
• United States: Cure Rare Disease
Ambassadors Program ‘Student
Education & Life Science Immersion
Program’ that will raise awareness
of Duchenne in schools
To learn more about the winning
organizations and their initiatives,
please click here to watch the video.
“I am so proud of the continued
support we are able to provide to
these organizations all around the
world through the STRIVE Awards,
so that they can keep Duchenne
communities supported and connected
through this turbulent time,” said
Mary Frances Harmon, Senior Vice
President, Corporate Relations, PTC
Therapeutics.
14
PTC 2020 ANNUAL REPORT 15
GLOSSARY
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 (LMS) are malignant
tumors of muscle tissue. They are rare tumors
with a high rate of relapse. Median overall
survival is 14 months.
MEDS: Mitochondrial Epilepsy Disorders
(MEDS) 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,
neurological disorders, including epilepsy, occur
quite commonly in mitochondrial disorders.
Most of the epilepsy caused by a mitochondrial
disorder starts in childhood and usually in
the first two years of life. Most mitochondrial
disorders are progressive meaning the symptoms
and the seizures will worsen over time. How
quickly 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.
PKU: Phenylketonuria (PKU) is a rare inherited
metabolic disorder and is caused by a defect in
the gene that helps create the enzyme needed
to break down phenylalanine. Without treatment,
phenylalanine can build up to harmful levels in
the body, causing mental retardation, cognitive
disabilities, seizures and other serious problems.
The majority of patients do not initially respond or
are not well controlled by the standard of care.
SMA: Spinal Muscular Atrophy (SMA) is a
genetic disease caused by mutation or deletion
of the SMN1 (survival of motor neuron) gene. In
its most severe forms, is associated with a high
rate of childhood mortality. SMA 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.
GBA Parkinsons: GBA-Parkinson’s disease
(GBA-PD) occurs as a result of a mutation in the
GBA gene, which makes the glucoscerebrosidase
enzyme. Deficits in this enzyme correlate with
motor symptom dysfunction, cognitive decline,
and diminishing gait and balance.
FA: Friedreich’s ataxia (FA) is an inherited
neuromuscular disorder most commonly caused
by a single genetic defect in the FXN 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. Symptoms of FA include progressive loss
of coordination and muscle strength, which lead
to the full-time use of a wheelchair; scoliosis
(which often requires surgical intervention);
diabetes mellitus; hearing and vision impairment;
serious heart conditions; 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
(>880mg/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% 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 major 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)
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. Ultimately, hATTR amyloidosis results
in death within three to 15 years of symptom
onset. Therapeutic options for the treatment of
patients with hATTR amyloidosis are limited.
HD: Huntington’s Disease (HD) is a rare
genetic disorder that is caused by a CAG repeat
expansion in the HTT gene. The mutated HTT
protein leads to severe neuron degeneration
predominately in the striatum and the cerebral
cortex. Currently, there are no approved disease-
modifying treatments.
AADC: AADC Deficiency (AADC-d) 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, norepinephrine,
epinephrine, serotonin and melatonin. AADC
Deficiency causes severe developmental delays,
the inability to develop any motor strength and
control (global muscular hypotonia/dystonia)
resulting in breathing, feeding, and swallowing
problems, frequent 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 (AML) 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. AML 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
UBE3a gene and affects all races and both
genders equally. People living with AS require
life-long care, intense therapies to help develop
functional skills and improve their quality 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 (DIPG) is
a rare, rapidly fatal pediatric brain tumor. Patients
are usually diagnosed between 5-6 years of age.
98% of patients die within two years of diagnosis.
DMD: Duchenne muscular dystrophy (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 the
skeletal, diaphragm and heart. 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. Patients with DMD
typically lose walking ability by their early teens,
require ventilation support in their late teens and,
eventually, die due to heart and lung failure. The
average age of death for DMD patients is in their
mid-twenties.
16
FORM
10K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
(cid:53)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: December 31, 2020
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
Common Stock, $0.001 par value per share
Trading Symbol (s)
PTCT
Name of each exchange on which registered
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 (cid:53) 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 (cid:53)
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 (cid:53) 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 (cid:53) 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
(cid:53)
☐
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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over
financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. (cid:53)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No (cid:53)
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 30, 2020, the last business day of the registrant’s most recently completed second fiscal quarter, was $2,923,373,633. 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 23, 2021, the registrant had 70,322,320 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 2021 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, 2020.
[This page intentionally left blank.]
TABLE OF CONTENTS
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
SIGNATURES
Page No.
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i
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FORWARD-LOOKING STATEMENTS
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:
•
•
•
•
•
•
•
•
our expectations with respect to the COVID-19 pandemic and related response measures and their effects on our
business, operations, clinical trials, potential regulatory submissions and approvals, our collaborators, contract
research organizations, suppliers and manufacturers;
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 nonsense mutation
Duchenne muscular dystrophy, or 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 utilize the dystrophin results from Study 045 and the totality of existing clinical and real-world data
or, alternatively, data from Study 041 to support a marketing approval for Translarna for the treatment of nmDMD
in the United States;
our expectations with respect to the development, regulatory and commercial status of EvrysdiTM (risdiplam) and
our 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 sales-based royalty payments or the
achievement of milestones in that program;
•
the timing and scope of our commercialization of our products and product candidates;
1
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
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 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;
the timing and conduct of our ongoing, planned and potential future clinical trials and studies in our splicing,
gene therapy, Bio-e, metabolic and oncology programs and studies of PTC299 for COVID-19 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 any post-marketing requirements imposed by regulatory agencies with respect to 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 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
2
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 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, metabolic 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
•
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 under the heading
“Summary of Risk Factors” and the risk factors detailed further 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.
3
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.
SUMMARY OF RISK FACTORS
Below is a summary of the principal risk factors that make an investment in our common stock speculative or risky.
This summary does not address all of the risks and uncertainties that we face. Additional risks and uncertainties not
presently known to us or that we presently deem less significant may also impair our business operations. Additional
discussion of the risks summarized in this risk factor summary, and other risks that we face, can be found in Item 1A. Risk
Factors, of this Annual Report on Form 10-K, and should be carefully considered, together with other information in this
Annual Report on Form 10-K and our other filings with the Securities Exchange Commission, before making an investment
decision regarding our common stock. The forward-looking statements discussed above 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.
Summary of Risk Factors
• We face risks related to the COVID-19 pandemic;
• We may fail to obtain regulatory approval for PTC-AADC for the treatment of AADC deficiency within our
expected timeline or at all;
• We could experience manufacturing problems, shortages of raw materials or failure of our key suppliers with
respect to our gene therapy product candidates;
• We have no experience manufacturing gene therapy products on our own and could encounter problems and
delays in establishing our biologics manufacturing facility;
• The process for administering PTC-AADC is complex and includes specific specialized requirements that could
delay or prevent the regulatory approval and commercialization of PTC-AADC for the treatment of AADC
deficiency;
• Regulatory requirements governing gene therapy products have changed frequently and may continue to change
in the future;
• Our gene therapy product candidates and the process for administering such product candidates may cause
undesirable side effects or have other negative properties;
• Our gene therapy approach may be perceived as unsafe or may result in unforeseen adverse events;
• Failure to obtain or maintain adequate insurance coverage and reimbursement for our products and product
candidates could limit our ability to market those products and decrease our ability to generate product revenue;
• We may be 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;
• 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 and is also subject to annual
reassessment of the benefit-risk balance 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;
• There is substantial risk that we will not be able to utilize the dystrophin results from Study 045 and the totality
of existing clinical and real-world data or, alternatively, data from Study 041 to support a marketing approval for
Translarna for the treatment of nmDMD in the United States;
• There is substantial risk that regulators in regions where we have not yet sought or are currently seeking marketing
authorization will not agree with the results from our clinical trials and existing real-world data for Translarna for
the treatment of nmDMD;
• The clinical trials of our products or our product candidates may fail to demonstrate safety and efficacy to the
satisfaction of regulators;
• We or our collaborators may experience any of a number of possible unforeseen events in connection with clinical
trials related to our products and product candidates;
• Because we are often 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;
4
• We may experience delays or difficulties in the enrollment of patients in our clinical trials;
• We may identify serious adverse side effects during the development or further development of any product or
product candidate;
• Our product candidates may be subject to marketing and distribution restrictions;
• Our products and product candidates may fail to achieve market acceptance in the medical community;
• We may be 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;
• A substantial portion of our commercial sales currently occurs in territories outside of the United States;
• We face substantial competition;
• Our products or product candidates may become subject to unfavorable pricing regulations, third-party
reimbursement practices or healthcare reform initiatives;
• We have incurred significant losses since our inception and expect to continue to incur significant operating
expenses for the foreseeable future. We may need additional funding and we may never generate profits from
operations or maintain profitability;
• 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 business and dilute our stockholders’ ownership;
• We may not be able to comply with applicable laws and regulations for our products or product candidates;
• We may not be able to obtain orphan drug exclusivity for our products or product candidates in either the United
States or the EU;
• We may fail to maintain non-patent market exclusivity periods under the Hatch-Waxman Act and the Orphan
Drug Act to commercialize Emflaza for the treatment of DMD in the United States;
• Legislative and regulatory changes affecting the pharmaceutical industry or the healthcare system more broadly
may negatively affect our business;
• We may fail to properly allocate our limited resources;
• We contract with third parties for the supply, manufacture and distribution of our products and our product
candidates and these third parties may encounter issues that affect our business;
• We rely on third parties to conduct our preclinical and clinical trials and other essential services;
• We currently depend, and expect to continue to depend, on collaborations with third parties for the development
and commercialization of some of our products and product candidates;
• 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 may be subject to product liability lawsuits;
• We may be unable to retain our key executives;
• We may encounter difficulties in managing our growth as a company;
• We may be unable to obtain or maintain patent protection for our technology and products;
• We may become involved in lawsuits to protect or enforce our patents or other intellectual property or in
connection with allegations that we are infringing on third party intellectual property rights;
• Without patent protection, our marketed products may face generic competition;
• We may not obtain or maintain adequate trademark protection for our brand names;
• 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 may not have sufficient cash flow from our business to make payments on our debt;
• The price of our common stock may be volatile and fluctuate substantially; and
• 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.
5
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 leverage its strong scientific expertise and global commercial infrastructure
to maximize value for its patients and other stakeholders.
Our Pipeline
We have a portfolio pipeline that includes several commercial products and 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
o Global DMD Franchise – We have two products, TranslarnaTM (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.
o TegsediTM (inotersen) and WaylivraTM (volanesorsen) – We hold the rights for the commercialization of
Tegsedi and Waylivra 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 filed for marketing authorization for Waylivra for the treatment of
FCS with ANVISA, the Brazilian health regulatory authority, in June 2020 and, subject to potential delays
in the review process related to the COVID-19 pandemic, expect a regulatory decision on approval from
ANVISA in the third quarter of 2021.
o Evrysdi™ (risdiplam) – 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 SMA program has one approved product, Evrysdi, which was
approved in August 2020 by the U.S. Food and Drug Administration, or FDA, for the treatment of SMA in
adults and children two months and older. Evrysdi also received marketing authorization for the treatment of
SMA in Brazil in October 2020. The European Medicines Agency, or EMA, accepted the marketing
authorization application, or MAA, filed by Roche for Evrysdi for the treatment of SMA in August 2020 and
an opinion from the Committee for Medicinal Products for Human Use, or CHMP, is expected in the first
quarter of 2021. Additionally, in October 2020, Chugai Pharmaceutical Co., Ltd., or Chugai, a subsidiary of
Roche, filed a New Drug Application, or NDA, in Japan for Evrysdi for the treatment of SMA and a
regulatory decision on approval is expected in 2021.
• Diversified Development Pipeline
o Splicing Platform – In addition to our SMA program, our splicing platform also includes PTC518, which is
being developed for the treatment of Huntington’s disease, or HD. We expect results from our Phase 1 study
of PTC518 in healthy volunteers in the first half of 2021.
o Gene Therapy Platform – We have a pipeline of gene therapy product candidates for rare monogenic
diseases that affect the central nervous system, or CNS, including PTC-AADC for the treatment of Aromatic
6
L-Amino Acid Decarboxylase, or AADC, deficiency, a rare CNS 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, and
we anticipate submitting a BLA to the FDA in the second quarter of 2021. In January 2020, we submitted an
MAA for PTC-AADC for the treatment of AADC deficiency in the EEA to the EMA and we expect an
opinion from the CHMP in the second quarter of 2021.
o Bio-e Platform – The two most advanced molecules in our Bio-e platform are vatiquinone and PTC857. We
initiated a registration-directed Phase 2/3 placebo-controlled trial of vatiquinone in children with
mitochondrial disease and associated refractory epilepsy in the third quarter of 2020 and anticipate data from
this trial to be available in the third quarter of 2022. We also initiated a registration-directed Phase 3 trial of
vatiquinone in children and young adults with Friedreich ataxia in the fourth quarter of 2020 and anticipate
data from this trial to be available in 2023. In the second quarter of 2020, we initiated a Phase 1 trial in
healthy volunteers to evaluate the safety and pharmacology of PTC857. We expect data from the Phase 1
trial to be available in the first half of 2021.
o Metabolic Platform – We expect to initiate a registration-directed Phase 3 trial for PTC923, which we
acquired in 2020 in connection with our acquisition of Censa Pharmaceuticals, Inc., or Censa, for
phenylketonuria, or PKU, in mid-2021.
o PTC299 for COVID-19 – In June 2020, we initiated a Phase 2/3 clinical trial evaluating the efficacy and
safety of PTC299, a dihydroorotate dehydrogenase inhibitor that we have also been developing in
oncological indications, in patients hospitalized with COVID-19. We expect data from this trial to be
available in the second half of 2021.
o Oncology Platform – We have two oncology agents in Phase 1 clinical development, PTC299 and PTC596.
We expect to report results from our Phase 1 trial evaluating PTC299 in acute myelogenous leukemia, or
AML, in the second half of 2021. We also expect to report results from our Phase 1 trials evaluating PTC596
in leiomyosarcoma, or LMS, and diffuse intrinsic pontine glioma, or DIPG, by the end of 2021.
• Multi-platform Discovery
o 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 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 to 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
7
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. In July 2020, the European
Commission approved the removal of the statement “efficacy has not been demonstrated in non-ambulatory patients” from
the indication statement for Translarna.
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
June 2020, the European Commission renewed our marketing authorization, making it effective, unless extended, through
August 5, 2021. In February 2021, 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.
United States
Translarna is an investigational new drug in the United States. During the first quarter of 2017, we filed an NDA, 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 NDA, 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 New Drugs of the FDA. In February 2018,
8
the Office of New Drugs of the FDA denied our appeal of the Complete Response Letter. In its response, the Office of
New Drugs recommended a possible path forward for our ataluren NDA submission based on the accelerated approval
pathway. This would involve a re-submission of an NDA containing the current data on effectiveness and safety of ataluren
with new data to be generated on dystrophin production in nmDMD patients’ muscles. We followed the FDA’s
recommendation and collected, using newer technologies via procedures and methods that we designed, dystrophin data
in a new study, Study 045, and announced the results in February 2021. Although Study 045 did not meet its pre-specified
primary endpoint, we plan to discuss the Study 045 dystrophin results and the totality of existing clinical and real-world
data with the FDA to determine if there is a potential path to approval based on these results and data. There is substantial
risk that the FDA will determine that the results from our clinical trials and existing real-world data are not sufficient to
support a marketing approval for Translarna for the treatment of nmDMD in the United States. In that case, as we expect
to have data for Study 041 in the third quarter of 2022, and subject to a positive outcome in that study, we would plan to
re-submit the NDA at that time.
See “Item 1. Business-Government Regulation-The new drug and biologic approval process” below for further discussion
with respect to the NDA 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, Brazil in 2019 and Russia in 2020 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 and Russia are 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.
Tegsedi and Waylivra
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.
9
Tegsedi
Tegsedi, a product of Ionis Pharmaceuticals, Inc.’s, or Ionis, the parent company of Akcea, proprietary antisense
technology, is an antisense oligonucleotide, or ASO, inhibitor of human transthyretin, or TTR, production. Tegsedi is the
world’s first RNA-targeted therapeutic to treat patients with hereditary transthyretin amyloidosis, or hATTR amyloidosis.
In October 2019, it received marketing authorization from ANVISA 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 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 filed for marketing authorization for Waylivra for the treatment of FCS with ANVISA in June 2020
and, subject to potential delays in the review process related to the COVID-19 pandemic, expect a regulatory decision on
approval from ANVISA in the third quarter of 2021.
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.
Evrysdi
Our SMA program, as described below, has one approved product, Evrysdi, which was approved in August 2020 by the
FDA for the treatment of SMA in adults and children two months and older. Evrysdi also received marketing authorization
for the treatment of SMA in Brazil in October 2020. The EMA accepted the MAA filed by Roche for Evrysdi for the
treatment of SMA in August 2020 and an opinion from the CHMP is expected in the first quarter of 2021. Additionally,
10
in October 2020, Chugai Pharmaceutical Co., Ltd., or Chugai, a subsidiary of Roche, filed an NDA in Japan for Evrysdi
for the treatment of SMA and a regulatory decision on approval is expected in 2021.
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 Neuron 1, or SMN1, gene that encodes the
survival of motor neuron, or SMN, protein. The SMN 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 Neuron 2, or SMN2, is very similar to
SMN1, contains a T nucleotide at position 6 in exon 7 and produces low, insufficient levels of functional SMN 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 SMN2 messenger RNA, or mRNA, transcript and the levels of SMN protein
produced by the SMN2 gene. Importantly, in studies in transgenic mice carrying only the SMN2 gene, these orally
bioavailable compounds penetrated the blood-brain barrier and increased the levels of full-length SMN2 mRNA 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 November 2011, we entered into a License and Collaboration Agreement, or the SMA License Agreement, by and
among us, Roche and, for the limited purposes set forth therein, the SMA Foundation under the SMA program, 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 $105.0 million in milestone
payments from Roche and as of December 31, 2020, we had recognized $4.8 million royalties on net sales pursuant to the
SMA License Agreement. We also previously received $13.3 million in sponsored research funding for this program from
the SMA Foundation.
In July 2020, we entered into a Royalty Purchase Agreement with RPI 2019 Intermediate Finance Trust, or RPI, and, for
the limited purposes set forth in the agreement, Royalty Pharma PLC, or the Royalty Purchase Agreement. Pursuant to the
Royalty Purchase Agreement, we sold to RPI 42.933%, or the Assigned Royalty Payment, of our right to receive sales-
based royalty payments, or the Royalty, on worldwide net sales of Evrysdi and any other product developed pursuant to
the SMA License Agreement. In consideration for the sale of the Assigned Royalty Payments, RPI paid us $650.0 million
in cash consideration. We have retained a 57.067% interest in the Royalty and all economic rights to receive the remaining
potential regulatory and sales milestone payments under the SMA License Agreement. The Royalty Purchase Agreement
will terminate 60 days following the earlier of the date on which Roche is no longer obligated to make any payments of
the Royalty pursuant to the SMA License Agreement and the date on which RPI has received $1.3 billion in respect of the
Assigned Royalty Payments.
The Evrysdi clinical development program is comprised of several studies evaluating Evrysdi 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 targeted therapies; age at enrollment of six months to 60 years), and
Rainbowfish (pre-symptomatic 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 Evrysdi. 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. 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. Both part 1 and part 2 of the study are being followed by an ongoing open-label extension.
11
In December 2016, a two-part clinical study, called Firefish, initiated in infants with type 1 SMA to investigate safety,
tolerability, and efficacy of Evrysdi. 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 1 was to assess the safety profile of Evrysdi in infants and determine the
dose for part 2. 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-INTEND 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) of infants were event-free after
receiving Evrysdi for 16 months. 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, SMN 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 1 of Firefish, part 2 of Firefish was initiated in March 2018 and completed recruitment in
November 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). 12 out of 41 babies
demonstrated the ability to sit without support in order to meet the primary endpoint in part two. Natural history indicates
that type 1 SMA babies never achieve this milestone.
an
study
open-label
investigating
Jewelfish,
and
pharmacokinetics/pharmacodynamic relationship of Evrysdi in patients aged from 6 months to 60 years with SMA
previously treated with one of several experimental or approved SMA therapies, initiated in the first quarter of 2017.
Preliminary pharmacodynamic data from twelve Jewelfish patients presented in October 2018 at the World Muscle
conference demonstrated sustained >2-fold increase in median SMN protein levels versus baseline over 12 months of
treatment. Also, Evrysdi was well tolerated, with no drug-related adverse events leading to withdrawal from the study.
The study has completed recruitment.
pharmacokinetics,
tolerability,
safety,
the
Rainbowfish is an open-label, single-arm, multicenter study, investigating the efficacy, safety, pharmacokinetics and
pharmacodynamics of Evrysdi 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 Evrysdi across all studies to date. Evrysdi has been well-tolerated and no
treatment-related safety findings have led to patient withdrawal in any study.
Diversified Development Pipeline
Our pipeline has a number of development programs in the clinical stages. These include splicing, gene therapy, Bio-e,
metabolic and oncology programs and studies of PTC299 for COVID-19 as well as studies in our current commercial
products for maintaining authorizations, label extensions and additional indications.
Splicing Platform
Our splicing platform focuses on the development of innovative therapies for diseases, such as SMA, that involve
regulation of mRNA splicing in the cell.
In addition to Evrysdi and our SMA program, our splicing platform also includes PTC518, which is being developed for
the treatment of HD. HD is a neurodegenerative and progressive brain disorder caused by a toxic gain-of-function triplet
repeat expansion in the Huntingtin gene resulting in uncontrolled movements and cognitive loss. There are currently no
drugs or disease-modifying therapies approved to delay the onset or slow the progression of HD. We believe that there are
approximately 45,000 HD patients in the United States. PTC518 is an orally bioavailable molecule with broad central
nervous system and systemic distribution that has been designed to target Huntingtin protein expression with high
selectivity and specificity. PTC518 has demonstrated uniform lowering of the Huntingtin protein throughout the brain in
animal models. In the fourth quarter of 2020, we initiated a Phase 1 study of PTC518 that includes both single and multiple
ascending dosing regimens to evaluate safety, pharmacology and dose selection for a potential Phase 2 study. We expect
results from the Phase 1 study to be available in the first half of 2021.
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Gene Therapy Platform
Our gene therapy platform focuses on the development of innovative therapies for rare, debilitating diseases of the CNS.
Our lead gene therapy product candidate is PTC-AADC for the treatment of AADC deficiency. AADC deficiency is a rare
CNS 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.
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 CNS 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
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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. No 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, we intend to provide additional information concerning the use of the commercial
cannula for PTC-AADC in young patients. However, due to hospitals generally canceling elective surgeries in response
to the COVID-19 pandemic and other administrative delays resulting from the COVID-19 pandemic, we have been delayed
in our ability to gather such information. We now anticipate submitting a BLA for PTC-AADC for the treatment of AADC
deficiency in the United States in the second quarter of 2021.
In January 2020, we submitted an MAA to the EMA for the treatment of AADC deficiency with PTC-AADC in the EEA.
However, certain of the third-party development and manufacturing organizations that we contract with for analytical
testing have prioritized materials and testing kits to support COVID-19 testing, diverted employees to support COVID-19
related programs and reduced their workforce to comply with social distancing requirements imposed in connection with
the COVID 19 pandemic. As a result of this shift in resources, we experienced a delay in generating analytical data needed
to respond to questions sent by the EMA regarding our MAA for PTC-AADC for the treatment of AADC deficiency in
the EEA. Following a clock stop extension, we submitted responses to the EMA’s questions and we currently expect an
opinion from the CHMP in the second quarter of 2021.
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 expect to rely on the twelve-year BPCIA regulatory exclusivity and concurrent
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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.
Bio-e Platform
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 CNS diseases. 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 activity.
One of the advanced molecules in our Bio-e platform is vatiquinone. Vatiquinone is a small molecule orally bioavailable
compound that has been in development for inherited mitochondrial diseases and related genetic disorders of oxidative
stress. Vatiquinone 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 third quarter of 2020, we initiated a
registration-directed Phase 2 randomized, placebo-controlled trial of vatiquinone in approximately 60 children with
mitochondrial disease and associated refractory epilepsy, called MIT-E. All subjects will be followed for one month to
ensure a baseline seizure frequency, and then will be randomized to receive vatiquinone or placebo for six months. We
anticipate data from the MIT-E trial to be available in the third quarter of 2022. We estimate that there are approximately
20,000 refractory mitochondrial epilepsy patients globally. Refractory epilepsy is a highly morbid symptom common to a
number of mitochondrial disease subtypes. The clinical rationale for the MIT-E 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 vatiquinone in mitochondrial disease patients conducted in the United States and
EU.
Additionally, we initiated a registration-directed Phase 3 trial of vatiquinone in approximately 110 patients with Friedreich
ataxia in the fourth quarter of 2020, called MOVE-FA. The MOVE-FA trial is an 18-month parallel arm, placebo-
controlled study evaluating vatiquinone versus placebo in children and young adults with Friedreich ataxia. We anticipate
data from the MOVE-FA trial to be available in 2023. Friedreich ataxia is a rare and life-shortening neurodegenerative
disease caused by a single defect in the FXN gene which causes reduced production of the frataxin protein. We believe
that there are approximately 25,000 Friedreich ataxia patients globally. Vatiquinone has previously been studied in
Friedreich ataxia patients in a Phase 2 trial that included a six-month placebo-controlled phase followed by an 18-month
open label extension. In this trial, long-term vatiquinone treatment (18-24 months) was associated with an improvement
in overall disease severity and neurological function relative to natural history. Vatiquinone has been dosed in over
500 subjects and has been generally well-tolerated in the clinic.
The other advanced molecule 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 CNS patients. In the second quarter of 2020, we initiated
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. We expect data from the Phase 1 trial to be available in the first half of 2021.
Metabolic Platform
On May 29, 2020, we acquired Censa, a biopharmaceutical company focused on the development of PTC923 for orphan
diseases. PTC923 is an oral formulation of synthetic sepiapterin, a precursor to intracellular tetrahydrobiopterin, which is
a critical enzymatic cofactor involved in metabolism and synthesis of numerous metabolic products. PTC923 has been
15
pursued as a possible treatment for orphan metabolic diseases associated with defects in the tetrahydrobiopterin
biochemical pathways, including PKU. PKU is an inborn error of metabolism caused predominantly by mutations in the
phenylalanine hydroxylase gene resulting in toxic buildup of the amino acid phenylalanine, or Phe, in the brain, and, if left
untreated, severe and irreversible disabilities such as permanent intellectual disability, seizures, delayed development,
behavioral problems and possibly psychiatric disorders can occur. We believe that there are approximately 16,500 PKU
patients in the United States. In December 2019, Censa announced that the Phase 2 trial for PTC923 as a potential treatment
for PKU met its primary and secondary endpoints, achieving statistically-significant and clinically-meaningful reduction
in blood Phe levels compared to both baseline and an active control group. We expect to initiate a registration-directed
Phase 3 trial for PTC923 for PKU in mid-2021.
PTC299 for COVID-19
In June 2020, the FDA authorized the initiation of a Phase 2/3 clinical trial evaluating PTC299 as a potential treatment for
COVID-19. PTC299 is a small molecule dihydrooratate dehydrogenase (DHODH) inhibitor that inhibits de novo
pyrimidine nucleotide synthesis that we have also been developing in oncological indications. PTC299 is an oral
investigational drug with a novel dual-mechanism of action that we believe has the potential to address the two crucial
elements of COVID-19: (i) the high viral replication and (ii) the uncontrolled inflammatory response that ensues after
infection. The integrated Phase 2/3 study, which has been initiated and is being conducted in two stages, will evaluate the
efficacy and safety of PTC299 in patients hospitalized with COVID-19. The primary objective of the study is to evaluate
the clinical efficacy of PTC299 compared with placebo assessed by time to respiratory improvement in adult individuals
hospitalized with COVID-19. In February 2021, we announced the completion of the first stage of the Phase 2/3 trial. We
expect data from this trial to be available in the second half of 2021. For a discussion of the risks related to the development
of PTC299 as a potential treatment for COVID-19, please see “Item 1A. Risk Factors-Risks Related to the Development
and Commercialization of our Product and our Product Candidates - We face risks related to the development of PTC299
as a potential treatment for COVID 19 and we may ultimately be unsuccessful in developing a treatment for the virus in a
timely manner or at all. Even if we are able to produce a drug that successfully treats the virus, there is significant
competition in the search for a treatment for COVID 19 and our product may not be the only effective treatment.”.
Translarna (ataluren)
Mechanism of action
We discovered Translarna by applying our technologies to identify molecules that promote or enhance the suppression of
nonsense mutations. Nonsense mutations are implicated in a variety of genetic disorders. Nonsense mutations create a
premature stop signal in the translation of the genetic code contained in mRNA 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 mRNA molecule and manufactures proteins, to enable the ribosome to read through premature
nonsense stop signals on mRNA 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.
16
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” and “-Risks Related to Regulatory Approval of our Product and our Product Candidates”.
Enrollment. According to the study protocol, Study 041 enrolled 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 also needed 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.
We completed enrollment of Study 041 in the fourth quarter of 2020. Of the 363 patients enrolled in Study 041, 185
patients meet the criteria for inclusion in the primary analysis population, which we refer to as the modified intention-to-
treat population, or mITT. Patients 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 North Star Ambulatory
Assessment, or NSAA, a functional scale designed for boys affected by DMD, will serve as an additional secondary
objective. NSAA 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 NSAA 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
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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).
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-NMD and the Cooperative International Neuromuscular 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 a temporary managed access agreement entered into in July 2016 between us, the UK National Institute for
Health and Care Excellence, or NICE, National Health Services England, or NHS England, and other interested parties,
the NorthStar Network is collecting data on the efficacy of Translarna for the treatment of nmDMD as measured by the
NorthStar 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 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.
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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.
Overview of treatment-emergent adverse events in Phase 3 clinical trial (as-treated population)
Parameter
Patients with ≥1 adverse event
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
N=115
Translarna
40 mg group
N=115
All
patients
N=230
101 (87.8) % 103 (89.6) % 204 (88.7) %
54 (47.0) % 61 (53.0) % 115 (50.0) %
37 (32.2) % 35 (30.4) % 72 (31.3) %
16 (7.0) %
—
9 (7.8) %
—
7 (6.1) %
—
47 (40.9) % 44 (38.3) % 91 (39.6) %
30 (26.1) % 20 (17.4) % 50 (21.7) %
18 (15.7) % 27 (23.5) % 45 (19.6) %
18 (7.8) %
2 (0.9) %
8 (3.5) %
—
6 (5.2) % 12 (10.4) %
1 (0.9) %
1 (0.9) %
4 (3.5) %
4 (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.
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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 NSAA 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. Natural 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 (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 NSAA 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
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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-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
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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).
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.
Study 045 did not meet its pre-specified primary endpoint. Patients received baseline biopsies prior to the initiation of
treatment and follow-up biopsies scheduled at 40 weeks following the start of treatment. However, certain patients were
delayed in obtaining the final study muscle biopsies performed at our clinical trial site at the University of California, Los
Angeles as a result of the COVID-19 pandemic. 8 of 20 patients were unable to undergo biopsies at week 40, and these
patients had their second biopsies between 62 and 70 weeks of treatment. Full-length dystrophin levels were measured
using both the Electrochemiluminescence, or ECL assay, as the primary endpoint and Immunohistochemistry, or IHC,
assay as the secondary endpoint.
The ITT population included the 20 patients enrolled in the study. However, one subject was determined to be non-
compliant, as he only took half of the study drug, and one subject did not have adequate biopsy samples to establish
baseline levels. Therefore, 18 patients were compliant with the study drug and had evaluable biopsy samples. These 18
patients are considered the evaluable population. 10 of these 18 patients had their second biopsy at week 40 and 8 had
their second biopsy between weeks 62 and 70. Patient characteristics, including age and steroid use were consistent across
both cohorts.
Overall in the ITT population, there was an increase in dystrophin expression from baseline, on both ECL as the primary
endpoint and IHC as the secondary endpoint, but these did not meet a p-value of <0.05. Nevertheless, when studying the
18 patients in the evaluable cohort, we identified a greater increase in dystrophin expression, and this increase did reach a
nominal p-value of 0.04 in the analysis of the IHC assay. Also, over 80% of the evaluable subjects demonstrated an increase
in dystrophin expression. 8 patients in the evaluable population had longer treatment exposure, ranging from 62-70 weeks,
and these 8 patients had markedly greater levels of dystrophin increase with an average of approximately 24% in the ECL
assay. We believe that these results suggest that longer duration of treatment resulted in greater biological effect, which is
consistent with the long-term Translarna treatment benefit we have previously reported from our other clinical studies and
our international drug registry for DMD patients receiving Translarna.
We also measured creatine kinase, or CK, levels of patients in Study 045 as an objective measure of muscle damage.
Dystrophin acts as a shock absorber during a muscle contraction and would be expected to protect against muscle
damage and therefore reduce CK levels. Consistent with an increase in the level of dystrophin, we observed a marked
reduction of approximately 20% in creatine kinase and that longer treatment with Translarna was associated with a
greater magnitude of biological effect.
Oncology Platform
We have two oncology agents in Phase 1 clinical development, PTC299 and PTC596. In the fourth quarter of 2018, we
initiated a Phase 1 dose-escalation trial of PTC299 in patients diagnosed with 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 and expect
to report results in the second half of 2021.
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.
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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.
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. We expect to have results from the Phase 1 trial by the end of 2021.
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. Approximately 4,000 patients
are diagnosed with LMS annually in the United States. 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 expect to have results from this trial by the end of
2021.
We received grant funding of $5.4 million for our oncology platform 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”.
Translarna for Nonsense mutation aniridia
Our clinical study of Translarna for nonsense mutation aniridia, which we refer to as STAR, was completed in
February 2020 and did not meet statistical significance. Given the results of STAR, we have discontinued the program.
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 RNA, DNA and energy production pathways.
Splicing
Post-transcriptional control processes are the events that occur in a cell following the transcription of DNA into RNA.
These processes regulate, for example, how long RNA molecules last in the cell, how exons in precursor messenger RNA,
or pre-mRNA, molecules are spliced, and how efficiently mRNA molecules are translated to proteins. In the majority of
human protein-encoding genes, the sequence encoding the mature mRNA transcript is not contiguous in the pre-mRNA
but rather has intervening non-coding regions called introns that interrupt the coding sequences, called exons. These introns
are removed from the final mRNA product by a process called splicing that also joins the exons together such that only
the exons are retained in the mature mRNA.
We use our splicing technology to identify molecules that modulate splicing of the pre-mRNA. Pre-mRNA splicing is a
series of highly organized biochemical reactions. Approximately 94% of all human genes encode pre-mRNAs that undergo
splicing. In addition, through splicing, one gene can often generate several mRNA products that include a different set of
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exons through a process called alternative splicing which results in mature mRNA 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-mRNA splicing. These technologies rely on sensitive
quantification of pre-mRNA isoforms directly in human cells or tissue samples. Using this technology, we have
successfully identified orally bioavailable small molecules that correct splicing of SMN2 mRNA. An example of one of
these molecules is Evrysdi, which was approved in August 2020 by the FDA for the treatment of SMA in adults and
children two months and older. Based on this experience, we believe that other small molecule drug candidates can be
rapidly identified that modify splicing of pre-mRNA, promote inclusion of specific exons into mRNA, including
pseudoexons, or force skipping of undesired exons from the mature mRNA. We believe that this technology is potentially
widely applicable to a large number of target genes across all therapeutic areas.
Nonsense suppression
An mRNA contains multiple regions that have specific functions. Although the protein coding region of mRNA contains
the information for the amino acid sequence of the protein product, several regions of mRNA do not code for the protein
and are known as untranslated regions, or UTRs. They are unique to specific mRNAs or groups of mRNAs and are directly
involved in the post-transcriptional control of protein production. Interactions of cellular factors with the UTRs in the
mRNA determine when and how much protein is produced as well as how mRNA is degraded and eliminated from the
cell. Additionally, certain sequences in the mRNA encode signals to stop protein production from the mRNA. 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 mRNA. 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 of 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 mRNA 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 mRNAs, 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 mRNAs. 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 CNS 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 CNS 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 CNS, 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 CNS disease indications. Our
detailed knowledge and expertise in rare CNS 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
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therapies to the CNS 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 CNS known to be involved in the cause of
the disease. Targeted micro-dosing ensures direct delivery to the CNS, 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. 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 dose our first patient in a clinical
study for this program by the end of 2021. Additionally, the gene therapy platform includes two other programs targeting
CNS disorders, including Angelman syndrome, a rare, genetic, neurological disorder characterized by severe
developmental delays. We continue to work towards submitting a filing in support of the first-in-human study for this
program.
Energy production and oxidative stress
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 potentially 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.
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 National Taiwan University, or NTU, for PTC-AADC, a collaboration and license agreement with Akcea
for Tegsedi and Waylivra and a license agreement with Shiratori Pharmaceutical Co., Ltd., or Shiratori, relating to the
manufacturing processes and technology for PTC923. 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-mRNA splicing defects pursuant to which we have certain licensing, development and
commercialization obligations to MGH.
Roche and the SMA Foundation
Overview. In November 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
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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, 2020, we have earned
$105.0 million of these development and regulatory milestone payments based on the progression of the collaboration
from the pre-clinical stage to the commercialization of Evrysdi. 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.
Pursuant to the Royalty Purchase Agreement, we sold to RPI the Assigned Royalty Payment, in consideration for $650.0
million. We have retained a 57.067% interest in the Royalty and all economic rights to receive the remaining potential
regulatory and sales milestone payments under the SMA License Agreement. The Royalty Purchase Agreement will
terminate 60 days following the earlier of the date on which Roche is no longer obligated to make any payments of the
Royalty pursuant to the SMA License Agreement and the date on which RPI has received $1.3 billion in respect of the
Assigned Royalty Payments.
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 November 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.
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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, with respect to collaboration products we outlicense, including Evrysdi, 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 an
aggregate of $52.5 million, 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.
National Taiwan University
We have two agreements with NTU relating to PTC-AADC: a collaborative research agreement, originally entered into
between Agilis Biotherapeutics, Inc., or Agilis, and NTU, in September 2015, as amended, or the NTU Collaboration
Agreement; and a license and technology transfer agreement, originally entered into between Agilis, NTU and Professor
Wuh-Liang (Paul) Hwu, in December 2015, or the NTU Licensing Agreement.
NTU Collaboration Agreement
Overview. The NTU Collaboration Agreement governs the collaboration between us and NTU with respect to the research
and clinical trials for AADC deficiency gene therapy, or the Research. Pursuant to the NTU Collaboration Agreement,
NTU is responsible for performing the research and clinical trials and we are responsible for providing related funding. In
accordance with such obligations, NTU 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 NTU’s research paid upon the achievement
of certain milestones. As of December 31, 2020, an aggregate amount of $1.9 million in funding payments has been paid
to NTU. Since December 31, 2020, an additional $29 thousand has been paid to NTU. An additional $1.2 million would
become due and payable to NTU upon a potential approval by the EMA of the MAA for PTC-AADC.
Intellectual property. All intellectual property developed or obtained by NTU relating to the Research shall be owned by
NTU. The NTU 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 NTU Collaboration Agreement expires on December 31, 2021, with automatic annual extensions subject
to our written approval. The NTU Collaboration Agreement can be terminated for certain specified breaches by either
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party upon 30 or 60 days’ notice, depending on the breach and following a specified cure period. Upon termination at our
election, NTU is obligated to return to us any unused funding payments made to NTU that have not yet been utilized, and
we are obligated to pay any non-cancellable expenses incurred by NTU, as of the date of termination.
NTU Licensing Agreement
Overview. Pursuant to the NTU Licensing Agreement, NTU 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 NTU 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. NTU received a lump sum of $100,000 upon execution of the NTU Licensing Agreement.
Additionally, NTU 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 NTU.
Termination. The NTU 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 NTU Licensing Agreement upon
60 days’ written notice to NTU 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 NTU within 30 days of termination and NTU would retain all rights to the
Technology. We may terminate the NTU Licensing Agreement for material breach by another party following a 30-day
cure period. NTU may terminate the NTU 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 ROFN, 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
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its parent company, 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 ANVISA, 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 ANVISA 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 ROFN 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 ROFN.
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.
Shiratori
Overview. In connection with our acquisition of Censa in May 2020, we became a party to a license agreement dated as of
February 8, 2015, as amended, between Shiratori and Censa, or the Shiratori License Agreement. Pursuant to the Shiratori
License Agreement, Shiratori granted Censa the sole and exclusive worldwide right and license, with the right to
sublicense, under certain licensed know-how, or the Licensed Know-How, and licensed patents, or the Licensed Patents,
relating to manufacturing processes and technology for sepiapterin, to research, have researched, develop, have developed,
use, import, export, market, have marketed, offer for sale, sell and have sold, and otherwise commercialize any final
pharmaceutical product in finished form containing sepiapterin as an active pharmaceutical ingredient, including PTC923,
collectively the Sepiapterin Products, covered by the Licensed Patents or using the Licensed Know-How in all countries
and territories of the world outside of Japan, or the Sepiapterin Territory.
Payments and Contingent Payments. Under the Shiratori License Agreement, we are obligated to pay to Shiratori a low
single digit percentage of annual net sales of the Sepiapterin Products in each country in the Sepiapterin Territory until the
expiration of the last-to-expire Licensed Patent controlled by Shiratori covering the relevant country. We are also obligated
to pay to Shiratori certain regulatory and development milestones.
Termination. Unless earlier terminated, the Shiratori License Agreement will continue in full force and effect on a country-
by-country and product-by-product basis until the obligation to pay royalties with respect to the sale of such Sepiapterin
Product in such country expires. The parties may agree to mutually terminate the Shiratori License Agreement. Shiratori
may elect to terminate the Shiratori License Agreement upon sixty days’ prior written notice to us in the event that we fail
to (i) achieve regulatory approval for a Sepiapterin Product in either the United States or EU by February 8, 2026 or (ii)
commercially launch a Sepiapterin Product in the United States or European Union by February 8, 2027. We may elect to
terminate the Shiratori License Agreement upon sixty days’ prior written notice to Shiratori.
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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 platform and antibacterial program. 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 platform. 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 platform), 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 platform. 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 platform. 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 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
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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 Emflaza 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 Nasdaq Global Select Market, or Nasdaq, for the 15 trading-day period ending on the
third trading day immediately preceding the closing. Beginning in 2018, Marathon is entitled to receive contingent
payments from us based on annual net sales of Emflaza, 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 Emflaza Asset Purchase Agreement.
Agilis Biotherapeutics, Inc.
On August 23, 2018, we completed our acquisition of Agilis pursuant to an Agreement and Plan of Merger, dated as of
July 19, 2018, or the Agilis 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.
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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
Nasdaq 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 sales milestones, as well as based upon a percentage of net sales of certain
products.
On April 29, 2020, we, certain of the former equity holders of Agilis, or the Participating Rightholders, and, for the limited
purposes set forth in the agreement, Shareholder Representative Services LLC, entered into a Rights Exchange Agreement,
or the Rights Exchange Agreement. Pursuant to the Right Exchange Agreement, we issued 2,821,176 shares of our
common stock and paid $36.9 million, in the aggregate, to the Participating Rightholders in exchange for the cancellation
and forfeiture by the Participating Rightholders of their rights to receive certain milestone-based contingent payments
under the Agilis Merger Agreement.
Our outstanding obligations under the Agilis Merger Agreement include obligations to pay up to an aggregate maximum
amount of $20.0 million upon the achievement of certain development milestones, up to an aggregate maximum amount
of $361.0 million upon the achievement of certain regulatory milestones, up to a maximum aggregate amount of
$150.0 million upon the achievement of certain net sales milestones and a percentage of annual net sales for Friedreich
ataxia and Angelman syndrome during specified terms, ranging from 2% to 6%, pursuant to the terms of the Agilis Merger
Agreement.
BioElectron Technology Corporation
On October 25, 2019, we completed the acquisition of substantially all of the assets of BioElectron Technology
Corporation, or BioElectron, pursuant to an Asset Purchase Agreement by and between the Company and BioElectron,
dated October 1, 2019, or the BioElectron Asset Purchase 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 BioElectron Asset Purchase 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 BioElectron
Asset Purchase Agreement, BioElectron may also become entitled to receive contingent payments based on a percentage
of net sales of certain products.
Censa Pharmaceuticals, Inc.
On May 29, 2020, we acquired Censa pursuant to an Agreement and Plan of Merger, dated as of May 5, 2020, or the Censa
Merger Agreement, by and among us, Hydro Merger Sub, Inc., our wholly owned, indirect subsidiary, and, solely in its
capacity as the representative, agent and attorney-in-fact of the securityholders of Censa, Shareholder Representative
Services LLC, or the Censa Merger.
Upon the closing of the Censa Merger, we paid to the Censa securityholders (i) cash consideration of $15.0 million, which
consisted of an upfront payment of $10.4 million and an additional $4.6 million for the net assets on Censa's opening
balance sheet as of the date of the acquisition, and (ii) 845,364 shares of our common stock, which were valued at $42.9
million based on the closing stock price on the acquisition date. The number of shares issued was determined using a 30-
day VWAP pursuant to the Censa Merger Agreement.
In addition, pursuant to the Censa Merger Agreement, Censa securityholders will be entitled to receive contingent
payments from us based on (i) the achievement of certain development and regulatory milestones up to an aggregate
maximum amount of $217.5 million for PTC923’s two most advanced programs and receipt of a priority review voucher
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from the FDA as set forth in the Merger Agreement, (ii) $109 million in development and regulatory milestones
for each additional indication of PTC923, (iii) the achievement of certain net sales milestones up to an aggregate maximum
amount of $160.0 million, (iv) a percentage of annual net sales during specified terms, ranging from single to low double
digits of the applicable net sales threshold amount, and (v) any sublicense fees paid to us in consideration of any sublicense
of Censa’s intellectual property to commercialize PTC923, on a country-by-country basis, which contingent payment shall
equal to a mid-double digit percentage of any such sublicense fees. We have the option to pay the initial $30 million
development milestone, for the completion of enrollment of a Phase 3 clinical trial for PTC923 for PKU, if achieved, in
cash or shares of our common stock.
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, 2021, our patent portfolio included a total of 117 active U.S. patents and 55 pending U.S. non-provisional
patent applications, including continuations and divisional applications, that are owned, co-owned, or exclusively in-
licensed. Our patent portfolio also includes numerous International and ex-U.S. patents and patent applications. The patent
portfolio includes patents and patent applications with claims including composition of matter, pharmaceutical formulation
and methods of use of our commercial products including ataluren, the active ingredient in the formulated product
Translarna, and risdiplam, the active ingredient in the formulated product Evrysdi.
The patent rights relating to ataluren owned by us consist of 41 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 African 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. Granted European patents will expire in 2024 for those patents drawn to composition of
matter, in 2026 and 2027 for those patents drawn to dosing regimen, and in 2027 for those patents drawn to the
manufacturing process. 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 patent rights relating to risdiplam owned by us and Roche consist of 5 issued co-owned U.S. patents relating to
composition of matter, methods of use, and methods of manufacture and multiple pending U.S. patent applications co-
owned or individually owned by us and Roche relating to composition of matter, methods of use, and formulation. We do
not license any material patent rights relating to risdiplam to unaffiliated parties. The issued U.S. patents relating to
composition of matter are currently scheduled to expire in 2033 and 2035. Our patent rights include 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 African countries, certain Asian countries and certain Eurasian
countries. We own 3 European patents relating to composition of matter, and uses of risdiplam, as well as multiple pending
European patent applications relating to composition of matter, uses and formulations. The expiration dates of the granted
European patents relating to composition of matter are currently scheduled to expire in 2033 and 2035. Except as indicated
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above, these anticipated expiration dates 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 NDA 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.
Analogous patent term extension 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 have no patents covering Emflaza or 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. 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 expect to rely on.
If PTC-AADC is approved in the United States, 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 expect to rely on. We
also expect to rely on orphan drug exclusivity in the EEA if PTC-AADC is approved by the EMA, as well as in other
countries or regions where such exclusivity is available.
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, using confidentiality agreements with our
employees, consultants, scientific advisors, contractors and collaborators. 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,
such 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 employees, former employees, consultants, scientific advisors, contractors or collaborators use intellectual
property owned by us or licensed to us by others in their work for us, trade secret disputes may arise. If such disputes
arise in the U.S., we may protect our trade secrets and pursue remedies available under federal statute using either the
Economic Espionage Act of 1996 and/or the Defend Trade Secrets Act of 2016 and, if necessary, under state law using
either the Uniform Trade Secrets Act or other State law available in the applicable venue. If such disputes arise ex-US,
we may protect our trade secrets and pursue remedies available under local or international law.
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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-licensed know-how and materials related to the production and use of PTC-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-National Taiwan University.”
We also exclusively in-license or jointly own patent applications with claims directed to composition of matter,
formulation and methods of use of other gene therapy products candidates currently in development.
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.
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.
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 in the United States. 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,
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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
rely on 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. No shortages or delays
of raw materials were encountered in 2020, and none are currently expected in 2021. 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 or internally, in the case of our gene therapy
platform.
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
specialty pharmacies to sell and distribute Emflaza to patients. The specialty pharmacies provide 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 the Akcea Agreement, 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 the drug substance of 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, New 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. In response to the COVID-19
pandemic, we deferred certain capital expenditures related to the Hopewell Facility and we now expect cGMP, as defined
below, manufacturing of clinical material at this facility to begin in the second half of 2021. 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 primarily 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 2020, 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 four specialty
pharmacies to sell and distribute Emflaza to patients. The specialty pharmacies receive prescription orders for Emflaza
directly from physicians and ship 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 2020, two 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 Note 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. For
example, as a result of the COVID-19 pandemic, the Brazilian Ministry of Health is continuing to experience significant
delays processing centralized group purchase orders. Almost all of our Brazilian product revenue for Translarna is
attributable to such purchase orders. These centralized group purchase order delays have caused, and may continue to
cause, fluctuations in our ability to generate revenue in Brazil.
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
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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 authorizations of Translarna in Brazil and Russia are 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 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 pharmacies we utilize provide 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 ANVISA for the treatment of stage 1 or stage 2
polyneuropathy in adult patients with hATTR amyloidosis 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.
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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 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”.
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.
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. Additionally, the FDA
granted accelerated approval to Viltepso (viltolarsen) from NS Pharma for the treatment of DMD in patients with
exon 53 skipping. 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)), Nippon Shinyaku (Viltolarsen (NS-065/NCNP-01) and NS-089/NCNP-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).
• 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 and Santhera
are developing a glucocorticoid antagonist (vamorolone) for DMD patients with anticipated NDA filing in 2021.
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• Evrysdi. Evrysdi 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. Zolgensma (onasemnogene
abeparvovec), a gene therapy drug developed by AveXis, Inc., (acquired by Novartis in 2018) is approved in the
United States and Japan for the treatment of SMA in patients under 2 years of age and in Europe for babies and
young children who weigh up to 21 kilograms. 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).
• Waylivra. If approved, Waylivra could face competition from drugs like Myalept (metreleptin). Myalept,
produced by Novelion Therapeutics, Inc., is currently approved for use in generalized lipodystrophy patients.
Additionally, Ionis is developing AKCEA-APOCIII-LRx for the treatment of FCS.
• Tegsedi. Tegsedi faces competition from drugs like Onpattro (patisiran) which was launched by Alnylam in the
United States in 2018 and received approval in Brazil for the treatment of hATTR amyloidosis in 2020. Vyndaqel
(tafamids meglumine) and Vyndamax (tafamidis) are commercialized in the United States, EU and some
countries in Latin America 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 (NPT-189), Prothena (PRX-004) and SOM Biotech (tolcapone).
• 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.
• PTC518 for Huntington disease. There are currently no drugs or disease-modifying therapies approved to delay
the onset or slow the progression of Huntington disease. However, Novartis (branaplam), uniQure (AMT-130),
Roche and Ionis (tominersen) and Wave Life Sciences (WVE-120102) are all developing product candidates for
treatment of Huntington disease.
• Vatiquinone for Friedreich ataxia. While there are currently no treatment options available for Friedreich ataxia,
omaveloxolone, which is being developed by Reata Pharmaceuticals and RT-001, which is being developed by
Retrotope, are each late stage product candidates being investigated for the treatment of Friedreich ataxia.
Voyager Therapeutics, Pfizer, Novartis, Stride Bio in collaboration with Takeda, AavantiBio, and Fulcrum
Therapeutics are also working on pre-clinical studies for a potential gene therapy solution.
• Vatiquinone for mitochondrial epilepsy. 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.
• PTC857 for GBA Parkinson’s disease. Although no drugs are currently approved for the treatment of GBA
Parkinson’s disease, Prevail Therapeutics (PR001) and Sanofi (GZ/SAR402671), each have clinical stage product
candidates being evaluated for the treatment of GBA Parkinson’s disease. Additionally, ambroxol, a generic
cough medicine, is also being evaluated for treatment of GBA Parkinson’s disease.
• PTC923 for PKU. If approved, PTC923 could face competition from Kuvan (sapropterin dihydrochloride),
including generic versions, and Palynziq (pegvaliase-pqpz), each of which is approved for the treatment of PKU.
Furthermore, Homology (HMI-102) and BioMarin (BMN 307) each are developing gene therapy product
candidates for the treatment of PKU.
• PTC299 for COVID-19. If approved, PTC299 could face significant competition as many other companies and
governmental organizations have expended resources to find a treatment for COVID-19. The FDA granted
emergency use authorizations to Pfizer and Moderna for their COVID-19 vaccines in the United States as well as
to Regeneron for the administration of casirivimab and imdevimab together. The FDA has also approved Gilead’s
antiviral drug Velkury (remdesivir), for the treatment of COVID-19.
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
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Candidates” for important information regarding some of the risks to our business arising as a result of government
regulation.
U.S. government regulation
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, 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. Moreover, in light of the COVID-19 pandemic,
the FDA has issued a number of guidance documents to assist companies navigating COVID-19, product development,
and manufacturing.
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 New Drug Application, or NDA, 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 to the FDA of an investigational new drug application, or IND, 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,
an Institutional Biosafety Committee, or 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 NIH Guidelines for
Research Involving Recombinant or Synthetic Nucleic Acid Molecules, or NIH Guidelines;
development of manufacturing processes to ensure the product candidate’s identity, strength, quality, purity, and
potency;
submission and FDA acceptance of an NDA, 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
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• FDA review and approval of the NDA or BLA to permit commercial marketing for particular indications for use.
Preclinical Studies and IND 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 IND 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 IND is submitted. The IND must become effective before human
clinical trials may begin. An IND 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 IND. In that
case, the IND sponsor and the FDA must resolve any outstanding FDA concerns or questions before clinical trials can
proceed. In other words, submission of an IND 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 due to safety concerns or non-compliance. As a
result, submission of an IND 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 IND.
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 INDs 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 NIH 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. 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 NDA 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
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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 are clinical trials 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 NDA, 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 NDA 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 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 NDA 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 NDA or BLA on the applicant’s agreement
to conduct additional clinical trials to further assess the product’s safety and effectiveness after NDA 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.
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.
Additional FDA Expedited Review and Approval Programs
The FDA has various programs that are intended to expedite or simplify the process for the development and FDA review
of certain products that are intended for the treatment of serious or life threatening diseases or conditions, and demonstrate
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the potential to address unmet medical needs or present a significant improvement over existing therapy. The purpose of
these programs is to provide important new therapeutics to patients earlier than under standard FDA review procedures.
To be eligible for a Fast Track designation, the FDA must determine, based on the request of a sponsor, that a product
candidate is intended to treat a serious or life threatening disease or condition and demonstrates the potential to address an
unmet medical need. If Fast Track designation is obtained, sponsors may be eligible for more frequent development
meetings and correspondence with the FDA. In addition, the FDA may initiate review of sections of an application before
the application is complete. This ‘‘rolling review’’ is available if the applicant provides and the FDA approves a schedule
for the remaining information. In some cases, a Fast Track product may be eligible for accelerated approval or priority
review.
The FDA may give a priority review designation to product candidates that are intended to treat serious conditions and, if
approved, would provide significant improvements in the safety or effectiveness of the treatment, diagnosis, or prevention
of the serious condition. A priority review means that the goal for the FDA is to review an application within six months,
rather than the standard review of ten months under current PDUFA guidelines.
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.
Under the provisions of the Food and Drug Administration Safety and Innovation Act, or FDASIA, enacted in 2012, a
sponsor can request designation of a product candidate as a ‘‘breakthrough therapy.’’ A breakthrough therapy is defined
as a product that is intended, alone or in combination with one or more other products, to treat a serious or life-threatening
disease or condition, and preliminary clinical evidence indicates that the product may demonstrate substantial improvement
over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early
in clinical development. Products designated as breakthrough therapies are eligible for intensive guidance on an efficient
development program beginning as early as Phase 1 trials, a commitment from the FDA to involve senior managers and
experienced review staff in a proactive collaborative and cross-disciplinary review, rolling review, and the facilitation of
cross-disciplinary review.
Another expedited pathway is the Regenerative Medicine Advanced Therapy, or RMAT, designation. Qualifying products
must be a cell therapy, therapeutic tissue engineering product, human cell and tissue product, or a combination of such
products, and not a product solely regulated as a human cell and tissue product. The product must be intended to treat,
modify, reverse, or cure a serious or life-threatening disease or condition, and preliminary clinical evidence must indicate
that the product has the potential to address an unmet need for such disease or condition. Advantages of the RMAT
designation include all the benefits of the Fast Track and breakthrough therapy designation programs, including early
interactions with the FDA. These early interactions may be used to discuss potential surrogate or intermediate endpoints
to support accelerated approval.
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
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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/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 NDA or BLA requesting approval to market
the product for one or more indications. In most cases, the NDA 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 NDA 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 NDA or BLA is incomplete, the FDA may refuse to file the application. If the FDA refuses
to file an NDA or BLA, the applicant may refile the application with information addressing the FDA identified
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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 NDA or BLA submission is accepted for filing, the FDA reviews the NDA 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 NDAs 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 NDA 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, NDAs or BLAs or supplements to NDAs 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 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 NDA or
BLA. The FDA also will inspect the facility or the facilities at which the product is manufactured before the NDA 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.
Notwithstanding 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
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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 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 IND
application; the proper design of tests to measure product potency in support of an IND or BLA application; and long term
patient and clinical study subject follow up and regulatory reporting. The FDA also issued a draft guidance specific to the
development of gene therapy products for neurodegenerative diseases as such products may face special challenges related
to CMCs and clinical and preclinical development, due to the nature of the products and potential patient population (e.g.,
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children), the heterogeneity of neurodegenerative disorders, the route of administration, the volume of the product that can
be administered, the delivery device, and the study population size.
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 NDA 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 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
National 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
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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 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 regarding manufactured products to the FDA upon their initial participation in
the manufacturing process for a commercial product, as well as periodically during the year. Recently, the information
that must be submitted to FDA regarding manufactured products was expanded through the Coronavirus Aid, Relief, and
Economic Security, or CARES, Act to include the volume of drugs produced during the prior year.
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 NDA 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 NDA, 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. Newly 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. New 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.
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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, for PTC-AADC for
the treatment of AADC deficiency, for Evrysdi 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 and DIPG. 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 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 also approved the use of Emflaza for the treatment of
patients 2 years to up to 5 years old with DMD on June 7, 2019. 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
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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) NDA is an application that contains full reports of
investigations of safety and efficacy. A 505(b)(2) NDA 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 New Drug Application, or ANDA. An ANDA 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 ANDA 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. ANDAs 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 NDA,
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 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 ANDA or
505(b)(2) NDA. In an effort to clarify which patents must be listed in the Orange Book, in January 2021, Congress passed
the Orange Book Transparency Act of 2020, which largely codifies FDA’s existing practices into the FDCA.
Upon submission of an ANDA or 505(b)(2) NDA, 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 ANDA or 505(b)(2) NDA approval cannot be made effective until all listed patents have expired,
except where the ANDA or 505(b)(2) NDA applicant challenges a listed patent through the last type of certification, also
known as a paragraph IV certification.
If the ANDA or 505(b)(2) NDA applicant has provided a paragraph IV certification to the FDA, the applicant must send
notice of the certification to the NDA and patent holders. The NDA 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
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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 ANDA or 505(b)(2) NDA applicant files a
paragraph IV certification, the NDA holder or patent owner(s) regularly take action to trigger the 30-month stay. Thus,
approval of an ANDA or 505(b)(2) NDA 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 NDA 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 ANDA or a 505(b)(2) NDA submitted by another company that contains the new chemical entity. However, an
ANDA or 505(b)(2) NDA 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 NDA, 505(b)(2) NDA, or supplement to
an existing NDA or 505(b)(2) NDA 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 ANDAs or 505(b)(2) NDAs 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 NDA;
however, an applicant submitting a full NDA 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 PTC-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 in 2020 finalized 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) NDA or ANDA 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 IND 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.
Emergency Use Authorizations
While, in most cases, a therapeutic must be approved by the FDA pursuant to an NDA, an ANDA, or a BLA, before the
product may be sold, when there is a public health emergency involving chemical, biological, radiological, or nuclear
agents, including infectious diseases like COVID-19, new therapeutics may be distributed pursuant to an Emergency Use
Authorization, or EUA. Under an EUA, the FDA may authorize the emergency use of an unapproved medical product or
an unapproved use of an approved product for certain emergency circumstances to diagnose, treat, or prevent serious or
life-threatening diseases or conditions when certain statutory criteria have been met, and after the Secretary of the
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Department of Health and Human Services has issued a declaration of emergency or threat justifying emergency use.
EUAs are intended to address serious or life threatening diseases or conditions caused by a chemical, biological,
radiological, or nuclear agent, including emerging infectious disease threats, such as the COVID-19 pandemic. To receive
an EUA, the product sponsor must demonstrate that the product “may be effective” in the prevention, diagnosis, or
treatment of an applicable disease or condition. Additionally, the FDA must determine that the product’s known and
potential benefits outweigh the known and potential risks. Further there must be no adequate, approved, and available
alternative product for the indication. Potential alternative products may be unavailable if there are insufficient supplies to
meet the emergency need. The FDA may establish additional conditions on an EUA that are necessary to protect public
health, including conditions related to information that must be disseminated to health care providers and patients, the
monitoring and reporting of adverse events, and record keeping. Conditions may also relate to how a product is distributed
and administered and how a product is advertised. Importantly, EUAs are not full marketing approvals. Rather, EUAs
are only effective for the duration of the applicable EUA declaration. Full approval of the product under applicable
standards established under the FDCA would be necessary to continue to distribute the product absent an EUA. EUAs
may also be revised or revoked by the FDA at any time. To date and with respect to the COVID-19 pandemic, while a
number of medical devices have received EUAs, including in vitro diagnostic products, personal protective equipment,
and ventilators, significantly fewer therapeutics have received EUAs.
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 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
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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) No.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 commenced the audit
of the system in December 2020 with a proposed implementation date in December 2021.
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. In addition, in
relation to advanced therapy medicinal products, or ATMPs, which are medicines based on genes, cells or tissues, the
Committee for Advanced Therapies, or CAT, EMA’s committee responsible for assessing the quality, safety and efficacy
of ATMPs, prepares a draft opinion on the ATMP application that is submitted to EMA before the CHMP adopts a final
opinion on the marketing authorization of the applicable medicine. 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.
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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 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.
Exceptional Circumstances. Similarly, certain of our product candidates may be eligible for a marketing authorization
under exceptional circumstances. Such an authorization may be granted where the applicant can demonstrate in its
application that it is unable to provide comprehensive data on efficacy and safety under normal conditions of use, because:
1) the indications for which the product in question is intended are encountered so rarely that the applicant cannot
reasonably be expected to provide comprehensive evidence; 2) in the present state of scientific knowledge, comprehensive
information cannot be provided; or 3) it would be contrary to generally accepted principles of medical ethics to collect
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such information. Authorizations under exceptional circumstances are annually reassessed and granted subject to a
requirement for the applicant to implement certain procedures, in particular, competent authority notification in the event
of any safety issue. After 5 years, the authorization is renewed under exceptional circumstances for an unlimited period,
unless European Medicines Agency decides, on justified grounds relating to pharmacovigilance, to proceed with one
additional five-year renewal. A marketing authorization under exceptional circumstances will not be granted when a
conditional marketing authorization is more appropriate. Orphan products are further eligible for approval under
exceptional circumstances only if the criteria considered for the approval under exceptional circumstances are fulfilled.
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 there is also a procedure which allows member states to authorize the distribution of an unauthorized medicinal
product in response to the spread of pathogens. The UK (but no EU countries) used this procedure with two COVID-19
vaccines during December 2020. Notwithstanding the UK’s subsequent full departure from the EU, the EU provision is
mirrored in UK medicines legislation.
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 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. Non-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. The CAT
is involved in any procedure regarding the provision of advice on the conduct of efficacy follow-up, pharmacovigilance
and risk management systems of ATMPs as provided for in ATMP legislation.
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
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safe and effective use of the medicinal product. Promotion of indications not covered by the SmPC is specifically
prohibited. ATMP legislation lays down certain minor extra labelling requirements for ATMPs.
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 required 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
packages of prescription medicines placed on the market in Europe have to bear two safety features: a unique identifier in
the form of a two-dimensional data matrix (barcode) and an anti-tamper device. In addition, ATMP legislation requires a
procedure for tracing the product and its starting and raw materials from its source to the site where the product is used.
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 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.
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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 the 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 and there is only limited EU-level control over the
decision-making autonomy of the government authorities including in relation to timing, justification and the ability to
challenge such decisions. 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 and the negotiation of supplemental rebates. 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, or require negotiation of
supplemental rebates for new drugs entering the market at price points determined to be high. Refusal to negotiate
supplemental rebates can negatively affect market access and provider reimbursement. Failure to comply with the rules for
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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 NDA) 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 (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, or rebates paid by manufacturers for, 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 NDA holder’s AMP for the
brand, thereby increasing the rebate amount and the 340B price for the brand. This was implemented by CMS in a final
rule issued December 31, 2020. The rule also expanded the definition of products identified as “line extensions” thereby
potentially increasing Medicaid rebates paid by manufacturers for such drugs. 340B program guidance regulations on civil
monetary penalties for statutory violations, which had been finalized in early 2017 but deferred, also recently went into
effect. On November 27, 2020, CMS issued an interim final rule implementing a Most Favored Nation payment model
under which reimbursement for certain Medicare Part B drugs and biologicals will be based on a price that reflects the
lowest per capita Gross Domestic Product-adjusted (GDP-adjusted) price of any non-U.S. member country of the
Organisation for Economic Co-operation and Development (OECD) with a GDP per capita that is at least sixty percent of
the U.S. GDP per capita. 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
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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. Net 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.”
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) No 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
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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. HHS recently promulgated a regulation that is effective in two phases. First, the regulation excludes from
the definition of “remuneration” limited categories of (a) PBM rebates or other reductions in price to a plan sponsor under
Medicare Part D or a Medicaid Managed Care Organization plan reflected in point-of sale reductions in price and (b) PBM
service fees. Second, effective January 1, 2023, the regulation expressly provides that rebates to plan sponsors under
Medicare Part D either directly to the plan sponsor under Medicare Part D, or indirectly through a pharmacy benefit
manager will not be protected under the anti-kickback discount 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.
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
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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 for which payment is available under
Medicare, Medicaid, or the Children’s Health Insurance Program (with certain exceptions) to report annually to CMS
information related to payments and other transfers of value made to or at the request of covered recipients, such as, but
not limited to, physicians, physician assistants, nurse practitioners, clinical nurse specialists, and certified registered nurse
anesthetists and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate
family. Payments made to physicians and certain research institutions for clinical trials are included within the ambit of
this law. 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, Nevada, 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.
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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 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, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, or HITECH
Act, and similar state laws also impose obligations on certain entities with respect to safeguarding the privacy, security
and transmission of individually identifiable health information, known as protected health information. Among other
things, the HITECH Act and its implementing regulations make 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. The HITECH Act 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
attorneys’ 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, United Kingdom 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). The EU legislation additionally only
permits data export to countries where there is adequate protection or where other controls are in place such as data export
agreements. In July 2020, the European Court declared the EU-US data ‘Privacy Shield’ invalid meaning that data transfers
to the United States require other guarantees such as contractual clauses. 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 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.
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Human Capital Resources
As of December 31, 2020, we had 967 employees, of whom 959 were employed on a full-time basis, and 122 consultants
and contractors, of whom 107 were full-time. None 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.
We believe that our growth and success is dependent on the contributions of our employees, as led by our executive
officers. We focus significant attention on attracting, retaining, engaging and further developing talented and experienced
individuals to manage and support our operations. In particular, recruiting and retaining qualified scientific, clinical,
manufacturing, commercial, marketing and support personnel is critical to our success. Competition for these skilled
personnel is high. We believe that our strong culture of teamwork and desire to be ever better helps us to attract and retain
employees. To continue to build upon our culture, we have partnered with Gallup, Inc., or Gallup, a global analytics and
advice firm with approximately 35 million respondents within its employee engagement database, to conduct employee
engagement surveys on an annual basis and more often as needed. Our executive team reviews these Gallup employee
engagement surveys to monitor employees’ needs, individual contribution, teamwork and growth. Results allow target
action plans to be created if needed. Our employees also complete Gallup’s CliftonStrengths talent assessment and attend
related training sessions. These tools have been implemented to help our employees identify their core strengths and learn
how to use these strengths to become more engaged and productive at work as well as to lead an overall more satisfied
and healthier lifestyle.
Based on external benchmarks, we offer employees a number of additional resources and tools to help in their personal
and professional development, including career coaching, internal and external development programs, professional
assessment tools, a paid subscription to a digital on-demand career and management learning solutions platform and a
wellness website through which employees may access information regarding scheduled healthy lifestyle activities, articles
and other beneficial resources. Additionally, we require specialized leadership training for all employees that are
responsible for the management of others within our organization. Furthermore, our executive team routinely reviews
employee turnover throughout the organization to monitor employee satisfaction.
We believe we provide a competitive total rewards offering to our employees, with market competitive cash compensation,
equity, and industry competitive company-paid benefits, including subsidized medical, and dental insurance and retirement
plans, as well as group vision insurance, tuition reimbursement and fitness reimbursement. Total rewards offerings are
established by employee positions, skill levels, experience, knowledge, and geographic location.
We are committed to hiring, developing and supporting a diverse and inclusive workplace, and continue to focus on
extending our equality, diversity and inclusion initiatives across our workforce. All of our employees are required to adhere
to our Code of Business Conduct and Ethics, and all relevant country regulations which sets forth the high level of integrity,
legal compliance and patient-centric focus expected of all our employees. We have a Chief Culture and Community Officer
who is responsible for maintaining and building upon our culture, ensuring a strong and healthy internal community, and
organizing outreach to our external communities. A core element of these responsibilities includes overseeing an equality,
diversity and inclusion, or ED&I, program which is managed by an ED&I professional, who reports to our Chief Culture
and Community Officer and routinely meets with our executive committee. Our ED&I program uses awareness and
education, talent development, employee resource groups and targeted focus groups with employees to present the opinions
of our employees at all levels to our executive team. In addition, we launched our global Talent Pipeline Program, or the
TPP, in 2020 to benefit students that graduated during the COVID-19 pandemic. The TPP is a one-year global internship
program aimed at providing recent diverse graduates real-world experience in the biopharmaceutical industry and related
professions, including research, clinical, finance, commercial, marketing, compliance, quality, legal, information
technology, human resources, government affairs, and communications. Participants were recruited form a global diverse
group of institutions and networks and are provided mentorship, job coaching, career counseling, and leadership training.
In response to the COVID-19 pandemic and related mitigation efforts, we assembled three task forces: (a) the COVID-19
task force, which consists of senior leaders from various departments within our organization and is responsible for the
safety of our employees, consultants and contractors throughout the world, collectively our workers, and to maintain
business continuity; (b) the Plan Ahead Team, which is responsible for assessing a long-term view and finding innovative
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ideas for returning to work in the office and takeaways from working during the COVID-19 pandemic that can be utilized
going forward; and (c) the Operational COVID-19 Team, which monitors supply chain, development and commercial
needs. Our COVID-19 task force continues to monitor safety protocols and procedures to protect our workers as well as
business essential operations. These protocols include: (i) limiting access to our facilities and requiring a majority of our
workers to work from home (except when access to facilities is necessary) while providing additional equipment to operate
successfully remotely, (ii) increasing physical distancing in workspaces for workers working onsite, (iii) adjusting
schedules for workers working onsite to minimize the number of individuals in a facility at one time, (iv) requiring masks
to be worn in all of our locations, (v) enhancing our cleaning protocols across all facilities, (vi) requiring workers to
undergo recurring COVID-19 safety training and (vii) establishing emergency worker testing procedures to immediately
respond to potential onsite exposure risks with subsequent testing, tracing, quarantining and re-testing to ensure a safe
work environment. Our COVID-19 task force periodically provides updates to our executive team and our board of
directors and provides timely communications to employees.
Our Corporate Information
Our principal executive offices are located at 100 Corporate Court, South Plainfield, New 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.
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 the COVID-19 Pandemic
We face risks related to health epidemics and other widespread outbreaks of contagious disease, which are, and may
continue to, delay our ability to complete our ongoing clinical trials and initiate future clinical trials, disrupt regulatory
activities and have other adverse effects on our business and operations, including the novel coronavirus (COVID-19)
pandemic, which has disrupted, and may continue to disrupt, our operations and may significantly impact our operating
results. In addition, the COVID-19 pandemic has caused substantial disruption in the financial markets and economies,
which could result in adverse effects on our business and operations.
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. Since that time, multiple other countries
throughout the world, including the United States, have been affected by the spread of the virus. To date, responsive
measures such as social distancing, travel bans and quarantines have been put into place in many countries throughout the
world, including the United States. These responsive measures have had a significant impact, both direct and indirect, on
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business and commerce worldwide, as worker shortages have occurred, supply chains have been disrupted and facilities
and production have been suspended or curtailed.
The spread of COVID-19 and the responsive measures taken to date have limited our access to our facilities, the access of
trial participants to clinical sites and caused the majority of our employees to work from home. We continue to monitor
the global spread and response of international, national and local authorities of COVID-19 and have put in place and will
continue to put in place measures as appropriate and necessary for our business and the safety of our employees. While
we expect the pandemic to continue to have an adverse effect on our business and operations, and the pandemic may have
an adverse effect on our financial condition and results of operations, we are unable to predict the extent or nature of the
future progression of the COVID-19 pandemic or its effects on our business, operations, financial condition and results of
operations at this time.
Furthermore, we have clinical trial sites located in countries that have been affected by COVID-19 that have been and may
continue to be disrupted, including the United States. The disruption of our clinical trial sites is having an adverse impact
on our clinical trial plans and timelines. For example, we initiated Study 045 to evaluate the ability of ataluren to increase
dystrophin protein levels in boys with nmDMD. As a result of the COVID-19 pandemic, our patients were temporarily
unable to safely travel to our clinical trial site at the University of California, Los Angeles, which also experienced
intermittent discontinuations of certain elective procedures and further complicated our patients’ ability to have final study
muscle biopsies performed, which delayed our completion of the trial by approximately six months. The COVID-19
pandemic has also adversely affected our ability to timely enroll patients for our clinical trials which may delay the
completion of clinical trials. Such disruptions could result in significant delays or could require us to abandon a clinical
trial altogether. For additional information, see the risk factor under “Risks Related to the Development and
Commercialization of our Products and our Product Candidates” titled, “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.”
Our ability to market and promote our products, as well as patient demand for our products may also be impacted. Because
access to health care providers and institutions has been limited, we have had to transition to virtual and online promotion
to reach existing and potential customers. Healthcare provider and institution restrictions and closures, as well as patient
reticence to visit their physicians may also result in a decrease in product prescribing.
Significant suppliers and manufacturing located in countries that have been affected by COVID-19 may also be disrupted,
which may affect our ability to procure items that are essential for our research and development activities and may cause
disruptions or delays in our sales and commercialization efforts of approved products and clinical trials with respect to
product candidates. In addition, our business and operations may be disrupted as resources, components and materials that
are essential for our research and development and manufacturing activities may be diverted towards the ongoing efforts
to rapidly diagnose, find and distribute a treatment or vaccine for COVID-19 and may not be readily available. The
response to the COVID-19 pandemic may also redirect resources with respect to regulatory matters in a way that would
adversely impact our ability to progress regulatory approval. For instance, certain of the third-party development and
manufacturing organizations that we contract with for analytical testing have prioritized materials and testing kits to
support COVID-19 testing, diverted employees to support COVID-19 related programs and reduced their workforce to
comply with social distancing requirements imposed in connection with the COVID-19 pandemic. As a result of this shift
in resources, we experienced a delay in generating analytical data needed to respond to questions sent by the EMA
regarding our MAA for PTC-AADC for the treatment of AADC deficiency in the EEA. Following a clock stop extension,
we submitted responses to the EMA’s questions. We may also choose to redirect our own resources in a way that may
adversely impact or delay certain of our programs. Furthermore, we may face impediments to regulatory meetings and
approvals due to measures intended to limit in-person interactions. For additional information, see the risk factor under
“Risks Related to the Development and Commercialization of our Products and our Product Candidates” titled, “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.”
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Further, our own relationships with commercial customers and suppliers could be affected if the government places rated
or allocation orders under the Defense Production Act, directly or through higher tier contractors, either with respect to
our products or our partners’ supplies or products that may be related to the COVID-19 pandemic. Specifically, the
Defense Production Act provides the president with authority to direct private sector production in, among other
circumstances, national emergencies. Once the Defense Production Act is invoked, federal agencies can use it to direct
companies to prioritize the sale of goods to the federal government. On March 18, 2020, former U.S. President Donald
Trump issued an executive order authorizing use of the Defense Production Act to acquire “health and medical resources
needed to respond to the spread of COVID-19.” President Biden has also directed that executive agencies consider whether
further use of the Defense Production Act is appropriate in support of the COVID-19 response effort.
We cannot foresee if and when the COVID-19 pandemic will be effectively contained, nor can we predict the severity and
duration of its impact. If the COVID-19 pandemic is not effectively and timely controlled, we may experience further or
prolonged disruption of our clinical trials, third-party suppliers or contract manufacturers, extended closures of facilities,
such as clinical trial sites, suppliers, manufacturers and distributors, including single source suppliers, and further delays
with respect to regulatory approvals or the commercialization of any current or future products. Such events may materially
and adversely affect our business operations and financial condition. Additionally, the COVID-19 pandemic has caused
significant disruptions in the financial markets, and may continue to cause such disruptions, which could impact our ability
to raise additional funds and has also impacted, and may continue to impact, the volatility of our stock price and trading
in our stock. Moreover, the COVID-19 pandemic has significantly impacted economies worldwide, which could result in
adverse effects on our business and operations. We cannot be certain what the overall impact of the COVID-19 pandemic
will be on our business and it has the potential to materially adversely affect our business, financial condition, results of
operations, and prospects.
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 2021. 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. However, certain of the third-party development and manufacturing organizations that we contract
with for analytical testing have prioritized materials and testing kits to support COVID-19 testing, diverted employees to
support COVID-19 related programs and reduced their workforce to comply with social distancing requirements imposed
in connection with the COVID-19 pandemic. As a result of this shift in resources, we experienced a delay in generating
analytical data needed to respond to questions sent by the EMA regarding our MAA for PTC-AADC for the treatment of
AADC deficiency. Following a clock stop extension, we submitted responses to the EMA’s questions and we currently
expect an opinion from the CHMP in the second quarter of 2021. 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.
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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, including the COVID-19 pandemic, 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
at the Hopewell Facility. In connection with our prioritization of expenses during the COVID-19 pandemic, we deferred
certain capital expenditures related to the Hopewell Facility, and we now expect cGMP manufacturing of clinical material
at this facility to begin in the second half of 2021. 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.
To the extent that we decide to manufacture our own clinical and commercial supply as an alternative source of supply,
there is no guarantee that we will be able to cost-effectively produce sufficient quantities of our program materials. 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 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.
Due to the potential impact of the COVID-19 pandemic on the manufacture of gene therapy products, the FDA issued
guidance concerning how sponsors and investigators may address these challenges. This guidance recommended that gene
therapy manufacturers perform a risk assessment to identify, evaluate, and mitigate factors that may allow for the
transmission of the COVID-19 virus. The FDA specifically recommended that manufacturers consider areas, such as
donor assessments, cellular and tissue source materials, manufacturing processes, manufacturing facility controls, product
and material testing, and the number of individuals who may receive the product. Per the guidance, risk assessment and
mitigation strategies should be submitted to the FDA.
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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, New 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, competition for skilled personnel within gene therapy
manufacturing is intense and we may not be able to attract and retain these personnel on acceptable terms. Moreover,
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. For example, in connection with our prioritization of expenses during the COVID-19 pandemic, we deferred
certain capital expenditures related to the Hopewell Facility, and we now expect cGMP manufacturing of clinical material
at this facility to begin in the second half of 2021. We currently continue to rely on contract manufacturers for the
manufacturing of our gene therapy program materials.
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.
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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 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 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. National 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
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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.
For our gene therapy product candidates, we may also pursue alternative approval pathways. For instance, in the EU, we
may pursue an exceptional circumstances marketing authorization. If a product candidate is eligible for the grant of a
marketing authorization under exceptional circumstances, the authorization would be subject to a requirement for the
applicant to implement specific procedures, in particular related to notification of the competent authorities of any safety
issue. Such exceptional circumstance marketing authorizations are annually reassessed and after five years, the
authorization may be renewed under exceptional circumstances for an unlimited period, or the EMA may decide, on
justified grounds relating to pharmacovigilance, to proceed with one additional five-year renewal. If any product we have
is approved under the exceptional circumstances process, there is no guarantee that we will be able to maintain such
approval. Moreover, our product candidates may not be eligible for exceptional circumstances marketing authorization.
By example, the product candidate may not fulfill the qualifying criteria or the EMA may determine that the marketing
authorization under exceptional circumstances may not be granted because a conditional marketing authorization is more
appropriate. Orphan products are further eligible for approval under exceptional circumstances only if the criteria
considered for the approval under exceptional circumstances are fulfilled.
Delays as a result of lengthier regulatory approval process and further restrictions on development or the approval 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 patient to produce an essential protein or ribonucleic acid, or RNA, 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 RNA. There is also a risk that production of the desired protein or RNA 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.
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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. Negative 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 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
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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:
•
•
•
•
•
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. Our rebate payments may increase
or our prices be adjusted under value-based purchasing arrangements based on evidence-based measures or outcomes-
based measures for a patient or beneficiary based on use of our drug. 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 NICE) 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.
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
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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.
Similarly, in the EU, another company could gain approval for a competing product based on an MAA with a completely
independent data package that includes 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.
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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.
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 NDA 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 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;
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•
•
•
•
•
•
•
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;
global trade policies;
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;
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 NDA
submission by us and, ultimately, may support approval of Translarna for nmDMD in the United States;
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
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.
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 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
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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 ANVISA, 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 June 2020 and is effective, unless extended, through August 5, 2021.
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 NDA 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 NDA for nmDMD with the FDA via the “file over protest” process
that allows a company to have its NDA filed and reviewed when there is a disagreement with regulators over the
acceptability of the NDA submission. In October 2017, the Office of Drug Evaluation I of the FDA issued a Complete
Response Letter for the NDA, 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 New Drugs of the FDA. In February 2018, the Office of New Drugs
of the FDA denied our appeal of the Complete Response Letter. In its response, the Office of New Drugs recommended a
possible path forward for the ataluren NDA submission based on the accelerated approval pathway. This would involve a
re-submission of an NDA containing the current data on effectiveness of ataluren with new data to be generated on
dystrophin production in nmDMD patients’ muscles. We followed the FDA’s recommendation and collected, using newer
technologies via procedures and methods that we designed, such dystrophin data in a new study, Study 045. 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 and the FDA will need to accept the methods utilized in the study. There is
substantial risk that the FDA will not accept the methods used to collect the data in Study 045.
In February 2021, we announced the results of Study 045. Although Study 045 did not meet its pre-specified primary
endpoint, we plan to discuss the Study 045 dystrophin results and the totality of existing clinical and real-world data with
the FDA to determine if there is a potential path to approval based on these results and data. There is substantial risk that
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the FDA will determine that the results from our clinical trials and existing real-world data are not sufficient to support a
marketing approval for Translarna for the treatment of nmDMD in the United States. In that case, as we expect to have
data for Study 041 in the third quarter of 2022, and subject to a positive outcome in that study, we would plan to re-submit
the NDA at that time.
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
NDA 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 NDA 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 NDA.
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 NDA, 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 NDA 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 NDA 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
NDA 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 NDA were to be resubmitted, the FDA specified that they
were not related to its refusal to file our NDA.
Following the refusal to file of our NDA, 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 NDA for nmDMD via the FDA’s file over
protest regulations. We included additional retrospective and post hoc analyses from our clinical trials with the NDA filed
in 2017, including analyses of the 6-minute walk test using alternative statistical and analytical methods and new analyses
from the North Star Ambulatory Assessment test, a functional scale designed for boys affected by DMD. Filing over
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protest is a procedural path permitted by FDA regulations that allows a company to have its NDA filed and reviewed when
there is a disagreement with regulators over the acceptability of the NDA submission.
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.
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 have incurred and expect to continue to 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 we
have enrolled patients in countries with a different standard of care for nmDMD patients and at clinical trial sites that are
inexperienced with nmDMD clinical trials, which may affect our ability to accurately evaluate the study and maintain
compliance with applicable regulatory requirements and laws. 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.
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
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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 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;
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
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;
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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;
clinical trial sites or enrolled patients may be negatively affected by the COVID-19 pandemic, resulting in delays
and disruptions in completing clinical trials, such as our patients’ temporary inability to safely travel to our clinical
trial site for Study 045 at the University of California, Los Angeles, which also experienced intermittent
discontinuations of certain elective procedures, further complicating our patients’ ability to have final study
muscle biopsies performed;
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;
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• 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;
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 IND, or comparable application or protocols prior to commencing a clinical trial;
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• 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,
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including a finding that the participants are being exposed to unacceptable health risks;
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;
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;
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• 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
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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 NDA, 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 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
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than 0.05. Nominal 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 NDA 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.
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We faced similar challenges in connection with the designs of our study of Translarna in nonsense mutation aniridia, which
did not meet statistical significance, our study of Translarna in nonsense mutation Dravet syndrome/CDKL5, which did
not meet its primary endpoint and our study in Emflaza in limb-girdle 2I. In each case, there was limited historical clinical
trial experience for the development of drugs to treat the underlying cause of these disorders. Our program for Emflaza in
limb-girdle 2I was discontinued in 2019 and our programs for Translarna in nonsense mutation aniridia and Translarna in
nonsense mutation Dravet syndrome/CDKL5 were each discontinued in 2020.
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
splicing, gene therapy, Bio-e, metabolic and oncology programs and studies of PTC299 for COVID-19 as well as studies
in our products for maintaining authorizations, label extensions and additional indications.
Many 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. 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. For example, there is significant competition, including from other companies and
governmental organizations, to find a treatment for COVID-19 which may affect the patient enrollment of our studies of
PTC299 for COVID-19.
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;
disruptions caused by the COVID-19 pandemic;
the willingness of potential patients to enroll in a clinical trial during the COVID-19 pandemic;
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 splicing, gene therapy, Bio-e, metabolic
and oncology programs and studies of PTC299 for COVID-19 as well as studies in our products for maintaining
authorizations, 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.
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
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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. 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-
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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.
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
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 study assessing Translarna in
nonsense mutation Dravet syndrome/CDKL5, 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
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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.
We face risks related to the development of PTC299 as a potential treatment for COVID-19 and we may ultimately be
unsuccessful in developing a treatment for the virus in a timely manner or at all. Even if we are able to produce a drug
that successfully treats the virus, there is significant competition in the search for a treatment for COVID-19 and our
product may not be the only effective treatment.
In June 2020, the FDA authorized the initiation of a Phase2/3 clinical trial evaluating PTC299 as a potential treatment for
COVID-19 and we expect data from this trial to be available in the second half of 2021. Our clinical trial for PTC299 may
reveal unfavorable characteristics, including safety concerns, and may not demonstrate efficacy. We cannot be certain that
the Phase 2/3 clinical trial will be sufficient to enable us to obtain marketing approval of PTC299 for the treatment of
COVID-19, and we may need to conduct additional clinical trials before we are able to apply for marketing approval.
Additionally, the FDA and other regulators may not agree with our interpretation of the results of the clinical data from
the trial. If we are unable to successfully complete the clinical trial, if the results of the clinical trial are not positive or are
only modestly positive, or if there are safety concerns, we may be unable to produce a drug that successfully treats
COVID-19 and receives regulatory approval in a timely manner, if at all.
The timing and success of our clinical trial of PTC299 for the treatment of patients with COVID-19 will depend on our
ability to enroll patients in the trial. Our inability to enroll a sufficient number of patients could result in significant delays
or could require us to abandon the trial and development of PTC299 for the treatment of COVID-19 altogether. Patient
enrollment may be affected by the availability of commercially available treatments and vaccines and other ongoing
clinical trials. There is significant competition, including from other companies and governmental organizations, to find a
treatment for COVID-19. For example, the FDA granted emergency use authorizations to Pfizer and Moderna for their
COVID-19 vaccines in the United States as well as to Regeneron for the administration of casirivimab and imdevimab
together. The FDA has also approved Gilead’s antiviral drug Velkury (remdesivir), for the treatment of COVID-19. As a
result, even if we are able to sufficiently enroll our clinical trial and produce an effective treatment for COVID-19, there
is no guarantee that we will be able to successfully commercialize our product. For additional information, see the risk
factor under “Risks Related to the Development and Commercialization of our Products and our Product Candidates”
titled, “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.”
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 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.
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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
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 and the
end of the transition period on January 1, 2021, commonly referred to as Brexit. 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. While a trade deal
has been agreed between the EU and UK, it is primarily focused on avoiding tariff barriers and mutual GMP recognition
with further regulatory cooperation to be agreed between the parties through a ‘Working Group on Medicinal Products’.
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. Net 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
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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.
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. Additionally, the FDA granted accelerated approval to Viltepso (viltolarsen) from NS Pharma for the treatment
of DMD in patients with exon 53 skipping. 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), Nippon Shinyaku (Viltolarsen (NS-065/NCNP-01) and NS-089/NCNP-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).
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 and
Santhera are developing a glucocorticoid antagonist (vamorolone) for DMD patients with anticipated NDA filing in 2021.
Evrysdi 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. Zolgensma (onasemnogene abeparvovec), a gene therapy drug
developed by AveXis, Inc. (acquired by Novartis in 2018) is approved in the United States and Japan for the treatment of
SMA in patients under 2 years of age and in Europe for babies and young children who weigh up to 21 kilograms. 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).
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 Myalept (metreleptin). Myalept, produced by Novelion Therapeutics, Inc., is currently
approved for use in generalized lipodystrophy patients. Additionally, Ionis is developing AKCEA-APOCIII-LRx for the
treatment of FCS. Tegsedi also faces competition from drugs like Onpattro (patisiran), which was launched by Alnylam
in the United States in 2018 and received approval in Brazil for the treatment of hATTR amyloidosis in 2020. Vyndaqel
(tafamidis meglumine) and Vyndamax (tafamidis) are commercialized in the United States, EU and some other countries
in Latin America 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 (NPT-189),
Prothena (PRK-004) and SOM Biotech (tolcapone).
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.
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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.
There are currently no drugs approved to delay the onset or slow the progression of Huntington disease. However, Novartis
(branaplam), uniQure (AMT-130), Roche and Ionis (tominersen) and Wave Life Sciences (WVE-120102) are all
developing product candidates for treatment of Huntington disease.
While there are currently no treatment options available for Friedreich ataxia, omaveloxolone, which is being developed
by Reata Pharmaceuticals and RT-001, which is being developed by Retrotope, are each late stage product candidates
being investigated for the treatment of Friedreich ataxia. Voyager Therapeutics, Pfizer, Novartis, Stride Bio in
collaboration with Takeda, AavantiBio, and Fulcrom Therapeutics are also working on pre-clinical studies for a potential
gene therapy solution. 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.
Although no drugs are currently approved for the treatment of GBA Parkinson’s disease, Prevail Therapeutics (PR001)
and Sanofi (GZ/SAR402671), each have clinical stage product candidates being evaluated for the treatment of GBA
Parkinson’s disease. Additionally, ambroxol, a generic cough medicine, is also being evaluated for treatment of GBA
Parkinson’s disease.
If approved, PTC923 could face competition from Kuvan (sapropterin dihydrochloride), including generic versions, and
Palynziq (pegvaliase-pqpz), each of which is approved for the treatment of PKU. Furthermore, Homology (HMI-102) and
BioMarin (BMN 307) each are developing gene therapy product candidates for the treatment of PKU.
If approved, PTC299 could face significant competition as many other companies and governmental organizations have
expended resources to find a treatment for COVID-19. The FDA granted emergency use authorizations to Pfizer and
Moderna for their COVID-19 vaccines in the United States as well as to Regeneron for the administration of casirivimab
and imdevimab together. The FDA has also approved Gilead’s antiviral drug Velkury (remdesivir), for the treatment of
COVID-19.
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
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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 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.
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Net 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 with respect to
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, and payment of Medicare
Coverage Gap discounts may further reduce realization on Part D drugs. Further, CMS is proposing to relax Part D
coverage requirements to give plans more leverage in negotiating their formularies.
With respect to drugs eligible for reimbursement under Medicare Part B, on November 27, 2020, CMS issued an interim
final rule implementing a Most Favored Nations payment model under which reimbursement for certain Medicare Part B
drugs and biologicals will be based on a price that reflects the lowest per capita Gross Domestic Product-adjusted (GDP-
adjusted) price of any non-U.S. member country of the Organisation for Economic Co-operation and Development
(OECD) with a GDP per capita that is at least sixty percent of the U.S. GDP per capita. 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.
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
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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 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 there may continue to be
future efforts to modify, repeal, or otherwise invalidate all, or certain provisions of the Affordable Care Act. The Biden
administration is expected to continue to take measures to further facilitate the implementation 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 and the FDA has finalized a guidance to facilitate the import of U.S.
approved pharmaceutical and biologic products that were originally intended for marketing in a foreign country. 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 Need 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, 2020, we had an accumulated deficit
of $1,628.9 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, proceeds from the Royalty Purchase
Agreement, the private placements of our preferred stock, collaborations, bank debt, convertible debt financings, our prior
credit agreement with MidCap Financial Trust 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. We also began to recognize revenue generated from net sales of Tegsedi for the
treatment of stage 1 or stage 2 polyneuropathy in adult patients with hATTR amyloidosis in 2019 and Waylivra for the
treatment of FCS in 2020 in Latin America and the Caribbean. 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 2021 and, while we anticipate that operating losses generated in future periods should decline versus prior periods,
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we may never generate profits from operations or maintain profitability. The net losses we incur may fluctuate significantly
from period to period.
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. See “Item
1. Business-Our Ongoing Acquisition-Related Obligations” for further information regarding our acquisitions and our
ongoing obligations. 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 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.
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. 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 NDA submission by us, we would expect to incur
significant costs, which may have a material adverse effect on our business and results of operations.”
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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 splicing, gene therapy, Bio-e, metabolic and oncology programs and studies of
PTC299 for COVID-19 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. We submitted an MAA to the EMA
for the treatment of AADC deficiency with PTC-AADC in the EEA. We are also preparing a BLA for PTC-AADC for the
treatment of AADC deficiency in the United States and we anticipate submitting a BLA to the FDA in the second quarter
of 2021. We filed for marketing authorization for Waylivra with ANVISA in June 2020 and, subject to potential delays in
the review process related to the COVID 19 pandemic, expect a regulatory decision on approval from ANVISA in the
third quarter of 2021. 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 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 Notes, 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 Notes,
cash interest payments are payable on a semi-annual basis in arrears, which will require total funding of $4.3 million
annually. 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 ANVISA, the determination for which we expect to potentially occur, subject to
potential delays in the review process related to the COVID-19 pandemic, in the third quarter of 2021.
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 splicing, gene therapy, Bio-e, metabolic and oncology
programs and our studies of PTC299 for COVID-19 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;
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seek to expand and diversify our product pipeline through strategic transactions;
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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;
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 successful, may enable FDA review of an NDA re-submission by us and, ultimately, may support approval of
Translarna for nmDMD in the United States;
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• maintaining orphan exclusivity in the United States for Emflaza;
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successfully completing any post-marketing requirements imposed by regulatory agencies with respect to our
products;
expanding the territories in which we are approved to market our products;
successfully advancing our other programs and collaborations, including our splicing, gene therapy, Bio-e,
metabolic and oncology programs and studies of PTC299 for COVID-19 as well as studies in our products for
additional indications;
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• 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;
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;
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
contracting for the manufacture and distribution of commercial quantities of our products and product candidates.
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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 our Convertible Notes offerings, public offerings of common stock, our
“at the market offering” of our common stock pursuant to an At the Market Offering Sales Agreement with Cantor
Fitzgerald and RBC Capital Markets, LLC, or the Sales Agreement, proceeds from the Royalty Purchase Agreement and
marketable securities, will be sufficient to fund our operating expenses and capital expenditure requirements for at least
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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 or analyses at significant cost which, if successful, may enable FDA review of an NDA re-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;
our ability to successfully complete any post-marketing requirements imposed by regulatory agencies with respect
to our products;
the progress, results and costs of our activities under our splicing, gene therapy, Bio-e, metabolic and oncology
programs and studies of PTC299 for COVID-19 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
splicing, gene therapy, Bio-e, metabolic and oncology programs and studies of PTC299 for COVID-19 as well
as studies in our products for maintaining authorizations, label extensions and additional indications;
our ability to satisfy our obligations under the indentures governing our Convertible Notes;
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
acquisitions of Emflaza, Agilis, Censa 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.
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-
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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.
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 Emflaza, Agilis, Censa 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, 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
other challenges associated with managing an increasingly diversified business.
For example, on May 29, 2020, we completed the acquisition of Censa pursuant to the Censa Merger Agreement. Upon
the closing of the Censa Merger, we paid to the Censa securityholders (i) cash consideration of $15.0 million, which
consisted of an upfront payment of $10.4 million and an additional $4.6 million for the net assets on Censa’s opening
balance sheet as of the date of the acquisition, and (ii) 845,364 shares of our common stock, which were valued at $42.9
million based on the closing stock price on the acquisition date. The number of shares issued was determined using a 30-
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day VWAP pursuant to the Censa Merger Agreement. In addition, Censa securityholders may become entitled to receive
contingent payments from us based on (i) the achievement of certain development and regulatory milestones up to an
aggregate maximum amount of $217.5 million for PTC923’s two most advanced programs and receipt of a priority review
voucher from the FDA as set forth in the Censa Merger Agreement, (ii) $109.0 million in development and regulatory
milestones for each additional indication of PTC923, (iii) the achievement of certain net sales milestones up to an aggregate
maximum amount of $160.0 million, (iv) a percentage of annual net sales during specified terms, ranging from single to
low double digits of the applicable net sales threshold amount, and (v) any sublicense fees paid to us in consideration of
any sublicense of Censa’s intellectual property to commercialize PTC923, on a country-by-country basis, which contingent
payment shall equal to a mid-double digit percentage of any such sublicense fees. Pursuant to the Censa Merger
Agreement, we have the option to pay the initial $30.0 million development milestone, for the completion of enrollment
of a Phase 3 clinical trial for PTC923 for PKU, if achieved, in cash or shares of our common stock. 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 Censa’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 PTC923 and the other assets acquired
from Censa. 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; marketing, distribution, licensing or other arrangements.
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.
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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 NOLs,
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 NOLs 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 NOLs and other tax attributes generated by us. Therefore, we have not established whether
the IRS would agree with our analysis regarding the application of Sections 382 and 383. We continue to fully evaluate
the impact of a limitation on the use of our NOLs and other tax attributes under Sections 382 and 383.
Moreover, our ability to use these NOLs to offset potential future taxable income and related income taxes that would
otherwise be due is dependent upon our generation of future taxable income. In 2020, we generated a significant amount
of taxable income from the sale of the Assigned Royalty Payment to RPI pursuant to the Royalty Purchase Agreement. As
a result, we utilized a significant amount of tax attributes.
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), may 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 executive
compensation, the limitation of tax deductions for net interest expense to 30% of adjusted earnings (except for certain
small businesses), the limitation of the deduction of NOLs arising in taxable years beginning after December 31, 2017 to
80% of current-year taxable income and elimination of NOL carrybacks for losses arising in taxable years ending after
December 31, 2017 (through any such NOLs may be carried forward indefinitely). 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 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
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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.
As part of Congress’s response to the COVID-19 pandemic, the Families First Coronavirus Response Act, or FFCR Act,
was enacted on March 18, 2020, the CARES Act was enacted on March 27, 2020, and COVID relief provisions were
included in the Consolidated Appropriations Act, 2021, or CAA, which was enacted on December 27, 2020. All contain
numerous tax provisions. In particular, the CARES Act retroactively and temporarily (for taxable years beginning before
January 1, 2021) suspends application of the 80%-of-income limitation on the use of NOLs, which was enacted as part of
the 2017 Tax Act. It also provides that net operating losses arising in any taxable year beginning after December 31, 2017,
and before January 1, 2021 are generally eligible to be carried back up to five years. The CARES Act also temporarily (for
taxable years beginning in 2019 or 2020) relaxes the limitation of the tax deductibility for net interest expense by increasing
the limitation from 30% to 50% of adjusted taxable income.
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. In July 2020, the European Commission approved the
removal of the statement “efficacy has not been demonstrated in non-ambulatory patients” from the indication statement
for Translarna. 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.
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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 we have enrolled patients
in countries with a different standard of care for nmDMD patients and at clinical trial sites that are inexperienced with
nmDMD clinical trials, which may affect our ability to accurately evaluate the study and maintain compliance with
applicable regulatory requirements and laws. 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 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 ANVISA 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, ANVISA 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
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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 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 Evrysdi, 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.
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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 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.
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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. Additionally, The FDA approved the use of
Emflaza for the treatment of patients 2 years to up to 5 years old with DMD on June 7, 2019.
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 NDAs 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 Orange Book. The two types of applications prevented
by Hatch-Waxman exclusivity are 505(b)(2) applications and abbreviated new drug applications, or ANDAs. A
505(b)(2) application allows the FDA to rely for approval of an NDA 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 ANDA is an application that contains information to show that
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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 ANDA 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. ANDAs do not generally contain clinical studies as required in full NDAs 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, if any periods of
exclusivity do not provide adequate protection or if we do not receive anticipated periods of exclusivity, we may face
competition from 505(b)(2) and ANDA products sooner than anticipated.
Exclusivity under the Hatch-Waxman Act does not prevent the submission, filing and approval of a full NDA 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,
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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.
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 NDA 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.
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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:
restrictions on such products, manufacturers or manufacturing processes;
changes to or restrictions on the labeling or marketing of a product;
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• 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;
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;
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• warning, cyber or untitled letters;
• withdrawal of the products from the market or marketing suspensions;
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• 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.
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
Non-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.
Not 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.
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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.
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 temporary managed access
agreement between us, National Health Services England, the National Institute for Health and Care Excellence, or NICE,
NorthStar clinical network and the patient organizations Muscular Dystrophy UK and Action Duchenne. The managed
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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 NICE guidance, 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.
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
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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 NDA) 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 HIPAA, as amended by the HITECH Act, and similar state laws, such as the California
Consumer Privacy Act. For example, HIPAA, as amended by the HITECH Act, and their implementing
regulations, 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 those obligations. In addition, international data protection laws including 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.
• 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. Notably, 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.
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• 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, certain other healthcare providers, and teaching hospitals, as well as physician and immediate
family ownership and investment interests in such manufacturers. A number of U.S. states and 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
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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, 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. The Biden administration is expected to continue to take measures to further facilitate the
implementation 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.
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 NDA holder’s AMP for the brand, thereby increasing the rebate
amount and the 340B price for the brand. This was implemented by CMS in a final rule issued December 31, 2020. The
rule also expanded the definition of products identified as “line extensions” thereby potentially increasing Medicaid rebates
paid by manufacturers for such drugs. 340B program guidance regulations on civil monetary penalties for statutory
violations, which had been finalized in early 2017 but deferred, recently also went into effect. On November 27, 2020,
CMS issued an interim final rule implementing a Most Favored Nation payment model under which reimbursement for
certain Medicare Part B drugs and biologicals will be based on a price that reflects the lowest per capita Gross Domestic
Product-adjusted (GDP-adjusted) price of any non-U.S. member country of the Organisation for Economic Co-operation
and Development (OECD) with a GDP per capita that is at least sixty percent of the U.S. GDP per capita.
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;
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•
•
•
•
challenges to the pricing of drugs or limits on prohibitions on reimbursement or specific products through other
means;
reform of drug importation laws and policies;
expansion of use of managed care systems in which the healthcare providers contract to provide comprehensive
healthcare for a fixed cost per person; and
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. In particular, we are unable to predict what changes the Biden administration will implement
through the U.S. Congress or future executive orders and how these would impact us. 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. Changes in FDA laws, regulations, and policies may also make it more difficult to obtain and maintain
marketing authorizations.
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 entered into a Rights Exchange Agreement, pursuant to
which we issued 2,821,176 shares of our common stock and paid $36.9 million, in the aggregate, to the Participating
Rightholders in exchange for the cancellation and forfeiture by the Participating Rightholders of their rights to receive
certain milestone-based contingent payments under the Agilis Merger Agreement. 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. Additionally, our programs for Translarna in nonsense mutation aniridia and Translarna in nonsense mutation Dravet
syndrome/CDKL5 were each discontinued in 2020 based upon the negative outcome of clinical studies. 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. Notwithstanding 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
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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 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. To the extent that we decide to manufacture our own clinical
and commercial supply for our gene therapy programs as an alternative source of supply, there is no guarantee that we will
be able to cost-effectively produce sufficient quantities of our program materials. 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. 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 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
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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 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 in the United States. 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 operations. Further, as we presently have no patent rights to protect the approved use of Emflaza, we
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
specialty pharmacies to sell and distribute Emflaza to patients. The specialty pharmacies provide 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
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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 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
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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 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
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candidates or commercialization of our products, producing additional losses and depriving us of potential product
revenue.
We currently depend, and expect to continue to depend, on collaborations with third parties for the development and
commercialization of some of our products and product candidates. If those collaborations are not successful, we may
not be able to capitalize on the market potential of these products and 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, including Evrysdi. 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 commercial success of Evrysdi will depend on the success of Roche’s commercialization program.
Furthermore, the successful development of another 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 pursues
clinical development of any other compounds identified under the collaborations.
Collaborations involving our products and 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 products and 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;
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disputes may arise between the collaborator and us as to the ownership of intellectual property arising during the
collaboration;
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us from collaborating with others, or from using our products or product candidates ourselves;
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 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.
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, including implementing the National Institute of Standards and
Technology cybersecurity framework, instituting a training and compliance program on cybersecurity for all employees
and doing a yearly external audit and penetration test, 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. No 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
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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, despite our having
a security risk insurance policy and disaster recovery and incident response plans. 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:
reduced resources of our management to pursue our business strategy;
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.
Because PTC299 for COVID-19 is being developed under an emergency Declaration, we may be eligible for limited
liability protection under the Public Readiness and Emergency Preparedness Act, or PREP Act. The PREP Act provides
limited immunity for manufacturers from claims for losses arising out of the administration or use of a “covered
countermeasure.” However, the PREP Act does not provide complete immunity as injured persons may still bring a suit
for “willful misconduct” under some circumstances. The PREP Act also does not provide immunity against federal
enforcement actions or claims under federal law for equitable relief. “Covered countermeasures” include “qualified
pandemic or epidemic products”, such as those for COVID-19. For these immunities to apply, the Secretary of the U.S.
Department of Health and Human Services, or HHS, must issue a declaration of a public health emergency, as was done
for COVID-19. To be covered by PREP Act immunity, activities and products must further meet the criteria set forth in
the HHS declaration of immunity from liability, and the therapeutic must be authorized by the FDA, or authorized for
investigational or emergency use for the applicable emergency. The federal government has continuously revised its PREP
Act declaration and has provided multiple advisory opinions regarding its interpretation of the PREP Act declarations
throughout the COVID-19 pandemic. Accordingly, interpretation of the scope of the PREP Act may change. Additionally,
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the PREP Act may not provide adequate coverage or immunity for all potential claims related to our COVID-19 product
candidate.
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 and gene therapy manufacturing is new and complex, we
might face a shortage of skilled individuals with substantial gene therapy and gene therapy manufacturing experience. As
a result, competition for skilled personnel, including in gene therapy research and gene therapy 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.
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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 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 or miss an opportunity to file a patent application. 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.
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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 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) No 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
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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 our commercial products. Thus, we do not know with certainty
whether any of our products or 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, 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 products 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
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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 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.
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On February 9, 2017, the FDA approved the corticosteroid Emflaza 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. Orphan drug
exclusivity for that particular indication will expire on February 9, 2024. The FDA approved the use of Emflaza for the
treatment of patients 2 years to up to 5 years old with DMD on June 7, 2019.
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.
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.
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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, 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, in the United States and
many other jurisdictions, a trademark registration may be cancelled through cancellation or forfeiture proceedings brought
by a third party or from non-use of the trademark in that jurisdiction. 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 NTU
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.
Our current gene therapy license agreements, including our agreement with NTU 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.
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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 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 Notes 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 Notes 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 Notes, 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 Notes, 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 Notes 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
Notes. 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 Notes 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 Notes 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 Notes, to pay the Convertible Notes at
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maturity or to pay cash upon conversions of Convertible Notes. In addition, our ability to repurchase Convertible Notes or
to pay cash upon conversions of Convertible Notes may be limited by law, by regulatory authority or by agreements
governing our future indebtedness. Our failure to repurchase Convertible Notes at a time when the repurchase is required
by the applicable indenture, to make interest payments on the Convertible Notes when due under the applicable indenture
or to pay any cash payable on future conversions of the Convertible Notes as required by the applicable indenture would
constitute a default under each indenture governing the Convertible Notes and our credit and security agreement with
MidCap Financial. An event of default under the applicable indenture governing the Convertible Notes 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 Notes, make interest payments on the Convertible Notes or
make cash payments upon conversions of the Convertible Notes.
In addition, even if holders of the Convertible Notes do not elect to convert their Convertible Notes, we could be required
under applicable accounting rules to reclassify all or a portion of the outstanding principal of the Convertible Notes 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;
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
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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 commercialization of Evrysdi and the development of the 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 NDA 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;
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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;
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;
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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.
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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 Nasdaq
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, Nasdaq 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 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.
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 Nasdaq rules. The shares underlying these awards are 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.
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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 Notes 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 Censa, Agilis and the rights
to Emflaza, and the issuance of shares of our common stock to certain former equityholders of Agilis in exchange for the
cancellation and forfeiture of their rights to receive certain contingent payments pursuant to the Agilis Merger Agreement,
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.
In connection with the Rights Exchange, we issued to the Participating Rightsholders 2,821,176 shares of our common
stock and in connection with our acquisition of Censa, we issued to the Censa shareholders 845,364 shares of our common
stock. Following both transactions, we registered the issued shares under the Securities Act, and such registrations were
terminated following the six-month anniversary of the respective transaction pursuant to the respective transaction
document. Any shares that have not yet been sold are currently restricted as a result of securities laws. Following expiration
of applicable holding periods, the shares will be able to be freely sold in the public market subject to any requirements and
restrictions, including any applicable volume limitations, imposed by Rule 144 under the Securities Act. 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 Notes or any future securities convertible
or exchangeable into our common stock or in connection with a strategic transaction or otherwise, 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
None.
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, New 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 New 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 220,500 square feet of office,
manufacturing and laboratory space at a facility located in Hopewell Township, New Jersey. The rental term for such
facility commenced 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.
136
Item 4. Mine Safety Disclosures
None.
137
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 Nasdaq 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 24, 2021, there were 120 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
We did not sell any of our equity securities or any options, warrants, or rights to purchase our equity securities during the
period covered by this Annual Report on Form 10-K that were not registered under the Securities Act of 1933, as amended,
or the Securities Act, and that have not otherwise been described in a Current Report on Form 8-K or a Quarterly Report
on Form 10-Q.
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.
138
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 Notes 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.
2020
2019
Year ended December 31,
2018
(In thousands, except per share data)
2017
2016
Statement of Operations Data:
Revenues:
Net product revenue
Collaboration and grant revenue
Royalty 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
Settlement of deferred and contingent
consideration
Total operating expenses
Loss from operations
Interest expense, net
Other income (expense), net
Loss before income tax (expense)
benefit
Income tax (expense) benefit
Net loss attributable to common
stockholders
Net loss attributable to common
stockholders per share:
Basic
Diluted
Weighted-average shares outstanding:
$
333,401 $
42,579
4,786
380,766
291,306 $
15,674
—
306,980
263,005 $
1,729
—
264,734
174,066 $
20,326
—
194,392
81,447
1,258
—
82,705
18,942
12,135
12,670
4,577
—
36,892
477,643
245,164
27,650
257,452
202,541
22,877
171,984
153,548
15,380
117,456
121,271
—
117,633
97,130
23,280
48,360
19,340
—
—
10,613
812,534
(431,768)
(56,352)
85,188
—
548,138
(241,158)
(12,491)
13,723
—
380,419
(115,685)
(12,554)
129
—
258,684
(64,292)
(12,094)
(1,279)
—
214,763
(132,058)
(8,276)
(1,207)
(402,932)
(35,228)
(239,926)
(11,650)
(128,110)
29
(77,665)
(1,335)
(141,541)
(569)
$
(438,160) $
(251,576) $
(128,081) $
(79,000) $
(142,110)
$
$
(6.64) $
(6.64) $
(4.27) $
(4.27) $
(2.75) $
(2.75) $
(2.02) $
(2.02) $
(4.17)
(4.17)
Basic
Diluted
66,027,908
66,027,908
58,863,185
58,863,185
46,576,313
46,576,313
39,183,073
39,183,073
34,044,584
34,044,584
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Balance Sheet Data:
Cash, cash equivalents, and marketable
securities
Working capital
Total assets
Total debt
Accumulated deficit
Total stockholders’ equity
2020
2019
2018
2017
2016
As of December 31,
(In thousands)
$ 1,103,650 $
954,412
2,208,278
309,145
(1,628,877)
481,982
686,563 $ 227,586 $ 191,246 $ 231,666
211,662
543,427
269,345
1,623,782
98,216
313,859
(735,108)
(1,190,499)
119,583
594,330
154,061
1,119,222
153,014
(938,923)
350,727
167,015
391,653
144,971
(814,108)
156,437
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 leverage our strong scientific expertise and global commercial infrastructure to maximize
value for our patients and other stakeholders. We have a portfolio pipeline that includes several commercial products and
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. In
July 2020, the European Commission approved the removal of the statement “efficacy has not been demonstrated in non-
ambulatory patients” from the indication statement for Translarna. During the year ended December 31, 2020, we
recognized $191.9 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, 2020, Emflaza achieved net sales of $139.0 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 June 2020, the European Commission renewed our
marketing authorization, making it effective, unless extended, through August 5, 2021. In February 2021, 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.
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
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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 New Drug
Application, or NDA, 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 NDA, 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 New Drugs of the FDA. In February 2018, the Office of New Drugs of the FDA
denied our appeal of the Complete Response Letter. In its response, the Office of New Drugs recommended a possible
path forward for the ataluren NDA submission based on the accelerated approval pathway. This would involve a re-
submission of an NDA containing the current data on effectiveness of ataluren with new data to be generated on dystrophin
production in nmDMD patients’ muscles. We followed the FDA’s recommendation and collected, using newer
technologies via procedures and methods that we designed, such dystrophin data in a new study, Study 045, and announced
the results of Study 045 in February 2021. Although Study 045 did not meet its pre-specified primary endpoint, we plan
to discuss the Study 045 dystrophin results and the totality of existing clinical and real-world data with the FDA to
determine if there is a potential path to approval based on these results and data. There is substantial risk that the FDA will
determine that the results from our clinical trials and existing real-world data are not sufficient to support a marketing
approval for Translarna for the treatment of nmDMD in the United States. In that case, as we expect to have data for Study
041 in the third quarter of 2022, and subject to a positive outcome in that study, we would plan to re-submit the NDA at
that time.
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 filed for marketing authorization for Waylivra for the
treatment of FCS with ANVISA, the Brazilian health regulatory authority, in June 2020 and, subject to potential delays in
the review process related to the COVID 19 pandemic, expect a regulatory decision on approval from ANVISA in the
third quarter of 2021.
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 SMA program has one approved product, Evrysdi™ (risdiplam), which was approved in August 2020 by the FDA for
the treatment of SMA in adults and children two months and older. Evrysdi also received marketing authorization for the
treatment of SMA in Brazil in October 2020. The European Medicines Agency, or EMA, accepted the marketing
authorization application, or MAA, filed by Roche for Evrysdi for the treatment of SMA in August 2020 and an opinion
from the Committee for Medical Products, or CHMP, is expected in the first quarter of 2021. Additionally, in October
2020, Chugai Pharmaceutical Co., Ltd., or Chugai, a subsidiary of Roche, filed an NDA in Japan for Evrysdi for the
treatment of SMA and a regulatory decision on approval is expected in 2021. In addition to our SMA program, our splicing
platform also includes PTC518, which is being developed for the treatment of Huntington’s disease, or HD. We expect
results from our Phase 1 study of PTC518 in healthy volunteers in the first half of 2021.
We have a pipeline of gene therapy product candidates for rare monogenic diseases that affect the central nervous
system, or CNS, including PTC-AADC for the treatment of Aromatic L-Amino Acid Decarboxylase, or AADC,
deficiency, or AADC deficiency, a rare CNS 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, and we anticipate submitting a BLA to the FDA in the second
141
quarter of 2021. In January 2020, we submitted an MAA for PTC-AADC for the treatment of AADC deficiency in the
EEA to the EMA and we expect an opinion from the CHMP in the second quarter of 2021.
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 CNS diseases. The two most advanced molecules
in our Bio-e platform are vatiquinone and PTC857. We initiated a registration-directed Phase 2/3 placebo-controlled trial
of vatiquinone in children with mitochondrial disease and associated refractory epilepsy in the third quarter of 2020 and
anticipate data from this trial to be available in the third quarter of 2022. We also initiated a registration-directed Phase 3
trial of vatiquinone in children and young adults with Friedreich ataxia in the fourth quarter of 2020 and anticipate data
from this trial to be available in 2023. We expect to complete enrollment for both of these trials by the end of 2021. In the
second quarter of 2020, we initiated a Phase 1 trial in healthy volunteers to evaluate the safety and pharmacology of
PTC857. We expect to data from the Phase 1 trial to be available in the first half of 2021.
On May 29, 2020, we acquired Censa Pharmaceuticals, Inc., or Censa, a biopharmaceutical company focused on the
development of PTC923 for orphan diseases. We expect to initiate a registration-directed Phase 3 trial for PTC923 for
phenylketonuria, or PKU, in mid-2021.
In June 2020, we initiated a Phase 2/3 clinical trial evaluating the efficacy and safety of PTC299, a dihydroorotate
dehydrogenase inhibitor that we have also been developing in oncological indications, in patients hospitalized with SARS-
CoV 2 infection. We expect data to be available from this trial in the second half of 2021.
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.
COVID-19 Impact
The global pandemic caused by a strain of novel coronavirus, COVID-19, has impacted and is continuing to
impact the timing of certain of our clinical trials and regulatory submissions as well as other aspects of our business
operations. In particular, the following expectations have been revised as a result of the impact or expected impact of the
COVID-19 pandemic:
• As previously disclosed, our expected completion of Study 045 was delayed as certain patients were unable
to have the final study muscle biopsies performed at our clinical trial site at the University of California, Los
Angeles as a result of the COVID-19 pandemic. As a result, completion of the trial was delayed by
approximately six months. The final study muscle biopsies were completed in October 2020 and we
announced the results of Study 045 in February 2021. Although Study 045 did not meet its pre-specified
primary endpoint, we plan to discuss the Study 045 dystrophin results and the totality of existing clinical and
real-world data with the FDA to determine if there is a potential path to approval based on these results and
data. There is substantial risk that the FDA will determine that the results from our clinical trials and existing
real-world data are not sufficient to support a marketing approval for Translarna for the treatment of nmDMD
in the United States. In that case, as we expect to have data for Study 041 in the third quarter of 2022, and
subject to a positive outcome in that study, we would plan to re-submit the NDA at that time.
• As previously disclosed, certain of the third-party development and manufacturing organizations that we
contract with for analytical testing have prioritized materials and testing kits to support SARS-CoV 2 testing,
diverted employees to support COVID-19 related programs and reduced their workforce to comply with
social distancing requirements imposed in connection with the COVID-19 pandemic. As a result of this shift
in resources, we experienced a delay in generating analytical data needed to respond to questions sent by the
EMA regarding our MAA for PTC-AADC for the treatment of AADC deficiency in the EEA. Following a
clock stop extension, we submitted responses to the EMA’s questions and we currently expect an opinion
from the CHMP in the second quarter of 2021.
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• As previously disclosed, in response to discussions with the FDA we intend to provide additional information
concerning the use of the commercial cannula for PTC-AADC in young patients. However, due to hospitals
generally canceling elective surgeries in response to the COVID-19 pandemic and other administrative
delays resulting from the COVID-19 pandemic, we have been delayed in our ability to gather such
information. We now anticipate submitting a BLA for PTC-AADC for the treatment of AADC deficiency in
the United States in the second quarter of 2021.
• As a result of the COVID-19 pandemic, the Brazilian Ministry of Health is continuing to experience
significant delays processing centralized group purchase orders. Almost all of our Brazilian product revenue
for Translarna is attributable to such purchase orders. These centralized group purchase order delays have
caused, and may continue to cause, fluctuations in our ability to generate revenue in Brazil.
• The COVID-19 pandemic has impacted multiple investigational new drug application, or IND, enabling
activities for our gene therapy programs targeting Friedreich ataxia and Angelman syndrome. We expect to
dose our first patient in a clinical study for our Friedreich ataxia program by the end of 2021 and we continue
to work towards submitting a filing in support of the first-in-human study for our Angelman syndrome
program.
• To date, except as otherwise disclosed with respect to Brazil, our ability to generate revenue has not been
significantly affected by the COVID-19 pandemic. However, due to travel restrictions, social distancing and
the continued global uncertainty resulting from the COVID 19 pandemic, we may have difficulty identifying
and accessing new patients, supporting existing patients and meeting with regulatory authorities or other
governmental entities, which may negatively affect our future revenue. We continue to remotely connect
with our existing patient base and have not encountered any material issues in supplying those patients.
• As previously disclosed, in response to the global uncertainty caused by the COVID-19 pandemic, we are
continuing to prioritize our expenses where we deem appropriate and strategically positioning our capital
allocation. For example, we have deferred certain capital expenditures related to our leased biologics facility
in Hopewell Township, New Jersey, or the Hopewell Facility, and we now expect cGMP manufacturing of
clinical material at this facility to begin in the second half of 2021.
The COVID-19 pandemic and responsive measures thereto may result in further negative impacts, including
additional delays in our clinical and regulatory activities and further fluctuations in our revenue. We cannot be certain
what the overall impact of the COVID-19 pandemic will be on our business and it has the potential to materially adversely
affect our business, financial condition, results of operations, and prospects. For additional information, see “Item 1A.
Risk Factors - We face risks related to health epidemics and other widespread outbreaks of contagious disease, which are,
and may continue to, delay our ability to complete our ongoing clinical trials and initiate future clinical trials, disrupt
regulatory activities and have other adverse effects on our business and operations, including the novel coronavirus
(COVID-19) pandemic, which has disrupted, and may continue to disrupt, our operations and may significantly impact
our operating results. In addition, the COVID-19 pandemic has caused substantial disruption in the financial markets and
economies, which could result in adverse effects on our business and operations.”
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 2020, our revenues were primarily
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
143
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.”
We also recognized $42.6 million in revenue during 2020 associated with milestone payments from Roche pursuant
to a license and collaboration agreement, or the SMA License Agreement, with Roche and the SMA Foundation.
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 provided for a senior secured term loan facility of $60 million, of which $40 million was drawn by us on May 5, 2017.
On July 1, 2020, we terminated the Credit Agreement with MidCap Financial.
In April 2018, we closed an underwritten public offering of our common stock. We issued and sold an aggregate of
4,600,000 shares of common stock 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.
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 Nasdaq 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. We issued and sold an aggregate
of 7,563,725 shares of common stock 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. 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. During the twelve month period ending December 31, 2020, we issued and sold an
aggregate of 542,470 shares of common stock pursuant to the Sales Agreement at a weighted average public offering price
of $53.37 per share. We received net proceeds of $28.1 million after deducting agent discounts and commissions and other
offering expenses payable by us. The remaining shares of our common stock available to be issued and sold, under the
Sales Agreement, have an aggregate offering price of up to $93.0 million as of December 31, 2020.
In September 2019, we closed an underwritten public offering of our common stock. We issued and sold an aggregate
of 2,475,248 shares of common stock 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 Notes, which included an option to purchase up to an additional $37.5 million
in aggregate principal amount of the 2026 Convertible Notes, which was exercised in full by the initial purchasers. We
received net proceeds of $279.3 million after deducting the initial purchasers’ discounts and commissions and the offering
expenses payable by us. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations—Liquidity and capital resources—Sources of Liquidity” for additional information.
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On October 25, 2019, we completed our acquisition of substantially all of the assets of BioElectron Technology
Corporation, or 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.
On April 29, 2020, we entered into a Rights Exchange Agreement, or the Rights Exchange Agreement, pursuant to
which we issued 2,821,176 shares of our common stock and paid $36.9 million, in the aggregate, to certain former
equityholders of Agilis, or the Participating Rightholders, in exchange for the cancellation and forfeiture by the
Participating Rightholders of their rights to receive certain milestone-based contingent payments under the Agreement and
Plan of Merger, dated as of July 19, 2018 by and among us, Agility Merger Sub, Inc. and, solely in its capacity as the
representative, agent and attorney-in-fact of the equityholders of Agilis Biotherapeutics, Inc., Shareholder Representative
Services LLC, or the Agilis Merger Agreement.
On May 29, 2020, we acquired Censa for total upfront consideration composed of (i) cash consideration of $15.0
million, which consisted of an upfront payment of $10.4 million and an additional $4.6 million for the net assets on Censa's
opening balance sheet as of the date of the acquisition, and (ii) 845,364 shares of our common stock, which were valued
at $42.9 million based on the closing stock price on the acquisition date. The number of shares issued was determined
using a 30-day VWAP pursuant to the Censa Merger Agreement.
In July 2020, we entered into a Royalty Purchase Agreement, or the Royalty Purchase Agreement, with RPI 2019
Intermediate Finance Trust, or RPI, pursuant to which we sold to RPI 42.933%, or the Assigned Royalty Payment, of our
right to receive sales-based royalty payments, or the Royalty, on worldwide net sales of Evrysdi and any other product
developed pursuant to the SMA License Agreement. In consideration for the sale of the Assigned Royalty Payments, RPI
paid us $650.0 million in cash consideration. The Royalty Purchase Agreement will terminate 60 days following the earlier
of the date on which Roche is no longer obligated to make any payments of the Royalty pursuant to the SMA License
Agreement and the date on which RPI has received $1.3 billion in respect of the Assigned Royalty Payments.
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 Notes offering, our offering of the 2026 Convertible Notes, and, together with
the 2022 Convertible Notes, the Convertible Notes, 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, proceeds from the Royalty Purchase Agreement,
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, 2020, we had an accumulated deficit of $1,628.9 million. We had a net loss of $438.2 million
and $251.6 million for the fiscal years ended December 31, 2020 and 2019, 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 splicing, gene therapy, Bio-e, metabolic and oncology programs and our studies of
PTC299 for COVID-19 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. We submitted an MAA to the EMA for the treatment
of AADC deficiency with PTC-AADC in the EEA. We are also preparing a BLA for PTC-AADC for the treatment of
AADC deficiency in the United States and we anticipate submitting a BLA to the FDA in the second quarter of 2021. We
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filed for marketing authorization for Waylivra with ANVISA in June 2020 and, subject to potential delays in the review
process related to the COVID 19 pandemic, expect a regulatory decision on approval from ANVISA in the third quarter
of 2021. 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 Notes, 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 Notes,
cash interest payments are payable on a semi-annual basis in arrears, which will require total funding of $4.3 million
annually. On April 29, 2020, pursuant to the Rights Exchange Agreement we paid $36.9 million as partial consideration
to the Participating Rightholders in exchange for the cancellation and forfeiture by the Participating Rightholders of their
rights to receive certain milestone-based contingent payments under the Agilis Merger Agreement. Upon the passing of
the second anniversary of the closing of the Agilis acquisition, August 23, 2020, we paid an additional $2.4 million in
development milestone payments as set forth in the Agilis Merger Agreement. 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 ANVISA,
the determination for which we expect to potentially occur, subject to potential delays in the review process related to the
COVID-19 pandemic, in the third quarter of 2021. 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.
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 November 2011, we entered into the SMA License Agreement
pursuant to which we are collaborating with Roche and the SMA Foundation to further develop and commercialize
compounds identified under our SMA program with the SMA Foundation. The research component of this agreement
terminated effective December 31, 2014. We are 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 specified sales events, and up to double digit
royalties on worldwide annual net sales of a commercial product. As of December 31, 2020, we had recognized a total of
$105.0 million in milestone payments and $4.8 million royalties on net sales pursuant to the SMA License Agreement. As
of December 31, 2020, the remaining potential research and development event milestones that can be received is $30.0
million. The remaining potential sales milestones as of December 31, 2020 are $325.0 million upon achievement of certain
sales events.
Pursuant to the Royalty Purchase Agreement, we sold to RPI the Assigned Royalty Payment, in consideration for
$650.0 million. We have retained a 57.067% interest in the Royalty and all economic rights to receive the remaining
potential regulatory and sales milestone payments under the License Agreement. The Royalty Purchase Agreement will
terminate 60 days following the earlier of the date on which Roche is no longer obligated to make any payments of the
Royalty pursuant to the SMA License Agreement and the date on which RPI has received $1.3 billion in respect of the
Assigned Royalty Payments.
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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, IT, human resources, and other support functions, 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
splicing, gene therapy, Bio-e, metabolic and oncology programs, and our studies of PTC299 for COVID-19 and
performance of any post-marketing requirements imposed by regulatory agencies with respect to our products. 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, 2020, 2019, and 2018.
Translarna (nmDMD, aniridia and Dravet)
PTC923
Gene Therapy
Bio-e
Oncology
Emflaza
Akcea
Splicing
Other research and preclinical
Total research and development
2020
December 31,
2019
(in thousands)
$
$
92,583 $
59,135
213,206
29,322
16,467
14,029
—
18,567
34,334
477,643 $
94,246 $
—
62,839
10,060
21,199
22,572
—
10,317
36,219
257,452 $
2018
80,859
—
6,534
—
16,438
16,461
11,957
11,999
27,736
171,984
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;
the potential benefits of our product and product candidates over other therapies;
our ability to market, commercialize and achieve market acceptance for our products 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
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•
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. In
addition, the uncertainty with respect to the duration, nature and extent of negative impacts of the COVID-19 pandemic
and responsive measures relating thereto on our ability to successfully enroll our current and future clinical trials, has
caused us to experience delays, and may cause us to experience further delays, in our clinical trials and regulatory
submissions.
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, commercial, 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 expense from the liability for the sale of future royalties related to the Royalty
Purchase Agreement, the Convertible Notes outstanding, and from the Credit Agreement offset by interest income earned
on investments.
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
• Liability for sale of future royalties
•
Income taxes
• Business combinations and asset acquisitions
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•
Indefinite-lived intangible assets
Revenue recognition
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)
No. 2014-9, “Revenue from Contracts with Customers (Topic 606)”. ASU No. 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, 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.
Net Product Revenue
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. 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. 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, 2020, 2019, and 2018, net product sales outside of
the United States were $194.4 million, $190.3 million, and $171.0 million respectively, and net product sales in the United
States were $139.0 million, $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.
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•
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.
Collaboration and royalty revenue
The terms of these agreements typically include payments to us of one or more of the following: nonrefundable,
upfront license fees; milestone payments; research funding and royalties on future product sales. In addition, we generate
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, we need 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, we assess the promises in the arrangement to identify
distinct performance obligations.
For licenses of intellectual property, we assess, 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. We need
to determine if the bundled performance obligation is satisfied over time or at a point in time. If we conclude that the
nonrefundable, upfront license fees will be recognized over time, we will need to assess the appropriate method of
measuring proportional performance.
For milestone payments, we assess, 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, we 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 our control. If it is probable that a significant revenue reversal will not occur, we will
estimate the milestone payments using the most likely amount method. We will re-assess the development and sales-based
milestones each reporting period to determine the probability of achievement. We recognize royalties from product sales
at the later of when the related sales occur or when the performance obligation to which the royalty has been allocated has
been satisfied. If it is probable that a significant revenue reversal will not occur, we will estimate the royalty payments
using the most likely amount method.
We recognize revenue for reimbursements of research and development costs under collaboration agreements as the
services are performed. We record these reimbursements as revenue and not as a reduction of research and development
expenses as we have the risks and rewards as the principal in the research and development activities.
Liability for sale of future royalties
In July 2020, we entered into the Royalty Purchase Agreement with RPI, pursuant to which we sold to RPI the
Assigned Royalty Payment. In consideration for the sale of the Assigned Royalty Payments, RPI paid us $650.0 million
in cash consideration. The Royalty Purchase Agreement will terminate 60 days following the earlier of the date on which
Roche is no longer obligated to make any payments of the Royalty pursuant to the SMA License Agreement and the date
on which RPI has received $1.3 billion in respect of the Assigned Royalty Payments.
The cash consideration obtained pursuant to the Royalty Purchase Agreement is classified as debt and is recorded as
“liability for sale of future royalties-current” and “liability for sale of future royalties-noncurrent” on our consolidated
balance sheet based on the timing of the expected payments to be made to RPI. The fair value for the liability for sale of
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future royalties at the time of the transaction was based on our estimates of future royalties expected to be paid to RPI over
the life of the arrangement, which was determined using forecasts from market data sources, which are considered Level
3 inputs. The liability will be amortized using the effective interest method over the life of the arrangement, in accordance
with the respective guidance. We will utilize the prospective method to account for subsequent changes in the estimated
future payments to be made to RPI.
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, 2020 and 2019, we recorded a valuation allowance
against our net deferred tax assets of $379.6 million and $267.1 million, respectively. The change in the valuation
allowance during the years ended December 31, 2020 and 2019 was $112.5 million and $86.7 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,
2020, we have $80.9 million and $22.6 million of federal and state 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, 2020, research and development credit carryforward for federal purposes is $15.7 million. In
addition, the Orphan Drug Credit Carryover available as of December 31, 2020 is $107.7 million. As a result of U.S. tax
reform legislation, federal net operating losses generated in 2018 carryforward indefinitely. Our federal credit
carryforwards began to expire in 2019. State net operating loss carryforwards begin to expire in 2037. 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 NOL 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 NOLs 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. At December 31, 2020, we utilized $364.1 million NOLs of which $97.7
million is the Section 382 NOL. There is $9.5 million available for immediate use and an additional $5.7 million will free
up in 2021.
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.
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Accordingly, we recognize 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, 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. No 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, 2020 and concluded that no impairment exists as of December 31, 2020.
For a description of our significant accounting policies, see note 2 to our consolidated financial statements.
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Year ended December 31, 2020 compared to year ended December 31, 2019
The following table summarizes revenues and selected expense and other income data for the year ended
December 31, 2020 and 2019:
(in thousands)
Net product revenue
Collaboration revenue
Royalty revenue
Cost of product sales, excluding amortization of acquired intangible
assets
Amortization of acquired intangible assets
Research and development expense
Selling, general and administrative expense
Change in the fair value of deferred and contingent consideration
Settlement of deferred and contingent consideration
Interest expense, net
Other income, net
Income tax expense
Year ended
December 31,
Change
$
2020
333,401 $
42,579
4,786
2019
291,306 $
15,674 $
— $
2020 vs. 2019
42,095
26,905
4,786
18,942
36,892
477,643
245,164
23,280
10,613
(56,352)
85,188
(35,228)
12,135 $
27,650 $
257,452 $
202,541 $
48,360 $
—
(12,491) $
13,723 $
(11,650) $
6,807
9,242
220,191
42,623
(25,080)
10,613
(43,861)
71,465
(23,578)
Net product revenue. Net product revenue was $333.4 million for the year ended December 31, 2020, an increase of
$42.1 million, or 14%, from net product revenue of $291.3 million for the year ended December 31, 2019. The increase
in net product revenue was primarily due to the increase in net product sales of Emflaza, which was due to increased new
patient prescriptions and higher compliance. Net product sales for Translarna also increased and were driven by broader
uptake due to new patients in existing geographies, geographic expansion, and label updates. The remaining increase was
due to an increase in net product sales of Tegsedi and the commercial launch of Waylivra in the twelve month period
ended December 31, 2020.
Collaboration revenue. Collaboration revenue was $42.6 million for the year ended December 31, 2020, an increase
of $26.9 million, over 100%, from collaboration revenue of $15.7 million for the year ended December 31, 2019. The
increase is primarily related to three milestones that were triggered from Roche in the twelve months ended December 31,
2020. In August 2020, the FDA approved Evrysdi for the treatment of SMA in adults and children two months and older.
The first commercial sale of Evrysdi in the United States was made in August 2020. This event triggered a $20.0 million
milestone payment to us from Roche. In August 2020, the EMA accepted the MAA filed by Roche for Evrysdi for the
treatment of SMA, which triggered a $15.0 million milestone payment to us from Roche. In October 2020, Chugai filed
an NDA in Japan for Evrysdi for the treatment of SMA, which triggered a $7.5 million milestone payment to us from
Roche. Comparatively, in the twelve month period ended December 31, 2019, a $15.0 million milestone was triggered
upon the FDA’s acceptance of the filing of the NDA for risdiplam for the treatment of SMA.
Royalty revenue. Royalty revenue was $4.8 million for the twelve months ended December 31, 2020, an increase of
$4.8 million, or 100%, from $0.0 million for the twelve months ended December 31, 2019. The increase in royalty revenue
was due to the FDA approval of Evrysdi in August 2020. In accordance with the SMA License Agreement, we are entitled
to royalties on worldwide annual net sales of the product.
Cost of product sales, excluding amortization of acquired intangible asset. Cost of product sales, excluding
amortization of acquired intangible asset, was $18.9 million for the year end December 31, 2020, an increase of $6.8
million, or 56%, from $12.1 million for the year ended December 31, 2019. Cost of product sales consist primarily of
royalty payments associated with Emflaza and Translarna net product sales, excluding contingent payments to Marathon,
costs associated with Emflaza and Translarna product sold during the period, and royalty expense related to royalty
revenues and collaboration milestone revenues. The increase in cost of product sales, excluding amortization of acquired
intangible asset, is primarily due to the increases in net product revenue, royalty revenues, and collaboration milestone
revenue.
153
Amortization of acquired intangible asset. Amortization of acquired intangible asset was $36.9 million for the year
ended December 31, 2020, an increase of $9.2 million, or 33%, from $27.7 million for the year ended December 31, 2019.
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 $477.6 million for the year ended
December 31, 2020, an increase of $220.2 million, or 86%, compared to $257.5 million for the year ended December 31,
2019. The increase in research and development expenses reflects costs associated with advancing the gene therapy and
Bio-e platforms, increased investment in research programs, and advancement of the clinical pipeline. The increase also
includes one-time charges of $53.6 million in acquisition related and other expenses from our acquisition of Censa pursuant
to the Censa Merger Agreement and $41.4 million related to our commercial manufacturing service agreement with
MassBiologics of the University of Massachusetts Medical School, or MassBio, related to dedicated manufacturing space
for our lead gene therapy program, AADC deficiency.
Selling, general and administrative expense. Selling, general and administrative expense was $245.2 million for
the year ended December 31, 2020, an increase of $42.6 million, or 21%, from $202.5 million for the year ended
December 31, 2019. The increase was primarily due to continued investment to support our commercial activities
including our expanding commercial portfolio and rent and related expenses associated with entering into a long term lease
for the Hopewell Facility that commenced on July 1, 2020.
Change in the fair value of deferred and contingent consideration. Change in the fair value of deferred and contingent
consideration was $23.3 million for the year ended December 31, 2020, a decrease of $25.1 million, or 52%, from $48.4
million for the year ended December 31, 2019. The change is related to the fair valuation of the potential future
consideration to be paid to former equityholders 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.
Settlement of deferred and contingent consideration. Settlement of deferred and contingent consideration was $10.6
million for year ended December 31, 2020. The settlement of deferred and contingent consideration is related to a loss
upon the settlement of the deferred and contingent consideration liabilities as a result of the Rights Exchange Agreement
with certain former equityholders of Agilis, whereby we exchanged their pro rata share of specific future cash milestone
payments in the aggregate amount of $225.0 million for a combination of cash and equity. We paid $36.9 million in cash
and issued 2,821,176 shares of common stock in exchange for the cancellation and forfeiture of the Participating
Rightholders’ rights to receive (i) $174.0 million, in the aggregate, of potential milestone payments based on the
achievement of certain regulatory milestones and (ii) $37.6 million, in the aggregate, of $40.0 million in development
milestone payments that would have been due upon the passing of the second anniversary of the closing of the Agilis
Merger, regardless of whether the milestones are achieved.
Interest expense, net. Interest expense, net was $56.4 million for the year ended December 31, 2020, an increase of
$43.9 million, over 100%, from interest expense, net of $12.5 million for the year ended December 31, 2019. The increase
in interest expense, net was primarily due to interest expense recorded from the liability for the sale of future royalties
related to the Royalty Purchase Agreement, interest expense recorded from the 2022 and 2026 Convertible Notes and the
Credit Agreement, partially offset by interest income from our investments.
Other income, net. Other income, net was $85.2 million for the year ended December 31, 2020, an increase of $71.5
million, over 100%, from other income, net of $13.7 million for the year ended December 31, 2019. The increase in other
income, net resulted primarily from an unrealized foreign exchange gain of $54.6 million from the remeasurement of our
intercompany loan and unrealized gains on our equity investment and convertible debt security in ClearPoint Neuro, Inc.
154
(formerly MRI Interventions, Inc.), or ClearPoint, or our Equity Investment, of $14.3 million and $19.3 million,
respectively. These gains were partially offset by Agilis Rights Exchange transaction fees of $2.0 million.
Income tax expense. Income tax expense was $35.2 million for the year ended December 31, 2020, an increase of
$23.6 million, over 100%, from income tax expense of $11.7 million for the year ended December 31, 2019. We recorded
a state income tax provision in the twelve months ended December 31, 2020, which is attributable to the taxable income
from the sale of our right to receive sales-based royalty payments on Roche’s worldwide net sales of Evrysdi. We also
incurred income tax expense in various foreign jurisdictions, and our foreign tax liabilities are largely dependent upon the
distribution of pre-tax earnings among these different jurisdictions.
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 years ended
December 31, 2019 and 2018:
(in thousands)
Net product revenue
Collaboration 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,
Change
$
2019
291,306 $
15,674
2018
263,005 $
1,729 $
2019 vs. 2018
28,301
13,945
12,135
27,650
257,452
202,541
48,360
(12,491)
13,723
(11,650)
12,670 $
22,877 $
171,984 $
153,548 $
19,340 $
(12,554) $
129 $
29 $
(535)
4,773
85,468
48,993
29,020
63
13,594
(11,679)
Net product revenue. Net 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 revenue. Collaboration revenue was $15.7 million for the year ended December 31, 2019, an increase
of $13.9 million, over 100%, from collaboration revenue of $1.7 million for the year ended December 31, 2018. The
increase in collaboration revenue was primarily due to the $15.0 million milestone achieved during the fourth quarter of
2019 from Roche, which was triggered in November 2019 upon the FDA’s acceptance of the filing of the NDA 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
155
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 vatiquinone 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 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. Interest expense, net was $12.5 million for the year ended December 31, 2019, a decrease of
$0.1 million, or 1%, from interest expense, net 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 Notes 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., 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.
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
156
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 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.
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, proceeds from the Royalty Purchase Agreement, 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 fiscal year. The net losses we incur may fluctuate significantly from quarter to quarter.
In August 2015, we closed a private offering of $150.0 million in aggregate principal amount of 2022 Convertible
Notes, 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 Notes. The 2022 Convertible Notes bear cash interest payable on February 15
and August 15 of each year, beginning on February 15, 2016. The 2022 Convertible Notes 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 Notes 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, or the measurement period, in which the trading price (as defined in the 2022 Convertible
Notes Indenture) per $1,000 principal amount of 2022 Convertible Notes 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 Notes at any time, regardless of the foregoing circumstances. Upon
conversion, we will pay cash up to the aggregate principal amount of the 2022 Convertible Notes 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 Notes being converted.
The conversion rate for the 2022 Convertible Notes was initially, and remains, 17.7487 shares of our common stock
per $1,000 principal amount of the 2022 Convertible Notes, 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 Notes prior to August 20, 2018. As of August 20, 2018, we
may redeem for cash all or any portion of the 2022 Convertible Notes, at our option, on or after August 20, 2018 if the last
reported 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 Notes to be redeemed, plus accrued and
unpaid interest to, but excluding, the redemption date. No sinking fund is provided for the 2022 Convertible Notes, which
means that we are not required to redeem or retire the 2022 Convertible Notes periodically. There have been no
redemptions to date.
If we undergo a “fundamental change” (as defined in the Indenture governing the 2022 Convertible Notes Indenture),
subject to certain conditions, holders of the 2022 Convertible Notes may require us to repurchase for cash all or part of
157
their 2022 Convertible Notes at a repurchase price equal to 100% of the principal amount of the 2022 Convertible Notes to
be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.
The 2022 Convertible Notes 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
Notes Indenture contains customary events of default with respect to the 2022 Convertible Notes, including that upon
certain events of default (including our failure to make any payment of principal or interest on the 2022 Convertible
Notes when due and payable) occurring and continuing, the 2022 Convertible Notes Trustee by notice to us, or the holders
of at least 25% in principal amount of the outstanding 2022 Convertible Notes by notice to us and the 2022 Convertible
Notes Trustee, may, and the 2022 Convertible Notes Trustee at the request of such holders (subject to the provisions of
the 2022 Convertible Notes Indenture) shall, declare 100% of the principal of and accrued and unpaid interest, if any, on
all the 2022 Convertible Notes 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
Notes 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 we terminated on July 1, 2020.
In April 2018, we closed an underwritten public offering of 4,600,000 shares of our common stock and received net
proceeds of approximately $117.9 million. In January 2019 and February 2019, we closed an underwritten public offering
of 7,563,725 shares of our common stock and received net proceeds of approximately $224.2 million. 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 September 2019,
we closed an underwritten public offering of 2,475,248 shares of our common stock and received net proceeds of $97.0
million. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—
Overview—Funding” for additional information regarding the transactions described in this paragraph.
In September 2019, we issued $287.5 million aggregate principal amount of 2026 Convertible Notes, which included
an option to purchase up to an additional $37.5 million in aggregate principal amount of the 2026 Convertible Notes,
which was exercised in full by the initial purchasers. The 2026 Convertible Notes 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 Notes 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 Notes 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 Notes Indenture) per $1,000 principal amount of 2026 Convertible Notes 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 Notes 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.
158
The conversion rate for the 2026 Convertible Notes was initially, and remains, 19.0404 shares of our common stock
per $1,000 principal amount of the 2026 Convertible Notes, 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 Notes prior to September 20, 2023. We may redeem for cash
all or any portion of the 2026 Convertible Notes, 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 Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. No
sinking fund is provided for the 2026 Convertible Notes, which means that we are not required to redeem or retire the
2026 Convertible Notes periodically.
If we undergo a “fundamental change” (as defined in the 2026 Convertible Notes Indenture), subject to certain
conditions, holders of the 2026 Convertible Notes may require us to repurchase for cash all or part of their 2026
Convertible Notes at a repurchase price equal to 100% of the principal amount of the 2026 Convertible Notes to be
repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.
The 2026 Convertible Notes 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
Notes Indenture contains customary events of default with respect to the 2026 Convertible Notes, including that upon
certain events of default (including our failure to make any payment of principal or interest on the 2026 Convertible
Notes when due and payable) occurring and continuing, the 2026 Convertible Notes Trustee by notice to us, or the holders
of at least 25% in principal amount of the outstanding 2026 Convertible Notes by notice to us and the Convertible
Notes Trustee, may, and the 2026 Convertible Notes Trustee at the request of such holders (subject to the provisions of
the 2026 Convertible Notes Indenture) shall, declare 100% of the principal of and accrued and unpaid interest, if any, on
all the 2026 Convertible Notes 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
Notes 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 July 2020, we entered into the Royalty Purchase Agreement. Pursuant to the Royalty Purchase Agreement, we sold
to RPI the Assigned Royalty Payment in consideration for $650.0 million. See “Item 7. Management’s Discussion and
Analysis of Financial Condition and Results of Operations—Overview—Funding” for additional information.
Cash flows
As of December 31, 2020, we had cash and cash equivalents and marketable securities of $1.1 billion.
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
2020
$
$
$
(194,071) $
(561,548) $
668,715 $
(98,639) $
(387,237) $
613,209 $
(27,641)
(42,613)
131,571
159
Net cash used in operating activities was $194.1 million, $98.6 million, and $27.6 million for the years ended
December 31, 2020, 2019, and 2018, respectively. The cash used in operating activities primarily related to supporting
clinical development, including the manufacture of drug product, commercial activities for Emflaza and Translarna, and
costs associated with the expansion of our international infrastructure for the years ended December 31, 2020, 2019, and
2018.
Net cash used in investing activities was $561.5 million, $387.2 million, and $42.6 million for the years ended
December 31, 2020, 2019 and 2018, respectively. The cash used in investing activities for the year ended December 31,
2020 was primarily related to purchases of marketable securities, the acquisition of product rights, purchases of fixed
assets, and our purchase of convertible debt security, partially offset by net sales and redemptions of marketable securities.
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.
Net cash provided by financing activities was $668.7 million, $613.2 million, and $131.6 million for the years ended
December 31, 2020, 2019 and 2018, respectively. The cash provided by financing activities for the year ended
December 31, 2020 is primarily attributable to proceeds from the Royalty Purchase Agreement, net proceeds received
from our “at the market offering” of our common stock, 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, payments on deferred
consideration obligation, and payments of finance lease principal. Net 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 ESPP, partially offset by repayment on our senior secured term
loan. Net 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.
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 splicing, gene therapy, Bio-e, metabolic and oncology programs and our studies of
PTC299 for COVID-19 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. We submitted an MAA to the EMA for the treatment
of AADC deficiency with PTC-AADC in the EEA. We are preparing a BLA for PTC-AADC for the treatment of AADC
deficiency in the United States and we anticipate submitting a BLA to the FDA in the second quarter of 2021. We filed
for marketing authorization for Waylivra with ANVISA in June 2020 and, subject to potential delays in the review process
related to the COVID 19 pandemic, expect a regulatory decision on approval from ANVISA in the third quarter of 2021.
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;
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 ANVISA;
satisfy contractual and regulatory obligations that we assumed through our other acquisitions and collaborations;
execute our commercialization strategy for our products and product candidates that may receive marketing
authorization;
160
•
•
•
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 splicing, gene therapy, Bio-e, metabolic and oncology
programs and our studies of PTC299 for COVID-19 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 our
offerings of the Convertible Notes, public offerings of common stock, our “at the market offering” of our common stock,
proceeds from the Royalty Purchase Agreement 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 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 NDA re-submission
by us and, ultimately, may support approval of Translarna for nmDMD in the United States;
unexpected decreases in revenue or increase in expenses resulting from the COVID-19 pandemic;
our ability to maintain orphan exclusivity in the United States for Emflaza;
our ability to successfully complete all post-marketing requirements imposed by regulatory agencies with respect
to our products;
the progress and results of activities under our splicing, gene therapy, Bio-e, metabolic and oncology programs
and our studies of PTC299 for COVID-19 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 territories in which we receive authorization to market
Translarna;
the costs, timing and outcome of regulatory review of our splicing, gene therapy, Bio-e, metabolic and oncology
programs and our studies of PTC299 for COVID-19 and Translarna in other territories;
our ability to utilize the Hopewell Facility to begin manufacturing program materials for certain of our gene
therapy product candidates;
our ability to satisfy our obligations under the indentures governing the Convertible Notes;
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 splicing, gene therapy, Bio-e, metabolic and oncology programs;
revenue received from commercial sales of our products or any of our product candidates;
161
•
•
•
•
•
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
acquisitions of Emflaza, Agilis, our Bio-E platform and Censa 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.
With respect to our outstanding 2022 Convertible Notes, 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 Notes,
cash interest payments are payable on a semi-annual basis in arrears, which will require total funding of $4.3 million
annually. 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.
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, debt or other 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, 2020.
(in thousands)
Operating lease obligations (1)
Finance lease obligations (2)
Long-term Debt obligations, including interest (3)
Minimum royalty (4)
Total contractual obligations
Less than
1 year
15,533
3,000
8,812
1,666
5 years
Total
80,777
$ 147,274
21,000
$ 36,000
291,813
$ 472,375
$
—
4,999
$ 660,648 $ 29,011 $ 200,017 $ 38,030 $ 393,590
1 - 3 years
27,559
6,000
163,125
3,333
23,405
6,000
8,625
—
More than
3 - 5 years
(1) We lease office space for our principal office in South Plainfield, New Jersey under three non-cancelable operating
leases with terms that extend through May 2022, August 2024 and October 2024. Obligations also stem from our
leases of office, manufacturing, and laboratory space in Hopewell, New Jersey and Bridgewater, New Jersey, as well
162
as office and laboratory space in Mountain View, California. In addition, we lease office space, vehicles and
equipment in various other domestic and international locations for our employees and operations.
(2) Obligations stem from a commercial manufacturing service agreement entered into with MassBio on June 19, 2020,
for a term of 12.5 years. Pursuant to the terms of the agreement, MassBio agreed to provide us with four dedicated
rooms for our AADC program. We concluded that the agreement contains an embedded lease as we control the use
of the four dedicated rooms and the equipment therein. As the present value of the facilities exceed the fair value, we
determined that it is a finance lease.
(3) Our long-term debt obligations reflect our obligations under the Convertible Notes to pay interest on the
$437.5 million aggregate principal amount of the Convertible Notes and to make principal payments on the
Convertible Notes 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, 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 platform and antibacterial program. As we have discontinued development
under our antibacterial program, we do not expect that milestone and royalty payments from us to Wellcome Trust will
apply under that agreement. Under our oncology platform 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 development milestone payment of $0.8 million to
Wellcome Trust under the oncology platform 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, including Evrysdi, 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 an
aggregate of $52.5 million.
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.
163
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, 2020. At December 31, 2020, we
held $1.1 billion 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, 2020, we recognized
foreign currency transaction losses, net of $1.3 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, 2020 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 Notes. We do not have economic interest rate exposure on the 2022 Convertible Notes as they have a fixed
annual interest rate of 3.00%. However, the fair value of the 2022 Convertible Notes is exposed to interest rate risk. We
do not carry the 2022 Convertible Notes 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 Notes will increase as interest rates fall and
decrease as interest rates rise. The 2022 Convertible Notes 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 Notes was approximately $193.2 million as of December 31, 2020.
In September 2019, we issued $287.5 million of 1.50% convertible senior notes due September 15, 2026, or the 2026
Convertible Notes. We do not have economic interest rate exposure on the 2026 Convertible Notes as they have a fixed
annual interest rate of 1.50%. However, the fair value of the 2026 Convertible Notes is exposed to interest rate risk. We
do not carry the 2026 Convertible Notes 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 Notes will increase as interest rates fall and
decrease as interest rates rise. The 2026 Convertible Notes 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 Notes was approximately $394.9 million as of December 31, 2020.
164
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, 2020 and 2019
Consolidated Statements of Operations for the years ended December 31, 2020, 2019, and 2018
Consolidated Statements of Comprehensive Loss for the years ended December 31, 2020, 2019, and 2018
Consolidated Statements Stockholders’ Equity for the years ended December 31, 2020, 2019, and 2018
Consolidated Statements of Cash Flows for the years ended December 31, 2020, 2019, and 2018
Notes to Consolidated Financial Statements
166
169
170
171
172
173
175
165
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, 2020 and 2019, 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, 2020, 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, 2020 and 2019, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended December 31, 2020, 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, 2020, 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 February 25, 2021 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.
166
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.
Description of the Matter
Variable consideration in contracts with customers
As discussed in Note 2 of the consolidated financial statements, the Company’s
revenues for product sold to its customers within the United States 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.
How We Addressed the Matter in
Our Audit
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.
167
Description of the Matter
Valuation of acquisition-related contingent consideration liability
As discussed in Note 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, 2020, the Company recorded $240.2 million in total contingent
consideration liabilities related to development, regulatory and net sales milestones.
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. Any
extinguishments of the liability are written off at fair value as of the date of
transaction. 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.
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 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, including
any extinguishments, 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.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2010.
Iselin, New Jersey
February 25, 2021
168
PTC Therapeutics, Inc.
Consolidated Balance Sheets
In thousands, except shares
December 31,
2020
2019
Assets
Current assets:
Cash and cash equivalents
Marketable securities
Trade receivables, net
Inventory, net
Prepaid expenses and other current assets
Total current assets
Fixed assets, net
Intangible assets, net
Goodwill
Operating lease ROU assets
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
Operating lease liabilities- current
Finance lease liabilities- current
Liability for sale of future royalties- current
Deferred consideration payable
Other current liabilities
Total current liabilities
Deferred revenue- long term
Long-term debt
Contingent consideration payable
Deferred tax liability
Operating lease liabilities- noncurrent
Finance lease liabilities- noncurrent
Liability for sale of future royalties- noncurrent
Other long-term liabilities
Total liabilities
Stockholders’ equity:
Common stock, $0.001 par value. Authorized 125,000,000 shares; issued and
outstanding 69,718,096 shares at December 31, 2020. Authorized 125,000,000 shares;
issued and outstanding 61,935,870 shares at December 31, 2019.
Additional paid-in capital
Accumulated other comprehensive income
Accumulated deficit
Total stockholders’ equity
Total liabilities and stockholders’ equity
See accompanying consolidated notes.
169
$
208,812 $
894,838
69,929
18,697
39,469
1,231,745
33,831
715,328
82,341
84,410
60,623
288,028
398,535
55,538
19,285
17,898
779,284
21,549
710,500
82,341
13,693
16,415
$ 2,208,278 $ 1,623,782
242,168
—
4,151
7,465
1,276
21,023
—
1,250
277,333
—
309,145
240,400
136,735
79,499
23,053
658,739
1,392
1,726,296
159,276
20,000
8,242
5,153
—
—
40,000
3,186
235,857
3,415
293,859
356,300
130,862
9,018
—
—
141
1,029,452
70
2,171,746
(60,957)
(1,628,877)
481,982
62
1,795,351
(10,584)
(1,190,499)
594,330
$ 2,208,278 $ 1,623,782
PTC Therapeutics, Inc.
Consolidated Statements of Operations
In thousands, except shares and per share data
Revenues:
Net product revenue
Collaboration revenue
Royalty revenue
Total revenues
Operating expenses:
2020
2019
2018
Year ended December 31,
$
$
333,401
42,579
4,786
380,766
$
291,306
15,674
—
306,980
263,005
1,729
—
264,734
Cost of product sales, excluding amortization of
acquired intangible assets
Amortization of acquired intangible assets
Research and development
Selling, general and administrative
Change in the fair value of deferred and contingent
consideration
Settlement of deferred and contingent consideration
Total operating expenses
Loss from operations
Interest expense, net
Other income, net
Loss before income tax expense
Income tax (expense) benefit
Net loss attributable to common stockholders
Weighted-average shares outstanding:
Basic and diluted (in shares)
Net loss per share—basic and diluted (in dollars per
share)
$
$
18,942
36,892
477,643
245,164
23,280
10,613
812,534
(431,768)
(56,352)
85,188
(402,932)
(35,228)
(438,160)
$
12,135
27,650
257,452
202,541
48,360
—
548,138
(241,158)
(12,491)
13,723
(239,926)
(11,650)
(251,576)
$
12,670
22,877
171,984
153,548
19,340
—
380,419
(115,685)
(12,554)
129
(128,110)
29
(128,081)
66,027,908
58,863,185
46,576,313
(6.64)
$
(4.27)
$
(2.75)
See accompanying consolidated notes.
170
PTC Therapeutics, Inc.
Consolidated Statements of Comprehensive Loss
In thousands
Year ended December 31,
2019
$ (438,160) $ (251,576) $ (128,081)
2018
2020
1,145
(51,518)
9
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Net loss
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Comprehensive loss
See accompanying consolidated notes.
171
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PTC Therapeutics, Inc.
Consolidated Statements of Cash Flows
In thousands
Cash flows from operating activities
Net loss
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization
Non-cash operating lease expense
Non-cash finance lease amortization expense
Non-cash royalty revenue related to sale of future royalties
Non-cash interest expense on liability related to sale of future royalties
Change in valuation of deferred and contingent consideration
Settlement of deferred and contingent consideration
Non-cash stock consideration, acquisition
Unrealized gain on equity investment in ClearPoint
Unrealized gain on ClearPoint convertible debt security
Amortization of premiums (discounts) on investments, net
Amortization of debt issuance costs
Share-based compensation expense
Non-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
Net cash used in operating activities
Cash flows from investing activities
Purchases of fixed assets
Purchase of convertible debt security
Purchases of marketable securities
Sale and redemption of marketable securities
Acquisition of product rights and licenses
Purchase of equity investment
Business acquisition, net of cash acquired
Net cash provided by (used in) investing activities
Cash flows from financing activities
Proceeds from issuance of convertible notes
Proceeds from exercise of options
Termination and exit fees related to payoff of secured term loan
Net proceeds from public offerings
Repayment of senior secured term loan
Payments on deferred consideration obligation
Proceeds from employee stock purchase plan
Payment of finance lease principal
Cash consideration received from Royalty Purchase Agreement
Net cash provided by financing activities
Effect of exchange rate changes on cash
Net decrease in cash and cash equivalents
Cash and cash equivalents, and restricted cash beginning of period
Cash and cash equivalents, and restricted cash end of period
173
Year ended December 31,
2019
2020
2018
$
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$
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$
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41,382
(2,055)
31,817
23,280
10,613
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(19,252)
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1,841
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70,798
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(8,032)
(194,071)
(17,843)
(10,000)
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944,094
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—
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—
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(597)
28,092
(28,333)
(38,100)
5,303
(17,829)
650,000
668,715
7,688
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295,528
216,312
$
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3,709
—
—
—
48,360
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(3,456)
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11,525
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26,836
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(1,388)
(98,639)
(13,757)
—
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156,270
(31,682)
(4,000)
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279,267
18,276
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(11,667)
—
3,577
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(1,303)
126,030
169,498
295,528
$
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(1,609)
(29,589)
(1,093)
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(7,097)
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90,423
(8,433)
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(42,613)
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10,868
—
117,916
—
—
2,787
—
—
131,571
(3,611)
57,706
111,792
169,498
Supplemental disclosure of cash information
Cash paid for interest
Cash paid for income taxes
Supplemental disclosure of non-cash investing and financing activity
Unrealized gain on marketable securities, net of tax
Right-of-use assets obtained in exchange for operating lease obligations
Right-of-use assets obtained in exchange for finance lease obligations
Acquisition of product rights and licenses
Issuance of common stock related to rights exchange
Capital expenditures unpaid at the end of period
$
$
$
$
$
$
$
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26,397
$
$
7,693
2,109
$
$
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1,583
1,145
$
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$
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41,382
14,191
150,528
1,060
$
$
$
$
17,389
—
11,434
—
—
$
$
$
$
9
—
—
5,981
—
—
See accompanying consolidated notes.
174
PTC Therapeutics, Inc.
Notes to consolidated financial statements
December 31, 2020
(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 leverage its strong scientific
expertise and 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 (“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 (“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. In July 2020, the European Commission approved the removal
of the statement “efficacy has not been demonstrated in non-ambulatory patients” from the indication statement for
Translarna. Emflaza is approved in the United States for the treatment of DMD in patients two years and older.
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 (“hATTR amyloidosis”). Waylivra has received marketing authorization
in the EU for the treatment of familial chylomicronemia syndrome (“FCS”). The Company filed for marketing
authorization for Waylivra for the treatment of FCS with ANVISA, the Brazilian health regulatory authority, in June 2020
and, subject to potential delays in the review process related to the COVID-19 pandemic, expects a regulatory decision on
approval from ANVISA in the third quarter of 2021.
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 SMA program has one approved product, Evrysdi™ (risdiplam), which was approved in August 2020 by
the United States Food and Drug Administration (“FDA”) for the treatment of SMA in adults and children two months
and older. Evrysdi also received marketing authorization for the treatment of SMA in Brazil in October 2020. The
European Medicines Agency (“EMA”) accepted the marketing authorization application, (“MAA”) filed by Roche for
Evrysdi for the treatment of SMA in August 2020 and an opinion from the Committee for Medical Products (“CHMP”) is
expected in the first quarter of 2021. Additionally, in October 2020, Chugai Pharmaceutical Co., Ltd. (“Chugai”), a
subsidiary of Roche, filed an NDA in Japan for Evrysdi for the treatment of SMA and a regulatory decision on approval
is expected in 2021. In addition to the Company’s SMA program, the Company’s splicing platform also includes PTC518,
which is being developed for the treatment of Huntington’s disease (“HD”). The Company expects results from our Phase
1 study of PTC518 in healthy volunteers in the first half of 2021.
The Company has a pipeline of gene therapy product candidates for rare monogenic diseases that affect the central
nervous system (“CNS”) including PTC-AADC for the treatment of Aromatic L-Amino Acid Decarboxylase (“AADC”)
deficiency (“AADC deficiency”), a rare CNS 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 (“BLA”) for PTC-
AADC for the treatment of AADC deficiency in the United States, which it anticipates submitting to the FDA in the second
175
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2020
(In thousands except share and per share amount)
quarter of 2021. In January 2020, the Company submitted an MAA to the EMA for PTC-AADC for the treatment of
AADC deficiency in the EEA, and the Company expects an opinion from the CHMP in the second quarter of 2021.
The Company’s 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 CNS diseases. The two most
advanced molecules in the Company’s Bio-e platform are vatiquinone and PTC857. The Company initiated a registration-
directed Phase 2/3 placebo-controlled trial of vatiquinone in children with mitochondrial disease and associated refractory
epilepsy in the third quarter of 2020 and anticipates data from this trial to be available in the third quarter of 2022. The
Company also initiated a registration-directed Phase 3 trial of vatiquinone in children and young adults with Friedreich
ataxia in the fourth quarter of 2020 and anticipates data from this trial to be available in 2023. In the second quarter of
2020, the Company initiated a Phase 1 trial in healthy volunteers to evaluate the safety and pharmacology of PTC857. The
Company expects data from the Phase 1 trial to be available in the first half of 2021.
On May 29, 2020, the Company completed its acquisition of Censa Pharmaceuticals, Inc. (“Censa”) pursuant to an
Agreement and Plan of Merger, dated as of May 5, 2020 (the "Censa Merger Agreement"), by and among the Company,
Hydro Merger Sub, Inc., the Company’s wholly owned, indirect subsidiary, and, solely in its capacity as the representative,
agent and attorney-in-fact of the securityholders of Censa, Shareholder Representative Services LLC (the "Censa
Merger"). The transaction was accounted for as an asset acquisition. In connection with the Censa Merger, the Company
acquired PTC923. The Company expects to initiate a registration-directed Phase 3 trial for PTC923 for phenylketonuria
(“PKU”) in mid-2021. Refer to Note 3 for further details.
In June 2020, the Company initiated a Phase 2/3 clinical trial evaluating the efficacy and safety of PTC299, a
dihydroorotate dehydrogenase inhibitor that it has also been developing in oncological indications, in patients hospitalized
with COVID-19 infection. The Company expects data from this trial to be available in the second half of 2021.
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 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 June 2020 and is effective, unless extended, through
August 5, 2021. 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
New Drug Application (“NDA”) 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 NDA, stating that it
was unable to approve the application in its current form. In response, the Company filed a formal dispute resolution
176
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2020
(In thousands except share and per share amount)
request with the Office of New Drugs of the FDA. In February 2018, the Office of New Drugs of the FDA denied PTC’s
appeal of the Complete Response Letter. In its response, the Office of New Drugs recommended a possible path forward
for the ataluren NDA submission based on the accelerated approval pathway. This would involve a re-submission of an
NDA containing the current data on effectiveness of ataluren with new data to be generated on dystrophin production in
nmDMD patients’ muscles. The Company followed the FDA’s recommendation and collected, using newer technologies
via procedures and methods that the Company designed, such dystrophin data in a new study, Study 045, and announced
the results of Study 045 in February 2021. Although Study 045 did not meet its pre-specified primary endpoint, the
Company plans to discuss the Study 045 dystrophin results and the totality of existing clinical and real-world data with
the FDA to determine if there is a potential path to approval based on these results and data. There is substantial risk that
the FDA will determine that the results from the Company’s clinical trials and existing real-world data are not sufficient
to support a marketing approval for Translarna for the treatment of nmDMD in the United States. In that case, as the
Company expects to have data for Study 041 in the third quarter of 2022, and subject to a positive outcome in that study,
the Company would plan to re-submit the NDA at that time.
On August 23, 2018, the Company completed its acquisition of Agilis Biotherapeutics, Inc. (“Agilis”), pursuant to an
Agreement and Plan of Merger, dated as of July 19, 2018 (the “Agilis 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 “Agilis Merger”).
Upon the closing of the Agilis 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 Nasdaq for the 10 consecutive trading-day period ending on
the second trading-day immediately preceding the closing of the Agilis Merger. Agilis equityholders are 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.
On April 29, 2020, the Company, certain of the former equity holders of Agilis, and, for the limited purposes set forth
in the agreement, Shareholder Representative Services LLC, entered into a Rights Exchange Agreement (the “Rights
Exchange Agreement”). Pursuant to the Rights Exchange Agreement, the Company issued 2,821,176 shares of its common
stock (the “Common Stock Consideration”) and paid $36.9 million (the “Cash Consideration”), in the aggregate, to such
former equityholders of Agilis (the “Participating Rightholders”) in exchange for the cancellation and forfeiture by the
Participating Rightholders of their rights to receive certain milestone-based contingent payments under the Agilis Merger
Agreement, pursuant to which the Company completed the Agilis Merger.
The Rights Exchange Agreement has no effect on the Agilis Merger Agreement other than to provide for the
cancellation and forfeiture of the Participating Rightholders’ rights to receive $211.6 million, in the aggregate, of the
milestone payments described above. As a result, all other rights and obligations under the Agilis Merger Agreement
remain in effect pursuant to their terms. The Company’s outstanding obligations under the Agilis Merger Agreement
include obligations to pay up to an aggregate maximum amount of $20.0 million upon the achievement of certain
development milestones, up to an aggregate maximum amount of $361.0 million upon the achievement of certain
regulatory milestones, up to a maximum aggregate amount of $150.0 million upon the achievement of certain net sales
milestones and a percentage of annual net sales for Friedreich ataxia and Angelman syndrome during specified terms,
ranging from 2% to 6%, pursuant to the terms of the Agilis Merger Agreement. Refer to Note 4 for further details regarding
the Rights Exchange Agreement.
177
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2020
(In thousands except share and per share amount)
As of December 31, 2020, the Company had an accumulated deficit of approximately $1,628.9 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 Note 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, proceeds from the Royalty Purchase Agreement
(see Note 2), private placements of its convertible preferred stock, collaborations, bank debt, the Company’s credit and
security agreement (the "Credit Agreement"), with MidCap Financial Trust (“MidCap Financial”) as administrative agent
and MidCap Financial and other certain institutions as lenders thereto (see Note 8), 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. Certain prior period balances have been reclassified to conform to the current period
presentation. These reclassifications did not have a material impact on the consolidated statements of operations,
consolidated balance sheets, consolidated statements of cash flows, or notes to the consolidated financial statements.
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, royalty
revenue, certain accruals related to the Company’s research and development expenses, valuation procedures for liability
for sale of future royalties, 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, New 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.
178
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2020
(In thousands except share and per share amount)
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:
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
End of
period-
December 31,
Beginning of
period-
December 31,
2019
288,028
7,500
295,528
2020
208,812 $
7,500
216,312 $
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. For available for sale debt securities in an unrealized loss position, the
Company assesses whether it intends to sell or if it is more likely than not that the Company will be required to sell the
security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met,
the security’s amortized cost basis is written down to fair value. If the criteria are not met, the Company evaluates whether
the decline in fair value has resulted from a credit loss or other factors. In making this assessment, management considers,
among other factors, the extent to which fair value is less than amortized cost, any changes to the rating of the security by
a rating agency, and adverse conditions specifically related to the security. If this assessment indicates that a credit loss
exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis
of the security. If the present value of the cash flows expected to be collected is less than the amortized cost basis, a credit
loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less
than the amortized costs basis. Any impairment that has not been recorded through an allowance for credit losses is
recognized in other comprehensive income. For the twelve month period ended December 31, 2020, no allowance was
recorded for credit losses.
179
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2020
(In thousands except share and per share amount)
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.
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
Machinery and lab equipment
Furniture and fixtures
Inventory and cost of product sales
Inventory
Lesser of useful life or lease term
3 years
7 years
7 years
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, 2020 December 31, 2019
874
824 $
$
9,652
8,759
19,285
8,745
9,128
18,697 $
$
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 write downs of $0.5 million
and $0.4 million for the twelve month periods ended December 31, 2020 and 2019, respectively, primarily related to
180
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2020
(In thousands except share and per share amount)
product approaching expiration. 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,
2020 and December 31, 2019, 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, royalty payments associated with net product sales, and royalty payments to
collaborative partners associated with royalty revenues and collaboration revenue related to milestones. Production costs
are expensed as cost of product sales when the related products are sold or royalty revenues and collaboration revenue
milestones are earned.
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”)
No. 2014-9, “Revenue from Contracts with Customers (Topic 606)”. ASU No. 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 consisted of $3.9
million in deferred revenue offset by $0.6 million of variable consideration.
Net 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
181
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2020
(In thousands except share and per share amount)
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, 2020, 2019, and 2018, net product sales
outside of the United States were $194.4 million, $190.3 million, and $171.0 million respectively, and net product sales in
the United States were $139.0 million, $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
•
or service 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 and royalty 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.
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
182
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2020
(In thousands except share and per share amount)
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 royalties from product sales at the later of when the related sales occur or when
the performance obligation to which the royalty has been allocated has been satisfied. If it is probable that a significant
revenue reversal will not occur, the Company will estimate the royalty payments using the most likely amount method.
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 Company also
assesses whether an allowance for expected credit losses may be required. For the twelve month period ended December
31, 2020, no allowance was recorded for credit losses. The allowance for doubtful accounts was $0.1 million as of
December 31, 2020 and $0.3 million as of December 31, 2019. For the twelve months ended December 31, 2020, 2019
and 2018, bad debt expense was immaterial.
Liability for sale of future royalties
On July 17, 2020, the Company, RPI Intermediate Finance Trust (“RPI”), and, for the limited purposes set forth in
the agreement, Royalty Pharma PLC, entered into a Royalty Purchase Agreement (the “Royalty Purchase
Agreement”). Pursuant to the Royalty Purchase Agreement, the Company sold to RPI 42.933% (the “Assigned Royalty
Payment”) of the Company’s right to receive sales-based royalty payments (the “Royalty”) on worldwide net sales of
Evrysdi and any other product developed pursuant to the License and Collaboration Agreement (the “License
Agreement”), dated as of November 23, 2011, by and among the Company, Roche and, for the limited purposes set forth
therein, the SMA Foundation under the SMA program. In consideration for the sale of the Assigned Royalty Payments,
RPI paid the Company $650.0 million in cash consideration. The Company has retained a 57.067% interest in the Royalty
and all economic rights to receive the remaining potential regulatory and sales milestone payments under the License
Agreement, which milestone payments equal $355.0 million in the aggregate as of December 31, 2020. The Royalty
Purchase Agreement will terminate 60 days following the earlier of the date on which Roche is no longer obligated to
make any payments of the Royalty pursuant to the License Agreement and the date on which RPI has received $1.3 billion
in respect of the Assigned Royalty Payments.
183
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2020
(In thousands except share and per share amount)
The cash consideration obtained pursuant to the Royalty Purchase Agreement is classified as debt and is recorded as
“liability for sale of future royalties-current” and “liability for sale of future royalties-noncurrent” on the Company’s
consolidated balance sheet based on the timing of the expected payments to be made to RPI. The fair value for the liability
for sale of future royalties at the time of the transaction was based on the Company’s estimates of future royalties expected
to be paid to RPI over the life of the arrangement, which was determined using forecasts from market data sources, which
are considered Level 3 inputs. The liability will be amortized using the effective interest method over the life of the
arrangement, in accordance with the respective guidance. The Company will utilize the prospective method to account for
subsequent changes in the estimated future payments to be made to RPI. Refer to Note 8 for further details.
Leases
The Company determines if an arrangement is a lease at inception. This determination generally depends on whether
the arrangement conveys to the Company the right to control the use of an explicitly or implicitly identified fixed asset for
a period of time in exchange for consideration. Control of an underlying asset is conveyed to the Company if the Company
obtains the rights to direct the use of and to obtain substantially all of the economic benefits from using the underlying
asset. The Company has lease agreements which include lease and non-lease components, which the Company accounts
for as a single lease component for all leases. Operating and finance leases are classified as right of use ("ROU") assets,
short term lease liabilities, and long term lease liabilities. Operating and finance lease ROU assets and lease liabilities are
recognized at the commencement date based on the present value of lease payments over the lease term. ROU assets are
amortized and lease liabilities accrete to yield straight-line expense over the term of the lease. Lease payments included in
the measurement of the lease liability are comprised of fixed payments.
Variable lease payments associated with the Company’s leases are recognized when the event, activity, or
circumstance in the lease agreement on which those payments are assessed occurs. Variable lease payments are presented
in the Company’s consolidated statements of operations in the same line item as expense arising from fixed lease payments
for operating leases.
Leases with an initial term of 12 months or less are not recorded on the consolidated balance sheet and the Company
recognizes lease expense for these leases on a straight-line basis over the lease term. The Company applies this policy to
all underlying asset categories.
A lessee is required to discount its unpaid lease payments using the interest rate implicit in the lease or, if that rate
cannot be readily determined, its incremental borrowing rate. As most of the Company’s leases do not provide an implicit
rate, the Company uses its incremental borrowing rate based on the information available at the commencement date in
determining the present value of lease payments. The Company gives consideration to its recent debt issuances as well as
publicly available data for instruments with similar characteristics when calculating its incremental borrowing rates.
The lease term for all of the Company’s leases includes the non-cancellable period of the lease plus any additional
periods covered by either a Company option to extend (or not to terminate) the lease that the Company is reasonably
certain to exercise, or an option to extend (or not to terminate) the lease controlled by the lessor. Leasehold improvements
are capitalized and depreciated over the lesser of useful life or lease term. See Note 6 Leases for additional information.
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
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Notes to consolidated financial statements (Continued)
December 31, 2020
(In thousands except share and per share amount)
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 $4.7 million and $4.5 million as of December 31, 2020 and 2019, 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 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.
Cash equivalents, 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.
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Notes to consolidated financial statements (Continued)
December 31, 2020
(In thousands except share and per share amount)
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. Starting in the third quarter
of 2019 and continuing forward, 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. Starting in the third quarter
of 2019 and continuing forward, 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 March 27, 2020, the United States enacted the Coronavirus Aid, Relief, and Economic Security Act, referred to
herein as the CARES Act, as a response to the economic uncertainty resulting from a strain of novel coronavirus, COVID-
19. The CARES Act includes modifications for net operating loss carryovers and carrybacks, limitations of business
interest expense for tax, immediate refund of alternative minimum tax (“AMT”) credit carryovers as well as a technical
correction to the 2017 Tax Cuts and Jobs Act ("the 2017 Tax Act") for qualified improvement property. On December 27,
2020, the Coronavirus Response and Relief Supplemental Appropriations Act of 2021 – a $900 billion relief package to
deliver the second round of economic stimulus for individuals, families, and businesses was signed into law. The bill
provides relief through multiple measures and expands many of the provisions already put into place under the CARES
Act. As of December 31, 2020, the Company expects that these provisions will not have a material impact. Tax provisions
of the CARES Act also include the deferral of certain payroll taxes, relief for retaining employees, and other provisions.
The relief for retaining employees was not material to the financial statements and the deferral of certain payroll taxes
amounted to $2.5 million as of December 31, 2020, which is accrued in other current liabilities and other long-term
liabilities on the consolidated balance sheet.
Additionally, the Organization for Economic Co-operation and Development, or OECD, the EC, and individual taxing
jurisdictions where the Company and its affiliates do business have recently focused on issues related to the taxation of
multinational corporations. The OECD has released its comprehensive plan to create an agreed set of international rules
for fighting base erosion and profit shifting. In addition, the OECD, the EC and individual counties are examining changes
to how taxing rights should be allocated among countries considering the digital economy. As a result, the tax laws in the
U.S. and other countries in which PTC and its affiliates do business could change on a prospective or retroactive basis and
any such changes could materially adversely affect the Company’s business.
On December 22, 2017, the U.S. government enacted 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, 2020.
In December 2017, the SEC staff issued Staff Accounting Bulletin No. 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 to extend beyond one year of the enactment date. As a result of the reduction in the U.S. corporate income tax
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PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2020
(In thousands except share and per share amount)
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.
In August 2018, the Company recorded a deferred tax liability in conjunction with the Agilis Merger, further discussed
in Notes 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.
The $650.0 million cash consideration received from RPI pursuant to the Royalty Purchase Agreement was treated as
taxable income in the current year and resulted in a current tax provision of $25.0 million related to state income taxes
after considering the state NOL and tax credits. The Company did not generate a federal income tax liability after
considering the federal NOLs.
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 also has an intercompany loan which is recorded on a non-U.S. subsidiary
and denominated in U.S. dollars. The loan is remeasured into local currency using the exchange rate as of the balance
sheet date. The Company’s asset and liability accounts, including the intercompany loan, 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. For the twelve month period ended December 31, 2020, the
Company recorded an unrealized foreign exchange gain of $54.6 million from the remeasurement of the intercompany
loan.
Net (loss) income per share
Basic net (loss) income per share is calculated by dividing the net (loss) 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.
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PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2020
(In thousands except share and per share amount)
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.
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. No 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.
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PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2020
(In thousands except share and per share amount)
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, 2020.
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, 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, 2020 and concluded that no impairment exists as of December 31, 2020.
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, 2020, 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, 2020 and concluded that no impairment exists as of December 31, 2020.
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PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2020
(In thousands except share and per share amount)
Recent accounting pronouncements
In August 2020, the FASB issued ASU 2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-
20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible
Instruments and Contracts in an Entity’s Own Equity.” ASU 2020-06 simplifies the accounting for convertible instruments
by removing certain separation models in Subtopic 470- 20, Debt—Debt with Conversion and Other Options, for
convertible instruments. Under ASU 2020-06, the embedded conversion features no longer are separated from the host
contract for convertible instruments with conversion features that are not required to be accounted for as derivatives under
Topic 815, Derivatives and Hedging, or that do not result in substantial premiums accounted for as paid-in capital.
Consequently, a convertible debt instrument will be accounted for as a single liability measured at its amortized cost and
a convertible preferred stock will be accounted for as a single equity instrument measured at its historical cost, as long as
no other features require bifurcation and recognition as derivatives. By removing those separation models, the interest rate
of convertible debt instruments typically will be closer to the coupon interest rate when applying the guidance in Topic
835, Interest. The amendments under ASU 2020-06 also include revisions related to the derivatives scope exception for
contracts in an entity’s own equity and earnings per share. The amendments under ASU 2020-06 are effective for public
business entities that meet the definition of a SEC filer, excluding entities eligible to be smaller reporting companies as
defined by the SEC, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal
years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2023, including
interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after
December 15, 2020, including interim periods within those fiscal years. The FASB specified that an entity should adopt
the guidance as of the beginning of its annual fiscal year. The Company expects to adopt this guidance when effective and
is currently assessing what effect the adoption of ASU 2020-06 will have on its consolidated financial statements and
accompanying notes.
Impact of recently adopted accounting pronouncements
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
principles 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 early adopted
this guidance January 1, 2020. The adoption of the guidance did not have a material impact on the consolidated financial
statements and accompanying notes.
In June 2016, the FASB issued ASU No. 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 November 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 adopted ASU 2016-13 and ASU 2019-11 effective January 1, 2020.
The adoption of the guidance did not have a material impact on the consolidated financial statements. The Company has
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PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2020
(In thousands except share and per share amount)
updated its accounting policy for marketable securities within this Note as well as its fair value note (Note 4) 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 adopted this guidance January 1, 2020. The adoption of the guidance did not have a material
impact on the consolidated financial statements. The Company has updated its fair value note (Note 4) with additional and
modified 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 adopted this guidance
January 1, 2020. The adoption of the guidance did not have a material impact on the consolidated financial statements and
accompanying notes.
In November 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 adopted this guidance January 1, 2020. The adoption of the guidance did not have a material
impact on the consolidated financial statements and accompanying notes.
3. Acquisitions
Censa Asset Acquisition
On May 29, 2020, the Company acquired Censa, pursuant to the Censa Merger Agreement. Upon the closing of the
Censa Merger, the Company paid to the Censa securityholders (i) cash consideration of $15.0 million, which consisted of
an upfront payment of $10.4 million and an additional $4.6 million for the net assets on Censa’s opening balance sheet as
of the date of the acquisition, and (ii) 845,364 shares of the Company’s common stock, which were valued at $42.9 million
based on the closing stock price on the acquisition date. The number of shares issued was determined using a 30-day
volume weighted average price (“VWAP”) pursuant to the Censa Merger Agreement.
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PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2020
(In thousands except share and per share amount)
The Company determined that substantially all of the fair value is concentrated in PTC923 and accounted for the
transaction as an asset acquisition under ASC 805-50. The purchase price consisted of the cash consideration of
$15.0 million and $42.9 million in the Company’s common stock, in addition to $0.7 million of acquisition costs. As such,
the total consideration transferred was determined to be $58.6 million. The opening balance sheet net assets of
$4.6 million, which consisted of cash of $3.8 million and other current assets of $0.8 million, were determined to be non-
qualifying assets and recorded at their fair values, respectively. The remaining consideration of $54.0 million was allocated
to PTC923. As PTC923 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 was expensed. Of the $54.0 million, $53.3 million is included
in research and development expense and the $0.7 million related to the acquisition costs, is included in selling, general,
and administrative expense within the Company’s statement of operations for the twelve month period ended December
31, 2020.
Subject to the terms and conditions of the Censa Merger Agreement, Censa securityholders may become entitled to
receive contingent payments from the Company based on (i) the achievement of certain development and regulatory
milestones up to an aggregate maximum amount of $217.5 million for PTC923’s two most advanced programs and receipt
of a priority review voucher from the FDA as set forth in the Censa Merger Agreement, (ii) $109.0 million in development
and regulatory milestones for each additional indication of PTC923, (iii) the achievement of certain net sales milestones
up to an aggregate maximum amount of $160.0 million, (iv) a percentage of annual net sales during specified terms,
ranging from single to low double digits of the applicable net sales threshold amount, and (v) any sublicense fees paid to
the Company in consideration of any sublicense of Censa’s intellectual property to commercialize PTC923, on a country-
by-country basis, which contingent payment shall equal to a mid-double digit percentage of any such sublicense fees.
Pursuant to the Censa Merger Agreement, the Company has the option to pay the initial $30.0 million development
milestone, for the completion of enrollment of a Phase 3 clinical trial for PTC923 for PKU, if achieved, in cash or shares
of the Company’s common stock. The Company will record the milestone and royalty payments when they become
payable. Milestone payments prior to FDA approval of PTC923 for PKU (or other indications) will be expensed
accordingly and milestone payments that will only occur after PTC923 for PKU (or other indications) is FDA approved,
will be capitalized and amortized over their expected useful lives.
BioElectron Asset Acquisition
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 “BioElectron Asset Purchase Agreement”).
BioElectron was a private company with a pipeline focused on inflammatory and central nervous system (CNS) disorders.
The lead program, vatiquinone, is in late stage development for CNS 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 BioElectron Asset Purchase 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 BioElectron Asset Purchase Agreement, BioElectron may also become entitled
to contingent payments based on a percentage of net sales of certain products.
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Notes to consolidated financial statements (Continued)
December 31, 2020
(In thousands except share and per share amount)
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 vatiquinone 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 vatiquinone 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 Agilis 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 Agilis 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 Agilis 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 Nasdaq for the 10 consecutive trading-day period ending on
the second trading-day immediately preceding the closing of the Agilis Merger. The fair value of the stock on the
acquisition date was determined to be $155.9 million.
Pursuant to the Agilis 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 Agilis Merger Agreement, the Company was 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 Agilis 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.
On April 29, 2020, the Company entered into the Rights Exchange Agreement, pursuant to which the Company issued
the Common Stock Consideration and the Cash Consideration to the Participating Rightholders in exchange for the
cancellation and forfeiture by the Participating Rightholders of their rights to receive certain milestone-based contingent
payments under the Agilis Merger Agreement outlined above. Refer to Note 1 for further details regarding the Rights
Exchange Agreement and Note 4 for fair value considerations.
193
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2020
(In thousands except share and per share amount)
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 Agilis Merger during the three month
period ended December 31, 2018 and recorded measurement period adjustments 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. 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.
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
181
153
38
576,500
(3,828)
(122,032)
451,340
82,341
533,681
— $
—
—
—
96,500
—
(6,832)
89,668 $
(17,968)
71,700 $
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.
194
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2020
(In thousands except share and per share amount)
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 Agilis 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
Net loss attributable to common stockholders
4. Fair value of financial instruments and investments
Twelve Months Ended December 31,
2018
264,734 $
(138,083) $
2017
194,392
(93,333)
$
$
The Company follows the fair value measurement rules, which provide 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.
Cash equivalents, 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 approximate fair value due to
the short-term nature of those instruments.
The Company uses the market approach to measure fair value for its marketable securities. The market approach uses
prices and other relevant information generated by market transactions involving identical or comparable assets. The
Company’s marketable securities are classified as Level 2 as they primarily utilize broker quotes in a nonactive market to
value these securities.
In May 2019, the Company purchased $4.0 million of shares of ClearPoint Neuro, 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, 2020 and 2019, the Company recorded unrealized gains of $14.3 million and $2.2
million respectively, which are components of other income, net within the consolidated statement of operations. The fair
value of the equity investment was $20.5 million and $6.2 million as of December 31, 2020 and 2019, respectively. The
195
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2020
(In thousands except share and per share amount)
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.
In January 2020, the Company purchased a $10.0 million convertible note from ClearPoint that the Company can
convert into ClearPoint shares at a conversion rate of $6.00 per share at any point throughout the term of the loan, which
matures five years from the purchase date. The Company determined that the convertible note represents an available for
sale debt security and the Company has elected to record it at fair value under ASC 825. The Company classifies its
ClearPoint convertible debt security as a Level 2 asset within the fair value hierarchy, as the value is based on inputs other
than quoted prices that are observable. The fair value of the ClearPoint convertible debt security is determined at each
reporting period by utilizing a Black-Scholes option pricing model, as well as a present value of expected cash flows from
the debt security utilizing the risk free rate and the estimated credit spread as of the valuation date as the discount rate.
During the year ended December 31, 2020, the Company recorded an unrealized gain of $19.3 million, which is a
component of other income, net within the consolidated statement of operations. The fair value of the convertible debt
security was $29.3 million as of December 31, 2020. The convertible debt security is considered to be long term and is
included as a component of deposits and other assets on the consolidated balance sheet. Other than the equity investment
and the convertible debt security, no other items included in deposits and other assets on the consolidated balance sheets
are fair valued.
The following represents the fair value using the hierarchy described in Note 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, 2020 and 2019:
December 31, 2020
Marketable securities
Equity investment in ClearPoint
ClearPoint convertible debt security
Contingent consideration payable- development and
regulatory milestones
Contingent consideration payable- net sales
milestones and royalties
$
$
$
$
$
Quoted prices
in active
markets for
identical assets
(level 1)
Total
894,838 $
20,503 $
29,252 $
— $
20,503 $
— $
Significant
other
observable
inputs
(level 2)
894,838 $
— $
29,252 $
Significant
unobservable
inputs
(level 3)
—
—
—
139,200 $
— $
— $
139,200
101,200 $
— $
— $
101,200
196
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2020
(In thousands except share and per share amount)
December 31, 2019
Marketable securities
Equity investment in ClearPoint
Stock appreciation rights liability
Deferred consideration payable
Contingent consideration payable- development and
regulatory milestones
Contingent consideration payable- net sales
milestones and royalties
$
$
$
$
$
$
Quoted prices
in active
markets for
identical assets
(level 1)
Total
398,535 $
6,194 $
3,186 $
40,000 $
— $
6,194 $
— $
— $
Significant
other
observable
inputs
(level 2)
398,535 $
— $
— $
40,000 $
Significant
unobservable
inputs
(level 3)
—
—
3,186
—
290,500 $
— $
— $
290,500
65,800 $
— $
— $
65,800
No transfers of assets between Level 1 and Level 2 of the fair value measurement hierarchy occurred during the years
ended December 31, 2020 and 2019.
The following is a summary of marketable securities accounted for as available-for-sale securities at December 31,
2020 and 2019:
Commercial paper
Corporate debt securities
Asset-backed securities
Government obligations
Total
Commercial paper
Corporate debt securities
Asset-backed securities
Total
Amortized
Cost
$ 276,855 $
474,030
28,681
113,372
$ 892,938 $
December 31, 2020
Gross Unrealized
Gains
19 $
1,658
210
88
1,975 $
Losses
Fair Value
(37) $ 276,837
475,659
(29)
28,888
(3)
(6)
113,454
(75) $ 894,838
Amortized
Cost
$ 157,936 $
188,778
51,062
$ 397,776 $
December 31, 2019
Gross Unrealized
Gains
162 $
576
49
787 $
Losses
Fair Value
— $ 158,098
189,334
(20)
(8)
51,103
(28) $ 398,535
Unrealized gains and losses on marketable securities are reported as a component of accumulated other comprehensive
(loss) income in stockholders’ equity. For available for sale debt securities in an unrealized loss position, the Company
assesses whether it intends to sell or if it is more likely than not that the Company will be required to sell the security
before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the
security’s amortized cost basis is written down to fair value. For the year ended December 31, 2020, no write downs
occurred. The Company does not intend to sell the investments and it is not more likely than not that the Company will be
required to sell the investments before recovery of their amortized cost bases, which may be maturity. The Company also
reviews its available for sale debt securities in an unrealized loss position and evaluates whether the decline in fair value
has resulted from credit losses or other factors. This review is subjective, as it requires management to evaluate whether
197
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2020
(In thousands except share and per share amount)
an event or change in circumstances has occurred in that period that may be related to credit issues. For the year ended
December 31, 2020, no allowance was recorded for credit losses.
For the year ended December 31, 2020, the Company had $0.7 million, realized gains from the sale of marketable
securities. For the year ended December 31, 2019, the Company had no realized gains from the sale of marketable
securities. Realized gains are reported as a component of interest expense, net in the consolidated statement of operations.
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, 2020 are as follows:
Securities in an unrealized loss
position less than 12 months
position greater than 12 months
Total
December 31, 2020
Securities in an unrealized loss
Unrealized losses Fair Value Unrealized losses Fair Value
$
Commercial paper
Corporate debt securities
Asset-backed securities
Government obligations
Total
(37)
(29)
(3)
(6)
129,630
102,426
1,830
27,084
$
(75) $ 260,970 $
—
—
—
—
— $
Unrealized losses Fair Value
129,630
(37)
102,426
(29)
1,830
(3)
27,084
(6)
(75) $ 260,970
—
—
—
—
— $
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:
Securities in an unrealized loss
position less than 12 months
Securities in an unrealized loss
position greater than 12 months
Total
December 31, 2019
Corporate debt securities
Asset-backed securities
Total
$
(20) $
(8)
(28) $
71,779 $
24,211
95,990 $
— $
—
— $
Unrealized losses Fair Value Unrealized losses Fair Value
$
Unrealized losses Fair Value
(20) $ 71,779
24,211
(28) $ 95,990
— $
—
— $
(8)
Marketable securities on the balance sheet at December 31, 2020 and 2019 mature as follows:
December 31, 2020
Less Than
12 Months
More Than
12 Months
—
235,520
22,525
47,930
305,975
276,837 $
240,139
6,363
65,524
588,863 $
Commercial paper
Corporate debt securities
Asset-backed securities
Government obligations
Total Marketable securities
$
$
198
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2020
(In thousands except share and per share amount)
December 31, 2019
Commercial paper
Corporate debt securities
Asset-backed securities
Total Marketable securities
$
$
Less Than
12 Months
More Than
12 Months
—
49,738
6,379
56,117
158,098 $
139,596
44,724
342,418 $
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 Notes”). In September 2019, the Company issued $287.5 million of 1.5% convertible senior notes due
September 15, 2026 (the “2026 Convertible Notes,” together with the “2022 Convertible Notes,” the “Convertible Notes”).
The Company separately accounted for the liability and equity components of the Convertible Notes by allocating the
proceeds between the liability component and equity component, as further discussed in Note 8. The fair value of the
Convertible Notes, 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 Notes observed in market trading which are Level 2
inputs. The estimated fair value of the 2022 Convertible Notes at December 31, 2020 and 2019 was $193.2 million and
$171.2 million, respectively. The estimated fair value of the 2026 Convertible Notes at December 31, 2020 and
December 31, 2019 was $394.9 million and $335.0 million.
Deferred consideration payable
Pursuant to the Agilis Merger Agreement, Agilis equityholders were previously 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 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 was required to pay $40.0 million of development milestone payments upon the passing of the
second anniversary of the closing of the Agilis Merger, regardless of whether the applicable milestones have been
achieved. The $40.0 million of development milestones were classified as deferred consideration on the Company’s
consolidated balance sheets at the time of the Agilis Merger closing and as of December 31, 2019.
Pursuant to the terms of the Rights Exchange Agreement, in the twelve month period ended December 31, 2020, the
Company issued 2,821,176 shares of its common stock and paid $36.9 million in the aggregate, to Participating
Rightholders, who in exchange have canceled and forfeited their rights under the Agilis Merger Agreement to receive (i)
$174.0 million, in the aggregate, of potential milestone payments based on the achievement of certain regulatory
milestones and (ii) $37.6 million, in the aggregate, of $40.0 million in development milestone payments, or the deferred
consideration, that would have been due upon the passing of the second anniversary of the closing of the Agilis Merger.
As a result of the Rights Exchange Agreement, the remaining deferred consideration payable was $2.4 million, was paid
out upon the passing of the second anniversary of the closing of the Agilis Merger. Accordingly, there was no deferred
consideration payable as of December 31, 2020.
199
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2020
(In thousands except share and per share amount)
As of result of the Rights Exchange Agreement, the Company recognized a gain of $0.7 million on the settlement of
the development milestones related to the difference in the development milestone settled of $37.6 million and Cash
Consideration of $36.9 million. Additionally, the Company recognized a loss of $11.3 million on the settlement of the
regulatory milestones related to the difference in fair value of the regulatory milestones settled of $139.2 million and the
fair value of the Common Stock Consideration of $150.5 million. The $0.7 million gain and $11.3 million loss are included
in the settlement of deferred and contingent consideration in the Company’s statement of operations for the twelve month
period ended December 31, 2020. Additionally, as of the date of the Rights Exchange Agreement, the Company recognized
a gain on the fair value of the contingent consideration of $1.0 million related to the portion of regulatory milestones that
were forfeited, which is included in the change in fair value of the deferred and contingent liability within the Company’s
statement of operations for the twelve month period ended December 31, 2020. This gain on the fair value of the contingent
consideration is considered a non-recurring Level 3 fair value measurement and was estimated using the same valuation
methodology and unobservable input ranges for development and regulatory milestones in the Level 3 valuation section
below. In conjunction with the Rights Exchange Agreement, the Company also incurred $2.0 million of transaction fees,
which were included in other expense in the Company’s statement of operations for the twelve month period ended
December 31, 2020.
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 last payment
of the SARs liability was made in the three month period ended March 31, 2020, and accordingly, the balance of the SARS
liability as of December 31, 2020 was $0.
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. On December 31, 2020, the weighted average discount rate for the
development and regulatory milestones was 3.4% and the weighted average probability of success was 42%. 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. On December 31, 2020, the weighted average discount rate for the net sales milestones and
royalties was 11.5% and the weighted average probability of success for the net sales milestones was 48%.
200
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2020
(In thousands except share and per share amount)
The table presented below is a summary of changes in the fair value of the Company’s Level 3 valuation for the SARs
liability and the contingent consideration payables for the years ended December 31, 2020, and 2019:
Level 3 liabilities
Contingent consideration payable- Contingent consideration payable-
net sales milestones and royalties
- Agilis
development and regulatory
milestones - Agilis
Beginning balance as of December 31, 2018
Additions
Change in fair value
Payments
Ending balance as of December 31, 2019
Additions
Change in fair value
Payments
Rights Exchange settlement
Ending balance as of December 31, 2020
SARs
$ 3,814 $
—
3,187
$ (3,815) $
3,186
—
—
(3,186)
—
— $
$
257,040 $
—
33,460
— $
290,500
—
(12,120)
—
(139,180)
139,200 $
53,200
—
12,600
—
65,800
—
35,400
—
—
101,200
The following significant unobservable inputs were used in the valuation of the contingent consideration payables for
the years ended December 31, 2020 and 2019 and of the SARS liability for the year ended December 31, 2019:
Contingent consideration
payable-
development and
regulatory milestones
Contingent considerable
payable- net sales
milestones and royalties
Fair Value Valuation Technique
$139,200
Probability-adjusted
discounted cash flow
$101,200
Option-pricing model
with Monte Carlo
simulation
December 31, 2020
Unobservable Input
Potential development and regulatory milestones
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
Projected years of payments
Range
$0 - $381 million
25% - 94%
2.2% - 4.5%
2021 - 2028
$0 - $150 million
25% - 94%
2% - 6%
11.5%
2022 - 2040
Fair Value Valuation Technique
Unobservable Input
Range
December 31, 2019
SARs
$3,186
Option-pricing model
Contingent consideration
payable- development and
regulatory milestones
$290,500
Probability-adjusted
discounted cash flow
Contingent considerable
payable- net sales milestones
and royalties
$65,800
Option-pricing model
with Monte Carlo
simulation
Volatility
Risk free interest rate
Strike price
Fair value of common stock
Expected life
Potential development and regulatory
milestones
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
Projected years of payments
28.93%
0.19%
$6.76 - $30.86
$48.03
0.01 years
$0 - $555 million
25% - 94%
2.2% - 4.7%
2020 - 2026
$0 - $150 million
25% - 89%
2% - 6%
14.5%
2021 - 2038
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
201
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2020
(In thousands except share and per share amount)
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, 2020 and 2019:
Leasehold improvements
Computer equipment and software
Machinery and lab equipment
Furniture and fixtures
Assets in process
Less accumulated depreciation
Total
December 31,
2020
8,072 $
11,471
23,430
3,844
5,076
51,893
(18,062)
33,831 $
2019
5,039
8,069
13,466
3,567
3,232
33,373
(11,824)
21,549
$
$
Depreciation expense was approximately $6.6 million, $4.7 million, and $2.6 million for the years ended
December 31, 2020, 2019, and 2018, respectively.
6. Leases
The Company leases office space in South Plainfield, New 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 approximately 220,500 square feet of office, manufacturing and laboratory space at a facility
located in Hopewell Township, New Jersey (the “Campus”) pursuant to a Lease Agreement (the “Lease”) with Hopewell
Campus Owner LLC (the “Landlord”). The rental term of the Lease commenced on July 1, 2020 and has an initial term of
fifteen years (the “Initial Term”), with two consecutive ten year renewal periods, each at the Company’s option. The
aggregate rent for the Initial Term will be approximately $111.5 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.
Subject to the terms of the Lease, the Company has a right of first refusal to rent certain other space of the Campus,
which would be triggered upon the Landlord’s issuance of a second round proposal or letter of intent to another tenant for
such space. The Company also may seek to build a new separate building on the Campus, which may not contain less than
75,000 square feet (the “New Building”). Upon receipt of notice of the Company’s intention to build the New Building,
the Landlord may, in its sole discretion, construct and lease the New Building to the Company or enter into a ground lease
with the Company permitting the Company to construct the New Building. Rent terms for the New Building would be
determined based on the land value, construction and project costs subject to whether the Landlord or Company constructs
the New Building.
202
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2020
(In thousands except share and per share amount)
On March 20, 2020, the Company entered into a lease agreement with COE Bridgewater LLC relating to the lease of
office and laboratory space located in Bridgewater, New Jersey. This lease replaced the Company’s existing lease on the
property beginning on May 1, 2020 and includes additional rental property of approximately 59,000 square feet.
On June 19, 2020, the Company entered into a commercial manufacturing service agreement for a term of 12.5 years
with MassBiologics of the University of Massachusetts Medical School ("MassBio"). The agreement will expire on
December 31, 2032 unless the Company terminates it on 24 months prior written notice to MassBio. Pursuant to the terms
of the agreement, MassBio agreed to provide the Company with four dedicated rooms for its gene therapy AADC program.
The Company concluded that the agreement contains an embedded lease as the Company controls the use of the four
dedicated rooms and the equipment therein. As the present value of the facilities exceeds the assessed fair value, the
Company determined that it is a finance lease. Given that the embedded finance lease is designed for the production of
PTC’s AADC program and would not have an alternate use outside the PTC gene therapy platform without incurring
significant costs, the Company determined that the lease should be treated as research and development expense under
ASC 730. Accordingly, the Company expensed the present value of all guaranteed future cash payments of $41.4 million
during the year ending December 31, 2020. Additionally, during the year ending December 31, 2020, the Company
recorded finance lease costs of $0.9 million related to interest on the lease liability.
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 14.5 years and certain leases include
renewal options to extend the lease for up to 10 years. Rent expense was approximately $15.3 million, $6.0 million, and
$2.7 million for the years ended December 31, 2020, 2019, and 2018.
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
Year Ended
December 31, 2020
Year Ended
December 31, 2019
$
$
12,368
2,448
450
15,266
$
$
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:
Operating lease ROU asset
Operating lease liabilities- current
Operating lease liabilities- noncurrent
Total operating lease liability
December 31, 2020 December 31, 2019
13,693
$
84,410 $
$
$
7,465 $
79,499
86,964 $
5,153
9,018
14,171
203
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2020
(In thousands except share and per share amount)
Finance lease liabilities- current
Finance lease liabilities- noncurrent
Total finance lease liability
December 31, 2020 December 31, 2019
—
$
—
—
1,276 $
23,053
24,329 $
$
The Company’s leases in Bridgewater, New Jersey and Hopewell Township, New Jersey are the primary drivers of
the increase in total operating lease ROU asset and total operating lease liability from December 31, 2019 to December
31, 2020.
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
Weighted-average remaining lease terms - finance lease (years)
Weighted-average discount rate - finance lease
Supplemental cash flow information related to leases was as follows:
December 31, 2020 December 31, 2019
3.38
7.33 %
—
— %
11.49
8.86 %
12.00
7.80 %
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases
Financing cash flows from finance lease
Operating cash flows from finance leases
Right-of-use assets obtained in exchange for lease obligations:
Operating leases
Finance lease
Year Ended December 31,
2020
2019
$
8,462 $ 4,466
—
—
17,829
171
$
76,811 $ 17,389
—
41,382
Future minimum lease payments under non-cancelable leases as of December 31, 2020 were as follows:
2021
2022
2023
2024
2025 and thereafter
Total lease payments
Less: Imputed Interest expense
Total
Operating Leases Finance Lease
3,000
$
3,000
3,000
3,000
24,000
36,000
11,671
24,329
13,721 $
13,301
12,870
12,171
92,012
144,075
57,111
86,964 $
$
In conjunction with the Asset Acquisition, the Company acquired BioElectron’s lease in Mountain View, California.
As substantially all of the fair value of the gross assets acquired was related to vatiquinone, the relative fair value allocated
to the right of use asset and corresponding lease liability for the Mountain View lease was determined to be immaterial,
and accordingly is not included in the tables above. The future minimum lease payments for the Mountain View lease are
$1.8 million and $1.4 million for 2021 and 2022, respectively, and $0 thereafter.
204
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2020
(In thousands except share and per share amount)
7. Accounts payable and accrued expenses
Accounts payable and accrued expenses at December 31, 2020 and 2019 consist of the following:
Employee compensation, benefits, and related accruals
Income tax payable
Consulting and contracted research
Professional fees
Sales allowance
Sales rebates
Royalties
Accounts payable
Other
Total
8. Debt
Liability for sale of future royalties
December 31,
2020
53,291 $
4,315
18,250
3,614
54,327
63,774
16,575
18,665
9,357
242,168 $
2019
38,390
499
12,969
3,562
38,579
29,268
13,729
10,324
11,956
159,276
$
$
In July 2020, the Company entered into the Royalty Purchase Agreement. As RPI’s interest is explicitly limited, the
$650.0 million cash consideration was classified as debt and is recorded as “liability for sale of future royalties-current”
and “liability for sale of future royalties-noncurrent” on the Company’s consolidated balance sheet based on the timing of
the expected payments to be made to RPI. The fair value for the liability for sale of future royalties at the time of the
transaction was based on the Company’s estimates of future royalties expected to be paid to RPI over the life of the
arrangement, which was determined using forecasts from market data sources, which are considered Level 3 inputs. The
liability will be amortized using the effective interest method over the life of the arrangement, in accordance ASC 470 and
ASC 835. The initial annual effective interest rate was determined to be 11.0%. The Company will utilize the prospective
method to account for subsequent changes in the estimated future payments to be made to RPI and will update the effective
interest rate on a quarterly basis. Issuance costs related to the transaction were determined to be immaterial.
The following table shows the activity within the “liability for sale of future royalties- current” and “liability for sale
of future royalties- noncurrent” accounts for the year ended December 31, 2020:
Liability for sale of future royalties- (current and noncurrent)
Beginning balance
Proceeds from sale of future royalties
Less: Non-cash royalty revenue payable to RPI
Plus: Non-cash interest expense recognized
Ending balance
Effective interest rate as of December 31, 2020
Year Ended December 31,
2020
$
$
—
650,000
(2,055)
31,817
679,762
10.4 %
Non-cash interest expense is recorded in the statement of operations within “Interest expense, net”.
205
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2020
(In thousands except share and per share amount)
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 provided 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 capitalized approximately $0.4 million
of debt issuance costs, which were netted against the carrying value of the Credit Facility and were 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.
Borrowings under the Credit Agreement bore interest at a rate per annum equal to LIBOR (with a LIBOR floor rate
of 1.00%) plus 6.15%. The Company was 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 was required to make monthly interest payments and monthly principal payments. The principal payments were
made based on straight-line amortization of the principal over the twenty-four month period. The maturity date of the
Credit Agreement was May 1, 2021, unless terminated earlier.
On July 1, 2020, the Company terminated the Credit Facility. In connection with the termination of the Credit Facility,
the Company repaid outstanding principal of $18.3 million, which was classified as the current portion of long term debt
on the consolidated balance sheet and accrued interest of $0.1 million, which was classified within accrued liabilities on
the consolidated balance sheet, thereunder totaling $18.4 million. The Company paid an additional $0.6 million in
termination and exit fees, which are included as a component of other income, net in the Company’s statement of
operations for the year ended December 31, 2020. All liens and security interests securing the term loan made pursuant to
the Credit Facility were released upon termination.
2026 Convertible Notes
the Company
In September 2019,
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 Notes, which was exercised in full by the initial purchasers. The 2026
Convertible Notes 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 Notes 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 Notes are governed by an indenture (the “2026 Convertible Notes Indenture”) with U.S Bank
National Association as trustee (the “2026 Convertible Notes Trustee”).
Holders of the 2026 Convertible Notes may convert their 2026 Convertible Notes 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
206
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2020
(In thousands except share and per share amount)
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 Notes Indenture) per $1,000 principal amount of 2026
Convertible Notes 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 Notes 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 Notes was initially, and remains, 19.0404 shares of the Company’s
common stock per $1,000 principal amount of the 2026 Convertible Notes, 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 Notes prior to September 20, 2023. The Company may
redeem for cash all or any portion of the 2026 Convertible Notes, 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 the 2026 Convertible Notes to be redeemed, plus accrued and unpaid interest to,
but excluding, the redemption date. No sinking fund is provided for the 2026 Convertible Notes, which means that the
Company is not required to redeem or retire the 2026 Convertible Notes periodically.
If the Company undergoes a “fundamental change” (as defined in the 2026 Convertible Notes Indenture), subject to
certain conditions, holders of the 2026 Convertible Notes may require the Company to repurchase for cash all or part of
their 2026 Convertible Notes at a repurchase price equal to 100% of the principal amount of the 2026 Convertible Notes to
be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.
The 2026 Convertible Notes 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 Notes Indenture contains customary events of default with respect
to the 2026 Convertible Notes, including that upon certain events of default (including the Company’s failure to make any
payment of principal or interest on the 2026 Convertible Notes when due and payable) occurring and continuing, the 2026
207
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2020
(In thousands except share and per share amount)
Convertible Notes Trustee by notice to the Company, or the holders of at least 25% in principal amount of the outstanding
2026 Convertible Notes by notice to the Company and the Convertible Notes Trustee, may, and the 2026 Convertible
Notes Trustee at the request of such holders (subject to the provisions of the 2026 Convertible Notes Indenture) shall,
declare 100% of the principal of and accrued and unpaid interest, if any, on all the 2026 Convertible Notes 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 Notes 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.
The Company accounts for the 2026 Convertible Notes as a liability and equity component where the carrying value
of the liability component will be valued based on a similar instrument. In accounting for the issuance of the 2026
Convertible Notes, the Company separated the 2026 Convertible Notes 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 Notes 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 Notes. 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 Notes was $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 Notes, the Company allocated
the total costs incurred to the liability and equity components of the 2026 Convertible Notes 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 Notes, 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 Notes.
The 2026 Convertible Notes consist of the following:
Liability component
Principal
Less: Debt issuance costs
Less: Debt discount, net(1)
Net carrying amount
2020
$ 287,500
(4,058)
(106,065)
$ 177,377
$
$
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 Notes using the effective interest rate method.
As of December 31, 2020, the remaining contractual life of the 2026 Convertible Notes is approximately 5.7 years.
208
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2020
(In thousands except share and per share amount)
The following table sets forth total interest expense recognized related to the 2026 Convertible Notes:
Year ended
December 31,
Contractual interest expense
Amortization of debt issuance costs
Amortization of debt discount
Total
Effective interest rate of the liability component
2022 Convertible Notes
$
$
2020
4,319
508
13,285
$ 18,112
$
10.2 %
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 Notes 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 Notes 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 Notes are governed by an indenture (the “2022 Convertible Notes Indenture”) with U.S Bank
National Association as trustee (the “2022 Convertible Notes Trustee”).
Holders of the 2022 Convertible Notes may convert their 2022 Convertible Notes 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 Notes Indenture) per $1,000 principal amount of
Convertible Notes 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 Notes 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 Notes to be converted
209
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2020
(In thousands except share and per share amount)
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 Notes being converted.
The conversion rate for the 2022 Convertible Notes was initially, and remains, 17.7487 shares of the Company’s
common stock per $1,000 principal amount of the 2022 Convertible Notes, 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 Notes prior to August 20, 2018. As of August 20,
2018, the Company may redeem for cash all or any portion of the Convertible Notes, 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 the 2022 Convertible Notes to be redeemed, plus accrued and
unpaid interest to, but excluding, the redemption date. No sinking fund is provided for the 2022 Convertible Notes, which
means that the Company is not required to redeem or retire the 2022 Convertible Notes periodically. There have been no
redemptions to date.
If the Company undergoes a “fundamental change” (as defined in the 2022 Convertible Notes Indenture), subject to
certain conditions, holders of the 2022 Convertible Notes may require the Company to repurchase for cash all or part of
their 2022 Convertible Notes at a repurchase price equal to 100% of the principal amount of the 2022 Convertible Notes to
be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.
The 2022 Convertible Notes 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 Notes Indenture contains customary events of default with respect
to the 2022 Convertible Notes, including that upon certain events of default (including the Company’s failure to make any
payment of principal or interest on the 2022 Convertible Notes when due and payable) occurring and continuing, the 2022
Convertible Notes Trustee by notice to the Company, or the holders of at least 25% in principal amount of the outstanding
2022 Convertible Notes by notice to the Company and the Convertible Notes Trustee, may, and the 2022 Convertible
Notes Trustee at the request of such holders (subject to the provisions of the 2022 Convertible Notes Indenture) shall,
declare 100% of the principal of and accrued and unpaid interest, if any, on all the 2022 Convertible Notes 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 Notes 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 Notes, the Company separated the 2022 Convertible Notes 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 Notes 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 Notes. The equity component is not re-measured as long as it continues to meet the conditions for equity
210
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2020
(In thousands except share and per share amount)
classification. The equity component recorded at issuance related to the 2022 Convertible Notes 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 Notes, the Company allocated
the total costs incurred to the liability and equity components of the Convertible Notes 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 Notes, 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 Notes.
The 2022 Convertible Notes consist of the following:
Liability component
Principal
Less: Debt issuance costs
Less: Debt discount, net (1)
Net carrying amount
Year ended
December 31,
2020
150,000 $
(865)
(17,372)
131,763 $
2019
150,000
(1,329)
(26,686)
121,985
$
$
(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 Notes using the effective interest rate method.
As of December 31, 2020, the remaining contractual life of the 2022 Convertible Notes is approximately 1.6 years.
The following table sets forth total interest expense recognized related to the 2022 Convertible Notes:
Year ended
December 31,
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
$
$
$
2020
4,500
464
9,314
14,278
$
11.0 %
2019
4,500
417
8,368
13,285
11.0 %
In April 2018, the Company closed an underwritten public offering of its common stock. The Company issued and
sold an aggregate of 4,600,000 shares of common stock 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.
211
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2020
(In thousands except share and per share amount)
In January 2019, the Company closed an underwritten public offering of its common stock. The Company issued and
sold an aggregate of 7,563,725 shares of common stock 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. 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. The Company issued
and sold an aggregate of 2,475,248 shares of common stock 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.
During the twelve month period ending December 31, 2020, the Company issued and sold an aggregate of 542,470
shares of common stock pursuant to the Sales Agreement at a weighted average public offering price of $53.37 per share.
The Company received net proceeds of $28.1 million after deducting agent discounts and commissions and other offering
expenses payable by the Company. The remaining shares of the Company’s common stock available to be issued and sold,
under the Sales Agreement, have an aggregate offering price of up to $93.0 million as of December 31, 2020.
As a result of the Rights Exchange Agreement, during the twelve month period ended December 31, 2020, the
Company issued 2,821,176 shares of its common stock to Participating Rightholders. The shares had a fair value of
$150.5 million upon issuance.
As a result of the Censa Merger, during the twelve month period ended December 31, 2020, the Company
issued 845,364 shares of the Company’s common stock to Censa securityholders, which were valued at $42.9 million
based on the closing stock price on the acquisition date. The number of shares issued was determined using a 30-day
VWAP pursuant to the Censa Merger Agreement.
As of December 31, 2020, the Company’s number of authorized shares of common stock was 125,000,000.
10. Net loss per share
Basic and diluted net loss per share is computed by dividing net loss available to common stockholders by the
weighted-average number of common shares outstanding. Potentially dilutive securities were excluded from the diluted
calculation because their effect would be anti-dilutive.
212
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2020
(In thousands except share and per share amount)
The following table sets forth the computation of basic and diluted net loss per share for common stockholders:
Numerator
Net loss
Denominator
Denominator for basic and diluted net loss per share
Net loss per share:
Basic and diluted
2020
Year ended December 31,
2019
2018
$
(438,160) $
(251,576) $
(128,081)
66,027,908
58,863,185 46,576,313
$
(6.64) * $
(4.27) * $
(2.75) *
* For the years ended December 31, 2020, 2019, and 2018, 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 awards and units
Total
11. Stock award plan
As of December 31,
2020
9,663,677
982,058
10,645,735
2019
11,043,939
642,419
11,686,358
2018
8,534,358
571,479
9,105,837
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.
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
213
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2020
(In thousands except share and per share amount)
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, 2020, awards for 941,381 shares of common stock were available for issuance under the
2013 Long Term Incentive Plan.
In January 2020, the Company’s Board of Directors approved the 2020 Inducement Stock Incentive Plan. The 2020
Inducement Stock Incentive Plan provides for the grant of incentive stock options, nonstatutory stock options, restricted
stock awards and other stock-based awards, initially up to an aggregate of 1,000,000 shares of common stock. Any grants
made under the 2020 Inducement Stock Incentive Plan must be made pursuant to the Nasdaq Listing Rule 5635(c)(4)
inducement grant exception as a material component of the Company’s new hires’ employment compensation. In
December 2020, the Company’s Board of Directors approved an additional 1,000,000 shares of common stock that may
be issued under the 2020 Inducement Stock Incentive Plan. As of December 31, 2020, awards for 1,186,005 shares of
common stock are available for issuance under the 2020 Inducement Stock Incentive Plan.
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 four-year period.
Inducement stock option awards
Pursuant to the Nasdaq inducement grant exception, during the year ended December 31, 2020, the Company issued
options to purchase an aggregate of 740,350 shares of common stock to certain new hire employees at a weighted-average
exercise price of $51.33 per share. Additionally, during the year ended December 31, 2020, the Company issued 73,645
restricted stock units under the 2020 Inducement Stock Incentive Plan. An aggregate of 357,052 of options previously
granted as inducement awards were forfeited during the year ended December 31, 2020 in connection with employee
separations from the Company.
214
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2020
(In thousands except share and per share amount)
A summary of stock option activity is as follows:
Weighted-
average
exercise
price
Weighted-
average
remaining
contractual
term
Aggregate
intrinsic
value(in
thousands)
Number of
options
Outstanding at December 31, 2017
Granted
Exercised
Forfeited
Outstanding at December 31, 2018
Granted
Exercised
Forfeited
Outstanding at December 31, 2019
Granted
Exercised
Forfeited/Cancelled
Outstanding at December 31, 2020
Vested or Expected to vest at December 31, 2020
Exercisable at December 31, 2020
6,448,642 $
3,181,623 $
(633,973) $
(461,934) $
8,534,358 $
3,977,995 $
(949,887) $
(518,527) $
11,043,939 $
2,777,975 $
(3,268,452) $
(889,785) $
9,663,677 $
4,910,488 $
4,249,063 $
29.00
26.64
18.61
35.36
28.58
35.81
19.25
35.27
31.67
51.06
24.25
42.14
38.72
41.24
35.24
7.37 years $ 218,374
97,320
8.49 years $
5.92 years $ 112,228
The fair values of grants made in the years ended December 31, 2020, 2019 and 2018 were contemporaneously
estimated on the date of grant using the following assumptions:
Risk-free interest rate
Expected volatility
Expected term
2020
2019
0.34% - 1.45% 1.58% - 2.63%
2018
2.25% - 3.10%
64% - 90%
87% - 89%
5.75 years
62% - 92%
5.75 - 6.11 years 5.03 - 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, 2020, 2019 and 2018 was $36.94, $23.05, and $17.48 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.
215
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2020
(In thousands except share and per share amount)
The following table summarizes information on the Company’s restricted stock awards and units:
Unvested at December 31, 2019
Granted
Vested
Forfeited
Unvested at December 31, 2020
Restricted Stock Awards and Units
Weighted
Average
Grant
Date
Fair Value
24.50
51.32
23.87
36.44
41.78
Number of
Shares
642,419 $
663,045 $
(232,975) $
(90,431) $
982,058 $
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
vested annually in equal installments over four years and were settled in cash on each vest date, which required the
Company to remeasure the SARs at each reporting period until vesting occurs. For the period ending December 31,2020,
a total of 132,136 SARS vested. The last payment of the SARS liability was made in the three month period ended March
31, 2020, and accordingly, the balance of the SARS liability as of December 31, 2020 was $0.
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. No
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, 2020, the Company recorded $1.9 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:
Research and development
Selling, general and administrative
Total
2020
38,716 $
31,609
70,325 $
Year ended December 31,
2019
20,836 $
21,298
42,134 $
$
$
2018
16,096
17,156
33,252
216
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2020
(In thousands except share and per share amount)
As of December 31, 2020, there was approximately $159.0 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 2.73 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, 2020, 2019, and 2018, respectively.
Unrealized
Gains
On
Marketable
Securities, net of tax
Foreign
Currency
Translation
Total
Accumulated
Other
Comprehensive
Items
Balance at December 31, 2017
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
Other comprehensive income (loss) before reclassifications
Amounts reclassified from other comprehensive items
Other comprehensive income (loss)
Balance at December 31, 2020
$
$
$
$
22 $
9
—
9
31 $
724
—
724
755 $
1,145
—
1,145
1,900 $
3,947 $
(2,516)
—
(2,516)
1,431 $
(12,770)
—
(12,770)
(11,339) $
(51,518)
—
(51,518)
(62,857) $
3,969
(2,507)
—
(2,507)
1,462
(12,046)
—
(12,046)
(10,584)
(50,373)
—
(50,373)
(60,957)
13. Revenue recognition
Net product sales
The Company views its operations and manages its business in one operating segment. During the twelve months
ended December 31, 2020, 2019, and 2018, net product sales in the United States were $139.0 million, $101.0 million,
and $92.0 million respectively, consisting solely of Emflaza, and net product sales not in the United States were $194.4
million, $190.3 million, and $171.0 million respectively, consisting of Translarna, Tegsedi, and Waylivra. For the twelve
months ended December 31, 2020 and 2019, two of the Company’s distributors each accounted for over 10% of the
Company’s net product sales. For the twelve months ended December 31, 2018, three of the Company’s distributors each
accounted for over 10% of the Company’s net product sales.
The Company’s contract liabilities balances as of December 31, 2020 and 2019 were $4.2 million and $11.7 million,
respectively. The Company did not have any contract assets for the twelve months ended December 31, 2020 and 2019.
During the twelve months ended December 31, 2020 and 2019, the Company recognized revenues of $8.1 million and
$3.9 million, respectively, related to amounts included in contract liability balance at the beginning of each period. The
217
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2020
(In thousands except share and per share amount)
Company has not made significant changes to the judgments made in applying ASC Topic 606 for the twelve months
ended December 31, 2020 and 2019.
Remaining performance obligations
Remaining performance obligations represent the transaction price for goods the Company has yet to provide. As of
December 31, 2020 and 2019, the aggregate amount of transaction price allocated to remaining performance
obligations relating to Translarna net product revenue was $4.2 million and $11.7 million, respectively. The Company
expects to recognize revenue within the next one year, as the specific timing for satisfying the performance obligations is
contingent upon a number of factors, including customers’ needs and schedules.
Collaboration revenue and Royalty revenue
In November 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 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 November 2019, the Company announced the filing of an NDA in the United States, which triggered a $15.0
million payment to the Company from Roche. Under ASC Topic 606, the acceptance of the NDA 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 SMA program currently has one approved product, Evrysdi, which was approved in August 2020 by the FDA for
the treatment of SMA in adults and children two months and older. The first commercial sale of Evrysdi in the United
States was made in August 2020. This event triggered a $20.0 million milestone payment to the Company from Roche. In
August 2020, the EMA accepted the MAA filed by Roche for Evrysdi for the treatment of SMA, which triggered a $15.0
million milestone payment to the Company from Roche. In October 2020, Chugai, a subsidiary of Roche, filed an NDA
in Japan for Evrysdi for the treatment of SMA, which triggered a $7.5 million milestone payment to the Company from
Roche. Under ASC Topic 606, the acceptance of the NDA filing resolved the uncertainty of whether the milestone was
probable of being achieved. The Company recorded the three milestone payments as collaboration revenue for the year
ended December 31, 2020.
218
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2020
(In thousands except share and per share amount)
The remaining potential research and development event milestones that can be received as of December 31, 2020 is
$30.0 million. The remaining potential sales milestones as of December 31, 2020 is $325.0 million upon achievement of
certain sales events.
For the twelve months ended December 31, 2020, 2019, and 2018, the Company recognized revenue related to the
licensing and collaboration agreement with Roche of $42.6 million, $15.2 million, and $0.2 million, respectively.
In addition to research and development and sales milestones, the Company is eligible to receive up to double-digit
royalties on worldwide annual net sales of a commercial product under the SMA License Agreement. For the twelve
months ended December 31, 2020, the Company has recognized $4.8 million of royalty revenue related to Evrysdi. No
royalty revenue was recognized in the years prior, as the first commercial sale of Evrysdi occurred in August 2020.
14. Income taxes
The loss from operations before tax (expense) benefit consisted of the following for the years ended December 31,
2020, 2019, and 2018:
Domestic
Foreign
Total
2019
2020
$ (452,475) $ (231,915) $
2018
(68,461)
(59,649)
$ (402,932) $ (239,926) $ (128,110)
49,543
(8,011)
The Income Tax Provision consisted of the following for the years ended December 31, 2020, 2019 and 2018:
Current:
U.S. Federal
U.S. State and Local
Foreign
Deferred:
U.S. Federal
U.S. State and Local
Foreign
Total tax benefit (expense)
2020
2019
2018
$
— $
(24,984)
(4,372)
— $
(61)
(2,041)
—
(38)
(669)
—
(5,872)
—
(35,228) $
—
(8,812)
(736)
(11,650) $
$
—
—
736
29
219
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2020
(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
Tax rate change
(Accrual) Release of uncertain tax positions
Other
Effective income tax rate
2020
21.00 %
(3.31)
(6.66)
4.93
(26.40)
2.93
0.72
(1.46)
(0.61)
0.12
(8.74) %
December 31,
2019
21.00 %
1.08
(6.17)
4.38
(35.49)
15.89
(1.88)
(3.67)
—
—
(4.86) %
2018
21.00 %
0.05
(6.41)
6.49
2.20
(14.22)
(9.10)
—
—
0.01
0.02 %
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:
Noncurrent deferred income taxes
Liabilities:
Noncurrent deferred income taxes
Deferred income taxes - net
2020
2019
$
— $
—
(136,735)
(130,862)
$ (136,735) $ (130,862)
220
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2020
(In thousands except share and per share amount)
The significant components of the Company’s deferred tax assets and liabilities at December 31, 2020 and 2019 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
Liability for sale of future royalties
Other comprehensive loss
Total gross deferred tax assets
Less valuation allowance
Total deferred tax assets, net of valuation allowance
Deferred tax liabilities:
Depreciation
Convertible debt
Indefinite lived intangible
Total gross deferred tax liabilities
Net deferred tax assets (liabilities)
2020
2019
$
5,528 $
80,677
—
123,405
—
16,999
1,428
—
661
14,612
161,204
7,624
412,138
(379,608)
$
32,530 $
2,588
78,291
991
99,421
6,489
91,010
1,360
1,056
1,274
16,425
—
1,512
300,417
(267,131)
33,286
$
(2,904) $
—
(33,286)
(130,862)
(164,148)
$ (136,735) $ (130,862)
(29,626)
(136,735)
(169,265)
For the year ended December 31, 2020, the Company generated taxable income in the U.S. of $364.1 million which
is primarily attributable to the taxable income from the sale of the Company’s right to receive sales-based royalty payments
on Roche’s worldwide net sales of products, pursuant to the Royalty Purchase Agreement. The Company has not recorded
any federal income tax provision after considering the federal NOL. The Company recorded a state income tax provision
of $25.0 million after considering the state NOL and state tax credits.
At December 31, 2020 and 2019, the Company recorded valuation allowance against its net deferred tax assets of
$379.6 million and $267.1 million, respectively. The change in the valuation allowance during the years ended
December 31, 2020 and 2019 was $112.5 million and $86.7 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, 2020, the Company had $80.9
million and $22.6 million of federal and state 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.
221
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2020
(In thousands except share and per share amount)
As of December 31, 2020, research and development credit carryforward for federal purposes is $15.7 million. In
addition, the Orphan Drug Credit Carryover available as of December 31, 2020 is $107.7 million. The Company’s federal
credit carryforwards began to expire in 2019.
As a result of U.S. tax reform legislation, federal net operating losses generated in 2018 carryforward indefinitely.
State net operating loss carryforwards begin to expire in 2037. 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 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 NOL 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
NOL’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. At December 31, 2020, the Company utilized $364.1 million NOLs of which $97.7
million is the Section 382 NOL. There is $9.5 million available for immediate use and an additional $5.7 million will free
up in 2021.
The income tax expense for the years ended December 31, 2020 and 2019 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 foreign taxes, the impact of
permanent differences, including “global intangible low-taxed income” (“GILTI”), 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, 2020, the Company recorded unrecognized tax benefits in the amount of $2.4 million and
has not accrued any interest or penalties through 2020. 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 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. No other examinations are in process.
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. As of December 31, 2020, for purposes of ASC 740-10-25-3, the
Company had $16.1 million of undistributed earnings from non-U.S. subsidiaries that it intends to reinvest permanently
in its non-U.S. operations. As these ASC 740-10-25-3 earnings are considered permanently reinvested, no tax provision
has been accrued. It is not feasible to estimate the amount of tax that might be payable on the eventual remittance of such
earnings.
222
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2020
(In thousands except share and per share amount)
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, 2018, which resulted in a provisional benefit of $46.1 million
which was offset by an associated change in the valuation allowance.
Uncertain Income Tax Benefits
A reconciliation of the gross amount of unrecognized tax benefits, excluding accrued interest and penalties, is as
follows:
Balance at December 31, 2019
Increase in tax positions for prior years
Balance at December 31, 2020
Unrecognized Tax Benefits
—
2,446
2,446
$
Uncertain tax positions, for which management's assessment is that there is a more than 50% probability of sustaining
the position upon challenge by a taxing authority based upon its technical merits, are subject to certain recognition and
measurement criteria. The nature of the uncertain tax positions is often very complex and subject to change, and the
amounts at issue can be substantial. The Company develops its cumulative probability assessment of the measurement of
uncertain tax positions using internal experience, judgment and assistance from professional advisors. The Company re-
evaluates these uncertain tax positions on a quarterly basis based on a number of factors including, but not limited to,
changes in facts or circumstances, changes in tax law, and effectively settled issues under audit and new audit activity.
Any change in these factors could result in the recognition of a tax benefit or an additional charge to the tax provision.
For the year ended December 31, 2020, the Company recorded $2.4 million of uncertain tax benefits which were
generated in tax years ended December 31, 2019. While it is reasonably possible that a further change in the unrecognized
tax benefits may occur within the next twelve months, the Company is unable to estimate the amount of any such change.
The Company records penalties and tax-related interest expense on unrecognized tax benefits as a component of the
provision for income taxes in the accompanying consolidated statement of operations. The Company has recorded no
interest and penalties related to uncertain tax positions for the years ended December 31, 2020 in the accompanying
consolidated balance sheet. Future changes in the Company’s unrecognized tax benefits will affect the Company’s annual
effective tax rate.
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 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 platform 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
223
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2020
(In thousands except share and per share amount)
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 platform 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, with respect to collaboration products the Company
outlicenses, including Evrysdi, 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 an aggregate of $52.5 million.
Pursuant to the asset purchase agreement ("Asset Purchase Agreement") between the Company and Marathon
Pharmaceuticals, LLC (now known as Complete Pharma Holdings, LLC) (“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 Agilis Merger Agreement with Agilis, Agilis equityholders were previously 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 was required to pay $40.0 million of the development milestone payments upon the passing
of the second anniversary of the closing of the Agilis Merger, regardless of whether the applicable milestones have been
achieved.
Pursuant to the terms of the Rights Exchange Agreement, the Participating Rightholders canceled and forfeited their
rights under the Agilis Merger Agreement to receive (i) $174.0 million, in the aggregate, of potential milestone payments
based on the achievement of certain regulatory milestones and (ii) $37.6 million, in the aggregate, of $40.0 million in
development milestone payments that would have been due upon the passing of the second anniversary of the closing of
the Agilis Merger, regardless of whether the milestones are achieved.
The Rights Exchange Agreement has no effect on the Agilis Merger Agreement other than to provide for the
cancellation and forfeiture of the Participating Rightholders’ rights to receive $211.6 million, in the aggregate, of the
milestone payments described above. As a result, all other rights and obligations under the Agilis Merger Agreement
remain in effect pursuant to their terms, including the Company’s obligation to pay up to an aggregate maximum amount
of $20.0 million upon the achievement of certain development milestones (representing the remaining portion of potential
development milestone payments for which rights were not canceled and forfeited pursuant to the Rights Exchange
Agreement while excluding the remaining $2.4 million milestone payment that was due and paid upon the passing of the
second anniversary of the closing of the Agilis Merger), up to an aggregate maximum amount of $361.0 million upon the
achievement of certain regulatory milestones (representing the remaining portion of potential regulatory milestone
224
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2020
(In thousands except share and per share amount)
payments for which rights were not canceled and forfeited pursuant to the Rights Exchange Agreement), up to a maximum
aggregate amount of $150.0 million upon the achievement of certain net sales milestones and a percentage of annual net
sales for Friedreich ataxia and Angelman syndrome during specified terms, ranging from 2% to 6%, pursuant to the terms
of the Agilis Merger Agreement.
Subject to the terms and conditions of the BioElectron Asset Purchase 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 BioElectron Asset Purchase Agreement, BioElectron may also
become entitled to receive contingent payments based on a percentage of net sales of certain products.
Subject to the terms and conditions of the Censa Merger Agreement, Censa securityholders may become entitled to
receive contingent payments from the Company based on (i) the achievement of certain development and regulatory
milestones up to an aggregate maximum amount of $217.5 million for PTC923’s two most advanced programs and receipt
of a priority review voucher from the FDA as set forth in the Censa Merger Agreement, (ii) $109.0 million in development
and regulatory milestones for each additional indication of PTC923, (iii) the achievement of certain net sales milestones
up to an aggregate maximum amount of $160.0 million, (iv) a percentage of annual net sales during specified terms,
ranging from single to low double digits of the applicable net sales threshold amount, and (v) any sublicense fees paid to
the Company in consideration of any sublicense of Censa’s intellectual property to commercialize PTC923, on a country-
by-country basis, which contingent payment shall equal to a mid-double digit percentage of any such sublicense fees.
Pursuant to the Censa Merger Agreement, the Company has the option to pay the initial $30.0 million development
milestone, for the completion of enrollment of a Phase 3 clinical trial for PTC923 for PKU, if achieved, in cash or shares
of the Company’s common stock.
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 ANVISA, 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 ANVISA. Akcea is also entitled to receive royalty payments subject to
certain terms set forth in the Akcea Collaboration and License Agreement.
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 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.
225
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2020
(In thousands except share and per share amount)
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
United States
Year Ended December 31, 2020
Non-US
Total
$
$
$
2,073,404
32,352
186,396
$
$
$
134,874
1,479
194,370
$
$
$
2,208,278
33,831
380,766
United States
Year Ended December 31, 2019
Non-US
Total
$
$
$
1,508,055
19,656
116,676
$
$
$
115,727
1,893
190,304
$
$
$
1,623,782
21,549
306,980
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%, 100% and 92% matching contribution for up to the first 6% of each contributing employee’s base salary
contributions for the years ended December 31, 2020, 2019 and 2018, respectively. The Company made matching
contributions to the 401(k) plan and recorded expense of approximately $5.3 million, $3.5 million, and $2.2 million for
the years ended December 31, 2020, 2019 and 2018, 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 periods ended
December 31, 2020, 2019, and 2018, milestone payments of $40.9 million, $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, 2020, a milestone payable to Marathon of $14.2 million was recorded on the balance sheet
within accounts payable and accrued expenses.
226
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2020
(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 ANVISA. 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, 2020, 2019, and 2018, the Company recognized amortization
expense of $36.9 million, $27.7 million, and $22.9 million respectively, related to the Emflaza rights, Waylivra, and
Tegsedi intangible assets. The estimated future amortization of the Emflaza rights, Waylivra, and Tegsedi intangible assets
is expected to be as follows:
2021
2022
2023
2024
2025 and thereafter
Total
As of December 31, 2020
42,341
$
42,341
42,341
7,064
4,741
138,828
$
The weighted average remaining amortization period of the definite-lived intangibles as of December 31, 2020 is
3.5 years.
Indefinite-lived intangibles
In connection with the acquisition of the Company’s gene therapy platform from Agilis (Note 3), the Company
acquired rights to PTC-AADC, for the treatment of AADC deficiency. AADC deficiency is a rare CNS 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 FXN gene which causes reduced production of the frataxin protein. Additionally, the gene therapy
platform includes two other programs targeting CNS 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 Agilis
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 Agilis Merger. The Company performed a qualitative annual impairment test for
its indefinite-lived intangible assets as of October 1, 2020 and concluded that no impairment exists as of December 31,
2020.
227
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2020
(In thousands except share and per share amount)
Goodwill
As a result of the Agilis 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 Note 3 for further details. There have
been no changes to the balance of goodwill since the date of the Agilis Merger. Accordingly, the goodwill balance as of
December 31, 2020 and 2019 was $82.3 million. The Company performed an annual impairment test for goodwill as of
October 1, 2020 and concluded that no impairment exists as of December 31, 2020.
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 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 agreement. 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.
228
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2020
(In thousands except share and per share amount)
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 2020 and
2019 are as follows:
March 31
June 30
September 30 December 31
For the quarters ending (1)
2020:
Net product revenue
Collaboration revenue
Royalty revenue
Operating expenses
Loss income from operations
Net loss
Basic and diluted net loss per common share
2019:
Net product revenue
Collaboration revenue
Operating expenses
Loss from operations
Net loss
Basic and diluted net loss per common share
$
$
$
68,196 $
63
—
161,250
(92,991)
(112,687)
(1.81) $
53,054 $
529
122,723
(69,140)
(72,113)
75,239 $
—
—
262,512
(187,273)
(181,427)
82,708 $ 107,258
7,516
35,000
4,090
696
215,238
173,535
(96,374)
(55,131)
(74,354)
(69,692)
(1.08)
(1.03) $
(2.78) $
85,476 $
46
124,280
(38,758)
(41,789)
47
131,891
(60,475)
(59,997)
71,369 $ 81,407
15,052
169,243
(72,784)
(77,677)
(1.37)
(1.06) $
$
(1.29) $
(0.75) $
(1) The amounts were computed independently for each quarter and the sum of the quarters may not total the annual
amounts.
229
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
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, 2020. 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, 2020, 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, 2020. 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, 2020 based on those criteria.
230
The effectiveness of our internal control over financial reporting as of December 31, 2020, 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
No change in our internal control over financial reporting occurred during the year ended December 31, 2020 that has
materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
231
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, 2020, 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, 2020, 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, 2020 and 2019, 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, 2020, and the related notes and our report dated February 25, 2021 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, New Jersey
February 25, 2021
232
Item 9B. Other Information.
None.
233
Item 10. Directors, Executive Officers and Corporate Governance
PART III
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 Nominations”, “Corporate Governance—Board Committees and Audit Committee”, and “Stockholder Proposals
and Nominations for Director” in our Proxy Statement for the 2021 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 Nasdaq 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”, “2020 Director
Compensation”, “Corporate Governance—Risk Oversight” and “Corporate Governance—Compensation Committee
Interlocks and Insider Participation” in our Proxy Statement for the 2021 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 2021 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 2021 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 2021 Annual Meeting of Shareholders is incorporated
in this Annual Report on Form 10-K by reference.
234
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, 2020 and 2019
• Consolidated Statements of Operations for the years ended December 31, 2020, 2019 and 2018
• Consolidated Statements of Comprehensive Loss for the years ended December 31, 2020, 2019 and 2018
• Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2020, 2019 and 2018
• Consolidated Statements of Cash Flows for the years ended December 31, 2020, 2019 and 2018
• Notes 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
Number
Exhibit Index
Description of Exhibit
2.1†† 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)
2.2 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)
2.3† 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)
2.4* 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)
2.5* Agreement and Plan of Merger, dated May 5, 2020, by and among PTC Therapeutics, Inc., Hydro Merger
Sub, Inc., Censa Pharmaceuticals Inc. and, solely in its capacity as securityholder 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 May 6, 2020)
235
Exhibit
Number
Description of Exhibit
3.1 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 No. 333-188657), of the Registrant)
3.2 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 (incorporated by reference to Exhibit 4.1 to the Annual Report on Form
10-K filed by the Registrant on March 2, 2020)
4.2 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 No. 333-188657), of the Registrant)
4.3
4.4
Indenture (including Form of Notes), dated as of August 14, 2015, by and between PTC Therapeutics, Inc.
and U.S. Bank National 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 Notes), dated as of September 20, 2019, by and between PTC Therapeutics,
Inc. and U.S. Bank National 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)
10.1+ 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 No. 333-188657), of the Registrant)
10.2+ Form of Notice 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 No.
333-188657), of the Registrant)
10.3+ Form of Notice of Award for Nonstatutory 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 No.
333-188657), of the Registrant)
10.4+ 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 No. 333-188657),
of the Registrant)
10.5+ 2013 Stock Incentive Plan (incorporated by reference to Exhibit 10.7 to the Registration Statement on Form
S-1, as amended (File No. 333-188657), of the Registrant)
10.6+ 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 No. 333-188657), of the Registrant)
10.7+ Form of Nonstatutory 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 No. 333-188657), of the
Registrant)
10.8+ 2013 Long Term Incentive Plan (incorporated by reference to Exhibit 10.10 to the Registration Statement
on Form S-1, as amended (File No. 333-188657), of the Registrant)
10.9+ 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
No. 333-188657), of the Registrant)
236
Exhibit
Number
Description of Exhibit
10.10+ Form of Nonstatutory 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
No. 333-188657), of the Registrant)
10.11+ Form of Nonqualified Stock Option Agreement Inducement Grant Agreement—2014-2021 (incorporated
by reference to Exhibit 10.14 to the Annual Report on Form 10-K filed by the Registrant on March 2, 2015)
10.12+ Form of Incentive Stock Option Agreement under 2013 Long Term Incentive Plan—2014-2021
(incorporated by reference to Exhibit 10.15 to the Annual Report on Form 10-K filed by the Registrant on
March 2, 2015)
10.13+ Form of Nonstatutory Stock Option Agreement under 2013 Long Term Incentive Plan—2014-2021
(incorporated by reference to Exhibit 10.16 to the Annual Report on Form 10-K filed by the Registrant on
March 2, 2015)
10.14+ Form of Nonstatutory Stock Option Agreement under 2013 Long Term Incentive Plan—Non-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)
10.15+ Form of Restricted Stock Unit Agreement under 2013 Long Term Incentive Plan —2016-2021
(incorporated by reference to Exhibit 10.32 to the Annual Report on Form 10-K filed by the Registrant on
February 29, 2016)
10.16+ Form of Restricted Stock Agreement under 2013 Long Term Incentive Plan —2017-2021 (incorporated by
reference to Exhibit 10.19 to the Annual Report on Form 10-K filed by the Registrant on March 16, 2017)
10.17+ Form of Nonqualified Restricted Stock Award Agreement Inducement Grant Agreement-2018
(incorporated by reference to Exhibit 99.3 to the Registration Statement on Form S-8 (File No. 333-229126),
of the Registrant)
10.18 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
No. 333-188657), of the Registrant)
10.19† License and Collaboration Agreement, dated as of November 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 No. 333-188657), of the Registrant)
10.20† 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 No. 333-188657), of the Registrant)
10.21† 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 No. 333-188657), of the Registrant)
10.22+ 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 No. 333-188657),
of the Registrant)
237
Exhibit
Number
Description of Exhibit
10.23+ 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
No. 333-188657), of the Registrant)
10.24+ Amended and Restated Employment Agreement between the Registrant and Neil Almstead (incorporated
by reference to Exhibit 10.24 to the Registration Statement on Form S-1, as amended (File No. 333-188657),
of the Registrant)
10.25† 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)
10.26† 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)
10.27+ 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)
10.28† Collaborative Research Agreement, dated September 30, 2015, as amended, by and between National
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 November 5, 2018)
10.29† License and Technology Transfer Agreement, dated December 23, 2015, by and among National 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
November 5, 2018)
10.30* License and Technology Transfer Agreement Amendment No. 2, dated December 1, 2019, by and among
National Taiwan University, Professor Wu-Lian (Paul) Hwu and PTC Therapeutics GT, Inc.
10.31† 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 November 5, 2018)
10.32 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)
10.33+ 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)
10.34* 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)
10.35
Irrevocable Standby Letter of Credit, dated September 3, 2019, issued by HSBC Bank USA, N.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)
238
Exhibit
Number
Description of Exhibit
10.36+ 2020 Inducement Stock Incentive Plan (incorporated by reference to Exhibit 99.3 to the Registration
Statement on Form S-8 (File No. 333-235823), of the Registrant)
10.37+ 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 No. 333-235823), of the
Registrant)
10.38+ 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 No. 333-235823),
of the Registrant)
10.39+ Amendment No. 1 to 2020 Inducement Stock Incentive Plan (incorporated by reference to Exhibit 99.3 to
the Registration Statement on Form S-8 (File No. 333-251878), of the Registrant)
10.40* First Amendment to Lease Agreement dated as of October 7, 2019 by and between Bristol-Myers Squibb
Company and PTC Therapeutics, Inc. (incorporated by reference to Exhibit 10.51 to the Annual Report on
Form 10-K filed by the Registrant on March 2, 2020)
10.41* Second Amendment to Lease Agreement dated as of March 25, 2020 by and between Bristol-Myers Squibb
Company and PTC Therapeutics, Inc. (incorporated by reference to Exhibit 10.1 to the Quarterly Report on
Form 10-Q filed by the Registrant on April 30, 2020)
10.42* License Agreement dated as of February 8, 2016, as amended, by and between Shiratori Pharmaceutical
Co. Ltd. and Censa Pharmaceuticals Inc. (incorporated by reference to Exhibit 10.1 to the Quarterly Report
on Form 10-Q filed by the Registrant on August 5, 2020)
10.43* Royalty Purchase Agreement, dated as of July 17, 2020, by and among PTC Therapeutics, Inc., RPI 2019
Intermediate Finance Trust, and, solely for the limited purposes set forth therein, Royalty Pharma PLC
(incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q filed by the Registrant on
August 5, 2020)
10.44+ Employment Agreement, as amended, between the Registrant and Matthew Klein (incorporated by
reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q filed by the Registrant on August 5, 2020)
10.45+ Employment Agreement, as amended, between the Registrant and Eric Pauwels (incorporated by reference
to Exhibit 10.4 to the Quarterly Report on Form 10-Q filed by the Registrant on August 5, 2020)
10.46* Rights Exchange Agreement, by and among PTC Therapeutics, Inc., the Rightholders set forth therein, and,
for the limited purposes set forth therein, Shareholder Representatives Services LLC, dated as of April 29,
2020 (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by the Registrant
on April 30, 2020)
10.47* Collaborative Research Agreement Amendment 5, dated as of January 17, 2020 by and between National
Taiwan University and PTC Therapeutics GT, Inc. (incorporated by reference to Exhibit 10.1 to the
Quarterly Report on Form 10-Q filed by the Registrant on October 29, 2020)
10.48* Collaborative Research Agreement Amendment 6, dated as of May 30, 2020 by and between National
Taiwan University and PTC Therapeutics GT, Inc. (incorporated by reference to Exhibit 10.1 to the
Quarterly Report on Form 10-Q filed by the Registrant on October 29, 2020)
10.49 At the Market Offering Sales Agreement, dated August 7, 2019, among PTC Therapeutics, Inc., Cantor
Fitzgerald & Co. and RBC Capital Markets, LLC (incorporated by reference to Exhibit 1.1 to the Current
Report on Form 8-K filed by the Registrant on August 7, 2019)
239
Exhibit
Number
Description of Exhibit
10.50* Collaborative Research Agreement Amendment 7, dated as of September 14, 2020 by and between National
Taiwan University and PTC Therapeutics GT, Inc.
10.51* Collaborative Research Agreement Amendment 8, dated as of December 5, 2020 by and between National
Taiwan University and PTC Therapeutics GT, Inc.
21.1 Subsidiaries of the Registrant (incorporated by reference to Exhibit 21.1 to the Annual Report on Form
10-K filed by the Registrant on March 2, 2020)
23.1 Consent of Independent Registered Public Accounting Firm
24.1 Power of attorney (included on the signature page to this Form 10-K)
31.1 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
31.2 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
32.1 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
32.2 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.INS
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 as to certain portions, which portions have been omitted and separately filed
with the Securities and Exchange Commission.
† 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.
240
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, New Jersey 07080.
Item 16. Form 10-K Summary
None.
241
SIGNATURES
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.
PTC THERAPEUTICS, INC.
Date: February 25, 2021
By:
/s/ STUART W. PELTZ
Stuart W. Peltz, Ph.D.
Chief Executive Officer
(Principal Executive Officer)
POWER OF ATTORNEY
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: February 25, 2021
Dated: February 25, 2021
Dated: February 25, 2021
Dated: February 25, 2021
Dated: February 25, 2021
Dated: February 25, 2021
/s/ STUART W. PELTZ
Stuart W. Peltz
Chief Executive Officer and Director
/s/ EMILY HILL
Emily Hill
Chief Financial Officer
(Principal Financial Officer)
/s/ CHRISTINE UTTER
Christine Utter
Chief Accounting Officer
(Principal Accounting Officer)
/s/ MICHAEL SCHMERTZLER
Michael Schmertzler
Director
/s/ ALLAN JACOBSON
Allan Jacobson
Director
/s/ STEPHANIE S. OKEY
Stephanie S. Okey
Director
By:
By:
By:
By:
By:
By:
242
Dated: February 25, 2021
Dated: February 25, 2021
Dated: February 25, 2021
Dated: February 25, 2021
Dated: February 25, 2021
By:
By:
By:
By:
By:
/s/ EMMA REEVE
Emma Reeve
Director
/s/ DAVID P. SOUTHWELL
David P. Southwell
Director
/s/ GLENN D. STEELE
Glenn D. Steele
Director
/s/ DAWN SVORONOS
Dawn Svoronos
Director
/s/ JEROME B. ZELDIS
Jerome B. Zeldis
Director
243
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the following Registration Statements:
(1) Registration Statement (Form S-8 No. 333-194323) pertaining to the 2013 Long Term Incentive Plan, and
the Inducement Stock Option Award,
(2) Registration Statement (Form S-8 No. 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 No. 333-203485) pertaining to the Inducement Stock Option Awards
(April 2014 - January 2015),
(4) Registration Statement (Form S-8 No. 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 No. 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 No. 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-8 No. 333-222391) pertaining to the 2013 Long Term Incentive Plan and
the Inducement Stock Option Awards (January 2017 – December 2017),
(8) Registration Statement (Form S-8 No. 333-229126) pertaining to the 2013 Long Term Incentive Plan and
the Inducement Grant Awards (January 2018 – December 2018),
(9) Registration Statement (Form S-8 No. 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,
(10) Registration Statement (Form S-3 No. 333-243712) of PTC Therapeutics Inc.
(11) Registration Statement (Form S-8 No. 333-251878) pertaining to the 2013 Long Term Incentive Plan and
the 2020 Inducement Stock Incentive Plan.
of our reports dated February 25, 2021, 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, 2020.
/s/ Ernst & Young LLP
Iselin, New Jersey
February 25, 2021
Exhibit 31.1
I, Stuart W. Peltz, certify that:
1. I have reviewed this Annual Report on Form 10-K of PTC Therapeutics, Inc.;
CERTIFICATIONS
2. 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;
3. 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;
4. 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) 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;
(b) 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;
(c) 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
(d) 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) 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
(b) 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: February 25, 2021
By: /s/ STUART W. PELTZ
Stuart W. Peltz
Chief Executive Officer
(Principal Executive Officer)
Exhibit 31.2
I, Emily Hill, certify that:
1. I have reviewed this Annual Report on Form 10-K of PTC Therapeutics, Inc.;
CERTIFICATIONS
2. 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;
3. 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;
4. 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) 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;
(b) 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;
(c) 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
(d) 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) 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
(b) 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: February 25, 2021
By: /s/ EMILY HILL
Emily Hill
Chief Financial Officer
(Principal Financial Officer)
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-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, 2020 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: February 25, 2021
By: /s/ STUART W. PELTZ
Stuart W. Peltz
Chief Executive Officer
(Principal Executive Officer)
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-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, 2020 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: February 25, 2021
By:
/s/ EMILY HILL
Emily Hill
Chief Financial Officer
(Principal Financial Officer)
Dawn Svoronos
Former President of
Europe/Canada
Merck
Jerome B. Zeldis,
M.D., Ph.D.
Executive Vice President
and Head of R&D
NexImmune, Inc.
BOARD OF DIRECTORS
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
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
Former Senior
Vice President,
Head of North America,
Rare Diseases &
U.S. General Manager,
Rare Disease Business Unit
Genzyme
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, 2020, 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.
$300
$250
$200
$150
$100
$ 50
$ 0
Dec-14
Dec-15
Dec-16
Dec-17
Dec-18
Dec-19
Dec-20
PTCT
IXIC
NBI
* 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
Dec 31,
2020
PTC Therapeutics, Inc.
(PTCT)
NASDAQ Composite
(IXIC)
NASDAQ Biotechnology
Index (NBI)
$ 100
$ 63
$ 21
$ 32
$ 66
$ 93
$ 118
$ 100
$ 106
$ 114
$ 146
$ 140
$ 189
$ 272
$ 100
$ 111
$ 87
$ 106
$ 95
$ 119
$ 150
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
Timothy 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., M.S., F.A.C.S.
Chief Development Officer
Eric Pauwels
Chief Business Officer
Mark J. Pykett, V.M.D., Ph.D.
Chief Scientific Officer
Martin Rexroad
Chief Culture and Community Officer
Hege Sollie-Zetlmayer
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 Tuesday, June 8th at 9am.
Due to uncertainties of the novel Covid-19
pandemic and health restrictions, please
check 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
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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