TRANSLATING SCIENCE.
Transforming Lives.
2 0 2 2 A N N UA L R E P O RT
Introduction
Shareholder letter
Metrics
A year of firsts
Glossary
Our promise
At PTC, we believe in the pursuit of the impossible.
For nearly 25 years we have been harnessing our
scientific platforms to pioneer breakthrough therapies
to transform lives and deliver more moments that
matter for patients and their families around the world.
Our science
For the last quarter century, we have been a pioneer in the development of breakthrough rare disease
therapies, delivering a number of firsts for patients who previously had no other treatment options.
We’re using our scientific platforms and expertise in translating science to target the underlying causes
of rare diseases, with an ambitious goal of developing at least one new, life-changing therapy every two
to three years.
Our commitment
We design every study, every resource, every breakthrough with patients at the center.
Their challenges are our challenges, and their successes are our successes. We are driven by
our passion to transform lives through new therapies and innovative support programs that
deliver more moments that matter.
Our culture
Our collective belief is that the impossible is within reach. This, coupled with our nimble and
entrepreneurial spirit, powers our pursuit. For us, changing the course of rare diseases isn’t a job,
it is our purpose. At PTC, we work as one to make the impossible possible.
Introduction
Shareholder letter
Metrics
A year of firsts
Glossary
A message to
our shareholders
Matthew B. Klein, M.D., M.S., FACS
Chief Executive Officer
As we mark the 25th anniversary
of PTC Therapeutics in 2023, we
proudly celebrate a quarter century
of bold, transformative science that
has brought more moments that
matter to patients with rare diseases
and their families. Through our
dedication to pioneering innovative
breakthrough rare disease therapies
through clinical development to
enabling global access to our
therapies for patients, PTC has
established itself as an enduring
biopharmaceutical company.
I am proud to share that 2022 was
a successful year for PTC. We
saw PTC revenues grow 30% year-
over-year, with total 2022 revenue
of $698.8 million. The increased
revenue was driven by our Duchenne
muscular dystrophy franchise
consisting of Translarna™ (ataluren)
and Emflaza® (deflazacort). Our
overall Duchenne franchise saw
an impressive 20% year-over-year
growth over 2021. Of note, net
revenues from Emflaza increased a
remarkable 17% growth over 2021,
driven by continued new patient
starts, broad access and continued
focus on high compliance and
lower treatment discontinuations.
Translarna revenues increased
by 22% compared to 2021, which
reflects new patient prescriptions,
high compliance and fewer
discontinuations. We continue to
push forward with our geographic
expansion of Translarna into new
markets in Latin America, Middle
East, Northern Africa and
Asia Pacific.
Along with our Duchenne franchise,
Waylivra® (volanesorsen) and
Tegsedi® (inotersen) in Latin
America have contributed to our
commercial success. The focus we
have had on building the foundation
of these therapies is delivering
results. We have strengthened our
position in Latin America as the
pioneers in rare diseases with our
recent approval in Brazil for the
second indication for Waylivra in
familial partial lipodystrophy (FPL).
This is the first treatment for FPL in
Brazil and the first approval globally
for Waylivra for the FPL indication.
For Tegsedi, we have received our
second group purchase order from
the Brazilian Ministry of Health,
which we expect to fulfill in the
first half of this year. Across the
region, we also continued with our
geographical expansion with MAA
filings for both Tegsedi and Waylivra,
and we continue to support and
grow our patient base through early
access programs.
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1
We are very proud of the approval
of Upstaza™ (eladocagene
exuparvovec) in the European
Union (EU) and Great Britain
for the treatment of aromatic
L-amino acid decarboxylase
(AADC) deficiency for patients 18
months and older. Upstaza is the
first approved disease-modifying
treatment for AADC deficiency, and
the first marketed gene therapy
directly infused into the brain.
We are pleased with the initial
launch of Upstaza following the
approval in the EU. Last year, we
treated commercial patients in
Germany and in France through
an early access program. We
anticipate continued growth in
2023 by treating patients in other
European countries and enabling
cross-border treatment options. To
continue the growth, we will further
focus on geographies outside of
Europe with additional registration
submissions and named patient
programs in Latin America, the
Middle East and Asia Pacific. In
addition, we collected collaboration
and royalty revenue from the global
sales of Evrysdi® (risdiplam), the
first approved small molecule for
the treatment of spinal muscular
atrophy (SMA) discovered through
PTC’s splicing platform.
Introduction
Shareholder letter
Metrics
A year of firsts
Glossary
We are equally excited to make
progress in advancing important
new therapies from our pipeline
to patients in need. We have
multiple promising development
programs focused on treating rare
diseases, from which we’ll have
four important readouts in the
first half of 2023, three of which
are registration-directed studies.
Results from our global Phase 3
trial of sepiapterin in patients with
phenylketonuria (PKU), APHENITY,
are expected in May 2023. There
continues to be high unmet need
among the majority of patients
with PKU, and with newborn
screening and established centers
of excellence, we see this as an
exciting program.
We also have two
registration-directed trials
of vatiquinone, MIT-E and
MOVE-FA, in mitochondrial
disease associated seizures
(MDAS) and Friedreich ataxia
(FA). Both trials are based
on strong scientific rationale
as well as data from several
previous studies in which
we have recorded evidence
of treatment benefit across
key disease endpoints.
Enrollment at our global
sites for our PIVOT-HD study
of PTC518 in Huntington’s
disease (HD) is also ongoing.
Our incredible year, and the
progress we have made, could not
have been possible without the
mission-driven culture at PTC and
the passion of its people. We strive
to foster and maintain a culture
of innovation and dedication to
patients, and we are proud of our
ability to retain that culture even
as PTC has grown. It’s our deep
passion for patients that drives us
to think differently about solutions
and to work collaboratively as “One
PTC.” We are guided by our values
of trust, respect, inclusion and
kindness, which allows us to work
together to reach more patients
and rapidly build our pipeline of
potential products.
We have grown to be a global
company, operating in over 20
offices with a footprint in more
than 50 countries around the
world. It’s this global presence
that naturally supports diversity
and inclusion. Additionally,
fostering and encouraging open
discussions across geographies
and departments allows us to
learn from one another and pushes
us toward making lasting and
impactful change for patients
and our communities. We also
continue to support our talented
employees, giving our team
seriously. Building on and
improving efforts in these areas
is crucially important to our
continued success as a company.
Our focus is on five areas
specifically: Our patients, people,
community, environment and
ethics & governance:
• We partner with more than 200
patient advocacy organizations
to support patients and their
families and to learn from them.
In 2022, PTC announced an
innovative research partnership
with Screen4Care, which allows us
to work alongside 36 international
partners from academia,
industry, and patient advocacy
organizations to find solutions
to shorten the path to
diagnosis and find appropriate
care for rare disease patients
and their families.
• We believe in supporting
our employees individually,
as leaders and as team
members, to be the best
they can be through our
strengths-based culture. We
are committed to investing
in leading-edge systems that
will strengthen and further
develop our people both
professionally and personally.
• Our Culture & Community
team seeks to build strong
communities through
improved relationships,
empathy and the ability
to work with people from
all walks of life. Through
our Employee Resource
Groups (ERGs) and Business
Resource Groups (BRGs),
we aim to cultivate a
supportive environment
led with kindness and
multiple opportunities for
engagement.
• We continuously look for ways
to enhance and ensure our
sustainability efforts are compliant
with environmental requirements
“
We believe in supporting
our employees individually,
as leaders and as team
members, to be the best
they can be through our
strengths-based culture.
”
members the ability to learn and
advance in their careers. We offer
learning, development, benefit,
wellbeing, and support programs
to all employees. We have specific
programs dedicated to enriching
our pipeline of future leaders who
will be capable of leading PTC in its
next quarter century.
Since our founding in 1998, we
have focused on doing the right
thing for our stakeholders, and
now as a global biopharmaceutical
company we take our obligations
related to environmental
stewardship, social responsibility,
and corporate governance
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Introduction
Shareholder letter
Metrics
A year of firsts
Glossary
and regulations and encourage
employee actions which are
environmentally friendly. Our Global
Environmental team works to
engage in initiatives with local and
regional teams to make positive
impacts on our environment both
at work and at home.
• We continue to make
improvements and updates to
ensure our governance is to
the highest legal and ethical
standards. In 2022, we created
a new compliance app and
refreshed our Code of Business
Conduct and Ethics.
Most importantly, we are mission
driven. Patients first, always. Our
deep passion for patients drives us
to think differently about solutions
and to work collaboratively as One
PTC. With our continued focus
on this mission and steadfast
commitment to retaining our
unique culture, I am confident and
optimistic about our company’s
position and the future.
I’m especially hopeful and
enthusiastic about 2023, and
honored to use my skills as a
doctor, scientist and public health
expert to make a bigger impact
by helping to develop therapies
that could help thousands, or even
millions, of people. I couldn’t ask for
a better place to do that than here
at PTC as I take on the role of Chief
Executive Officer. After 25 years as
the company’s founding CEO, Stuart
Peltz announced his retirement
in March of 2023. Thanks to his
tenacious dedication and the hard
work of our employees, that vision
has been a reality. These remarkable
achievements would not have
been possible without the support
and dedication of our incredible
community of advocates, patients,
partners and employees. As the
new CEO, I am extremely proud to
have the opportunity to lead PTC’s
experienced and dedicated team
into its next quarter century as we
advance our pioneering science to
develop valuable and transformative
therapies for children and adults
with unmet medical needs.
Sincerely,
Matthew B. Klein, M.D., M.S., FACS
Chief Executive Officer
Substantial revenue growth from 2021 to 2023
2021
2022
2023
Commercial
Total revenue
Total revenue
Potential future revenues
$539M
$699M
($740M at
CER*)
$940M-$1B
$423M DMD $116M
$507M $203M
$545-565M $395-435M
DMD
Other
* Revenue at Constant Exchange Rates, or CER, represents revenue calculated as if the exchange rates had remained unchanged from average exchange rates in 2021.
CER is a non-GAAP measure. 2022 GAAP total revenue as reported was $698.8M. The impact of foreign currency translation equates to an additional $40.8M of total
revenue for Non-GAAP total revenue at CER of $739.6M.
3
Introduction
Shareholder letter
Metrics
A year of firsts
Glossary
A diverse and robust portfolio to continually create value
PTC is committed to improving the lives of
patients through multiple products that are
making a difference in the lives of patients and
families. We have many promising product
candidates in our pipeline. In our search for
new treatments, we are continually investing in
cutting-edge programs.
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Introduction
Shareholder letter
Metrics
A year of firsts
Glossary
Strong R&D execution and value creation in 2022
Our most noteworthy accomplishments include:
Clinical achievements
Regulatory achievements
Initiation of CARDINALS study for utreloxastat
Initiation of PIVOT-HD study for PTC518
Initiation of SUNRISELMS trial for unesbulin
Completion of Study 041 for Translarna
Completion of FITE-19 study for emvododstat
Completion of enrollment for MIT-E
Achieved European Union
and United Kingdom approval
for Upstaza
Achieved Waylivra approval in
Brazil for the treatment of FPL
Filed type II variation for MAA
for Translarna in EU and
additional global approvals
Substantial pipeline progress planned in 2023:
Q1 2023
Q2 2023
Q3 2023
Q4 2023
Part 1
Part 2
BLA
Submission
DIPG
5
Introduction
Shareholder letter
Metrics
A year of firsts
Glossary
2022: A year of many firsts
For PTC, 2022 was a milestone-reaching, patient-supporting, award-
winning, employee-engaging, community-driven year.
It was also another year of many
firsts. The first approved disease-
modifying treatment for AADC
deficiency, and the first marketed
gene therapy directly infused into
the brain, was approved in Europe
and Great Britain. We also had the
first global regulatory approval
for treatment of familial partial
lipodystrophy (FPL). For the first
time, we were the proud sponsor
of the 2022 IWAS Powerchair
Hockey World Cup tournament. And,
the first cohort of PTC employees
engaged in our Emerging Leaders
program graduated.
Let’s dive into some of the
incredible moments of 2022.
Milestone-reaching
We had several exciting milestones
this year, which helped us to reach
more patients and drive progress in
the pipeline.
We had a busy year across
our clinical pipeline: we shared
topline results from Study 041
of Translarna™ (ataluren) in
patients with nonsense mutation
Duchenne muscular dystrophy
(DMD), we initiated the PIVOT-
HD study to evaluate PTC518 in
patients with Huntington’s disease,
presented preliminary results of
the Phase 1b study of unesbulin
in leiomyosarcoma and made
significant progress in our clinical
trials for PKU, Mitochondrial
Disease Associated Seizures
(MDAS) and Friedreich ataxia (FA).
We also achieved many significant
regulatory milestones. The
marketing authorization by the
European Commission and MHRA
authorization of our innovative gene
therapy, Upstaza™ (eladocagene
exuparvovec) was momentous
for patients and the gene therapy
community.
The U.S. FDA also approved a
label expansion for Evrysdi®
(risdiplam), providing treatment
to even more babies with spinal
muscular atrophy (SMA). Waylivra™
(volanesorsen) was granted
approved for FPL in Brazil, and the
first approval for FPL in the world.
Patient-supporting
Patients are truly at the center of
everything we do at PTC, and this
year, we achieved this mission
through our work with advocacy
organizations, providing resources
for patients and their families and
showcasing patient voices.
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To help support patients and their
families – whether they are just
starting out on their rare disease
journey or already well into it –
we created the education series
Insightful Moments. This year,
we also launched My VIBE: My
Voice is Inspirational, Brave and
Empowering, an audio platform
where the rare disease community
can share their stories. We recorded
patient stories at the myriad
advocacy organization events we
attended this year.
Once again, we were thrilled
to announce recipients of the
STRIVE awards, our program that
provides grants to non-profit patient
advocacy organizations serving the
Duchenne community. This year,
grants funded projects focused
on formal learning, psychological
support, sexuality and skills-based
training for people with Duchenne.
We proudly supported the 2022
IWAS Powerchair Hockey
World Cup, the most important
international competition for
powerchair hockey athletes.
We also acknowledged World
Duchenne Awareness Day by
highlighting inspiring women
in the Duchenne community
Introduction
Shareholder letter
Metrics
A year of firsts
Glossary
and celebrating the day across
the globe. We marked the
third annual AADC Deficiency
Awareness Day and celebrated
this important day together with
AADC advocacy organizations.
Together with Economist
Impact, we commissioned a
report highlighting key policies
for improving care, patient
outcomes and quality of life
of patients in Europe. We also
joined Screen4Care, an innovative
research partnership aimed at
shortening the diagnosis journey
for people living with rare diseases.
Employee-engaging
More firsts: We opened offices in
Japan and Poland, expanding our
global presence to reach more
rare disease patients around the
world. We celebrated the first class
of graduates from the Emerging
Leaders program, a tailor-made
program for PTC, with its core
mission to create a rich pipeline
of future PTC leaders. We are
proud to have achieved a best-in-
class retention rate through our
strong and supportive culture.
This year, we also launched the
second cohort of our Talent
Pipeline Program, a one-year,
immersive, global fellowship aimed
at providing recent graduates
real-world experience in the
biopharmaceutical industry and
related professions.
Community driven
Our Zug, Switzerland team helped
make impactful change for the
environment by planting trees.
In partnership with OneTree
Planted and Almighty Tree this
year, 100 oak trees were planted
to help combat climate change
and prevent biodiversity loss for
generations to come.
Award-winning
We couldn’t highlight our
achievements without
mentioning several awards our
team has received this year.
We were selected as the 2022
Biotechnology Innovator of the
Year by BioTech Breakthrough. Our
Hopewell Manufacturing Center
of Excellence was recognized in
the New Good Neighbor Awards
by the New Jersey Business &
Industry Association (NJBIA). PTC
was recognized a second time as
a Great Place to Work in Brazil,
and in Italy, we received an award
for Excellence of the Year in
Innovation and Biopharmaceutical
Leadership. We were also a finalist
in the Pharma Industry Awards
Ireland in two categories, Biotech
Company of the Year and Supply
Chain Achievement Award.
We are so proud of all
we’ve accomplished in
2022, and look forward
to continuing this
momentum in 2023,
as we celebrate PTC’s
25th anniversary.
PTC’s commitment to corporate
responsibility focuses on five key areas:
our patients, our people, our community,
our environment, and our values.
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5 Introduction
Shareholder letter
Metrics
A year of firsts
Glossary
Glossary
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
neurotransmitter’s dopamine, norepinephrine,
epinephrine, serotonin, and melatonin.
AADC-d 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-d patients.
ALS: Amyotrophic Lateral Sclerosis (ALS)
is a progressive neurodegenerative disease
that affects nerve cells in the brain and
spinal cord. Motor neurons reach from the
brain to the spinal cord and from the spinal
cord to the muscles throughout the body.
The progressive degeneration of the motor
neurons in ALS eventually leads to their
demise. When the motor neurons die, the
ability of the brain to initiate and control
muscle movement is lost. When voluntary
muscle action is progressively affected,
people may lose the ability to speak, eat,
move, and breathe. There is no cure for this
fatal disease.
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 lifelong 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
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.
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.
MDAS: Mitochondrial Disease Associated
Seizures (MDAS) 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
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. Most
patients do not initially respond or are not
well controlled by the standard of care.
SCA-3: Spinocerebellar ataxia type 3
(SCA-3) is a rare, inherited, ataxia (lack
of muscular control) affecting the central
nervous system and characterized by the
slow degeneration of areas of the brain
called the hindbrain. Patients may eventually
become crippled and/or paralyzed but their
intellect remains intact.
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.
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.
FA: Friedreich 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.
8
Form 10-k
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, 2022
or
(cid:1407)
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 (cid:1407)
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 (cid:1407) 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 (cid:1407)
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 (cid:1407)
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
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Accelerated filer
Smaller reporting company
Emerging growth company
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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. (cid:1407)
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 (cid:1407) No (cid:53)
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing
reflect the correction of an error to previously issued financial statements. (cid:401)
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of
the registrant’s executive officers during the relevant recovery period pursuant to §(cid:3031)240.10D-1(b). (cid:401)
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, 2022, the last business day of the registrant’s most recently completed second fiscal quarter, was $2,129,532,394. 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 16, 2023, the registrant had 73,815,144 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 2023 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, 2022.
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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. [Reserved]
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
Item 9C. Disclosures Regarding Foreign Jurisdictions that Prevent Inspections
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
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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:
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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;
expectations with respect to our gene therapy platform, including our ability to commercialize UpstazaTM
(eladocagene exuparvovec) for the treatment of Aromatic L-Amino Acid Decarboxylase, or AADC deficiency,
in the European Economic Area, or EEA, any potential regulatory submissions and potential approvals for our
product candidates, 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 maintain our marketing authorization of TranslarnaTM (ataluren) for the treatment of nonsense
mutation Duchenne muscular dystrophy, or nmDMD, in the 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 utilize results from Study 041 to support a conversion of the conditional marketing authorization
for Translarna for the treatment of nmDMD in the EEA to a standard marketing authorization and to support a
marketing approval for Translarna for the treatment of nmDMD in the United States;
the anticipated period of market exclusivity for Emflaza® (deflazacort) for the treatment of Duchenne muscular
dystrophy in the United States under the Orphan Drug Act of 1983;
our expectations with respect to the commercial status of Evrysdi® (risdiplam) and our program directed against
spinal muscular atrophy in collaboration with F. Hoffmann La Roche Ltd and Hoffmann La Roche Inc. and the
Spinal Muscular Atrophy Foundation and our estimates regarding future revenues from sales-based royalty
payments or the achievement of milestones in that program;
our expectations and the potential financial impact and benefits related to our Collaboration and License
Agreement with a subsidiary of Ionis Pharmaceuticals, Inc. including with respect to the timing of regulatory
approval of Tegsedi® (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 royalty
payments by us based on our potential achievement of certain net sales thresholds;
the timing and scope of our commercialization of our products and product candidates;
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 ability to obtain additional and maintain existing reimbursed named patient and cohort early access programs
for our products on adequate terms, or at all;
1
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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 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 products and product candidates
through alternative means if pricing and reimbursement negotiations in the applicable territory do not have a
positive outcome;
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 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;
the potential receipt of revenues from future sales of our products or product candidates;
our sales, marketing and distribution capabilities and strategy, including the ability of our third-party
manufacturers to manufacture and deliver our products and product candidates in clinically and commercially
sufficient quantities and the ability of distributors to process orders in a timely manner and satisfy their other
obligations to us;
our ability to establish and maintain arrangements for the manufacture of our products and product candidates
that are sufficient to meet clinical trial and commercial launch requirements;
our 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;
our ability to complete any post-marketing requirements imposed by regulatory agencies with respect to our
products;
our expectations with respect to the potential financial impact and benefits of our leased biologics manufacturing
facility and our ability to satisfy our obligations under the terms of the lease agreement for such facility;
our ability to satisfy our obligations under the terms of the credit agreement with funds and other affiliated entities
advised or managed by Blackstone Life Sciences and Blackstone Credit and Wilmington Trust, National
Association, as the administrative agent;
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our ability to satisfy our obligations 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;
(cid:120) 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;
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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
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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.
All website addresses given in this Annual Report on Form 10-K are for information only and are not intended to be
an active link or to incorporate any website information into this document.
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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
(cid:120) 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;
(cid:120) Delays or failures in obtaining regulatory approval would materially impair our commercialization capabilities;
(cid:120) We may not qualify for certain specialized pathways to develop our product candidates or to seek approval;
(cid:120) 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;
(cid:120) Subgroup, retrospective, post-hoc, and certain statistical analyses may not be reliable and typically will not form
the basis for regulatory approval;
(cid:120) We may experience delays or difficulties in the enrollment of patients in our clinical trials;
(cid:120) We may identify serious adverse side effects during the development or further development of any product or
product candidate;
(cid:120) Our products and product candidates may be difficult to manufacture;
(cid:120) 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;
(cid:120) Our products and product candidates may fail to achieve market acceptance in the medical community;
(cid:120) 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;
(cid:120) A substantial portion of our commercial sales currently occurs in territories outside of the United States which
subjects us to additional business risks and laws and regulations, including those governing export restrictions
and economic sanctions;
(cid:120) We face substantial competition;
(cid:120) Our products or product candidates may become subject to unfavorable pricing regulations, third-party
reimbursement practices or healthcare reform initiatives;
(cid:120) 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;
(cid:120) Our credit agreement with funds and other affiliated entities advised or managed by Blackstone Life Sciences
and Blackstone Credit, collectively, Blackstone, may adversely affect our financial condition or restrict future
operations;
(cid:120) We may engage in strategic transactions to acquire assets, businesses, or rights to products, product candidates
or technologies or from collaborations or make investments in other companies or technologies that could harm
our business and dilute our stockholders’ ownership;
(cid:120) Raising additional capital may dilute our stockholders’ ownership, restrict our operation or require us to relinquish
rights to our technologies or product candidates;
(cid:120) We may not be able to comply with applicable laws and regulations for our products or product candidates;
(cid:120) We may not be able to obtain orphan drug exclusivity for our products or product candidates in either the United
States or the EU;
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(cid:120) All pharmaceutical products for which marketing authorization has been granted are subject to extensive and
rigorous regulation;
(cid:120) Failure to obtain and maintain acceptable pricing and reimbursement terms for our products would delay our
commercialization efforts;
(cid:120) Legislative and regulatory changes affecting the pharmaceutical industry or the healthcare system more broadly
may negatively affect our business;
(cid:120) We may fail to properly allocate our resources;
(cid:120) We face risks related to health epidemics and other widespread outbreaks of contagious disease, including
COVID-19;
(cid:120) We contract with third parties for the manufacture and distribution of our products and certain of our product
candidates and these third parties may encounter issues that affect our business;
(cid:120) We rely on third parties to conduct our preclinical and clinical trials and other essential services;
(cid:120) 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;
(cid:120) 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;
(cid:120) We may be subject to product liability and other civil lawsuits;
(cid:120) We may be unable to retain our key executives;
(cid:120) We may encounter difficulties in managing our growth as a company;
(cid:120) We may be unable to obtain or maintain patent protection for our technology and products;
(cid:120) We may become involved in lawsuits to protect or enforce our intellectual property or in connection with
allegations that we are infringing on third party intellectual property rights;
(cid:120) Without patent protection, our marketed products may face generic competition;
(cid:120) We may not obtain or maintain adequate trademark protection for our brand names;
(cid:120) Our rights to develop and commercialize Upstaza and our other gene therapy product candidates are subject, in
part, to the terms and conditions of licenses granted to us by others;
(cid:120) We may not have sufficient cash flow from our business to make payments on our debt; and
(cid:120) The price of our common stock may be volatile and fluctuate substantially.
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Item 1. Business
Overview
PART I
We are a science-driven global biopharmaceutical company focused on the discovery, development and commercialization
of clinically differentiated medicines that provide benefits to patients with rare disorders. Our ability to innovate to identify
new therapies and to globally commercialize products is the foundation that drives investment in a robust and diversified
pipeline of transformative medicines. Our mission is to provide access to best-in-class treatments for patients who have
little to no treatment options. Our strategy is to leverage our strong scientific and clinical expertise and global commercial
infrastructure to bring therapies to patients. We believe that this allows us to maximize value for all of our 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 for rare diseases relating to neurology, metabolism and oncology. The chart and
the disclosure directly below summarizes the status of our clinical-stage programs and commercial products as of the date
of this report, including those with our strategic partners:
(cid:120) 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 Russia
for the treatment of nmDMD in patients aged two years and older. Translarna also has marketing
authorization in Brazil for the treatment of nmDMD in ambulatory patients two years and older and for
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continued treatment of patients that become non-ambulatory. Emflaza is approved in the United States for
the treatment of DMD in patients two years and older.
o UpstazaTM (eladocagene exuparvovec) – Upstaza, a gene therapy for the treatment of Aromatic L-Amino
Decarboxylase, or AADC, deficiency, a rare central nervous system, or CNS, disorder is approved for the
treatment of AADC deficiency for patients 18 months and older within the EEA and the United Kingdom.
We expect to submit a biologics license application, or BLA, for Upstaza for the treatment of AADC
deficiency in the United States to the United States Food and Drug Administration, or FDA, in the first half
of 2023.
o Tegsedi® (inotersen) and Waylivra® (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 a subsidiary of Ionis Pharmaceuticals, Inc.
Tegsedi has received marketing authorization in the United States, European Union, or EU, and Brazil for
the treatment of stage 1 or stage 2 polyneuropathy in adult patients with hereditary transthyretin amyloidosis,
or hATTR amyloidosis. We began to make commercial sales of Tegsedi for the treatment of hATTR
amyloidosis and Waylivra for the treatment of familial chylomicronemia syndrome, or FCS, in Brazil in
2022. Waylivra is also approved in Brazil for the treatment of familial partial lipodystrophy, or FPL.
o Evrysdi® (risdiplam) – Evrysdi, a treatment for spinal muscular atrophy, or SMA, was approved by the FDA
for the treatment of SMA in adults and children of all ages and by the European Commission for the treatment
of 5q SMA in patients two months and older with a clinical diagnosis of SMA Type 1, Type 2 or Type 3 or
with one to four SMN2 copies. Evrysdi has also received marketing authorization for the treatment of SMA
in Brazil and Japan. We expect the EMA to make a regulatory decision on approval for a label expansion for
Evrysdi to include infants under two months old with SMA in 2023. Evrysdi is a product of our SMA program
and our 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.
(cid:120) 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 initiated a Phase 2 study of PTC518
for the treatment of HD in the first quarter of 2022, which consists of an initial 12-week placebo-controlled
phase focused on safety, pharmacology and pharmacodynamic effects followed by a nine-month placebo-
controlled phase focused on PTC518 biomarker effect. Enrollment in the Phase 2 study remains active and
ongoing outside of the United States. Enrollment within the United States is paused as the FDA has requested
additional data to allow the Phase 2 study to proceed; discussions are ongoing with the FDA to allow the
resumption of U.S. enrollment. We expect data from the initial 12-week phase of the Phase 2 study in the
second quarter of 2023.
o Bio-e Platform – The two most advanced molecules in our Bio-e platform are vatiquinone and utreloxastat.
We initiated a registration-directed Phase 2/3 placebo-controlled trial of vatiquinone in children with
mitochondrial disease associated seizures in the third quarter of 2020. We anticipate results from the Phase
2/3 trial to be available in the second quarter of 2023. 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
results from this trial to be available in the second quarter of 2023. We initiated a Phase 2 trial of utreloxastat
for amyotrophic lateral sclerosis, or ALS, in the first quarter of 2022 and enrollment is ongoing.
o Metabolic Platform – The most advanced molecule in our metabolic platform is sepiapterin. We initiated a
registration-directed Phase 3 trial for sepiapterin for phenylketonuria, or PKU, in the third quarter of 2021
and now expect results from Part 2 of this trial to be available in May 2023 as the trial is overenrolled and
additional time is required for the entirety of the primary analysis population to complete the study.
o Gene Therapy Platform – In addition to Upstaza, our gene therapy platform includes an asset targeting
Friedreich ataxia. We continue to work towards initiating a clinical study for this program. Additionally, the
gene therapy platform includes our program targeting Angelman syndrome. We continue to work towards
submitting a filing in support of the first-in-human study for this program.
o Oncology Platform – Unesbulin is our most advanced oncology agent. We initiated a registration-directed
Phase 2/3 trial of unesbulin for the treatment of leiomyosarcoma, or LMS, in the first quarter of 2022 and
enrollment is ongoing. We expect to initiate a registration-directed Phase 2/3 trial of unesbulin for the
treatment of diffuse intrinsic pontine glioma, or DIPG, in the fourth quarter of 2023.
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(cid:120) 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 the National Organization for Rare Diseases 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 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 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 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 2022, the European Commission renewed our marketing authorization, making it effective, unless extended, through
August 5, 2023. In February 2023, we submitted a marketing authorization renewal request to the EMA.
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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. Within
the placebo-controlled trial, Translarna showed a statistically significant treatment benefit across the entire intent to treat
population as assessed by the 6-minute walk test, assessing ambulation and endurance, and in lower-limb muscle function
as assessed by the North Star Ambulatory Assessment, a functional scale designed for boys affected by DMD.
Additionally, Translarna showed a statistically significant treatment benefit across the intent to treat population within the
10-meter run/walk and 4-stair stair climb, each assessing ambulation and burst activity, while also showing a positive trend
in the 4-stair stair descend although not statistically significant. Within the primary analysis group, Translarna
demonstrated a positive trend across all endpoints, however, statistical significance was not achieved. Translarna was also
well tolerated. In September 2022, we submitted a Type II variation to the EMA to support conversion of the conditional
marketing authorization for Translarna to a standard marketing authorization, which included a report on the placebo-
controlled trial of Study 041 and data from the open-label extension. We expect an opinion from the Committee for
Medicinal Products for Human Use, or CHMP, in the first half of 2023.
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 a New Drug
Application, or 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, or CRL, 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 CRL. 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, such
dystrophin data in a new study, Study 045, and announced the results of Study 045 in February 2021. Study 045 did not
meet its pre-specified primary endpoint. In June 2022, we announced top-line results from the placebo-controlled trial of
Study 041. Following this announcement, we submitted a meeting request to the FDA to gain clarity on the regulatory
pathway for a potential re-submission of an NDA for Translarna. The FDA provided initial written feedback that Study
041 does not provide substantial evidence of effectiveness to support NDA re-submission. We recently had an informal
meeting with the FDA, during which we discussed the potential path to an NDA re-submission for Translarna. Based on
the meeting discussion, we plan to request an additional Type C meeting with the FDA in the near future to review the
totality of data collected to date, including dystrophin and other mechanistic data as well as additional analyses that could
support the benefit of Translarna.
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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, in addition to approvals from other countries, 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 decides not to renew or otherwise modifies
or withdraws our marketing authorization in the EEA. 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.
Emflaza has a seven-year exclusive marketing period in the United States for its approved indications, commencing on the
date of FDA approval, under the provisions of the Orphan Drug Act of 1983, or the Orphan Drug Act. See “Item 1.
Business-Government Regulation” for further discussion with respect to marketing protection we rely on.
Upstaza
Upstaza is a gene therapy for the treatment of AADC deficiency, a rare CNS disorder arising from reductions in the enzyme
AADC that results from mutations in the dopa decarboxylase gene. In July 2022, the European Commission approved
Upstaza for the treatment of AADC deficiency for patients 18 months and older within the EEA. In November 2022, the
Medicines and Healthcare Products Regulatory Agency approved Upstaza for the treatment of AADC deficiency for
patients 18 months and older within the United Kingdom. We are also preparing a BLA for Upstaza for the treatment of
AADC deficiency in the United States and we expect to submit a BLA to the FDA in the first half of 2023.
AADC is the enzyme responsible for the conversion of L-dopa to dopamine. Dopamine is a key neurotransmitter that acts
within the striatum (caudate and putamen), a component of the brain’s deep grey matter, to modulate output of neurons
that project to the motor and premotor cortices of the brain that plan and execute normal motor function. Dopamine is
required in the brain for humans to develop and maintain proper motor function.
AADC deficiency is a monogenic disorder of neurotransmitter synthesis that manifests in young children and most
commonly results in profound developmental delay, often seen as complete arrest of motor development. AADC
deficiency generally causes the inability to develop motor control, resulting in breathing, feeding, and swallowing
problems, frequent hospitalizations, and the need for life-long care. On average, patients with AADC deficiency die in the
first decade of life due to profound motor dysfunction and secondary complications such as choking, hypoxia, and
pneumonia. Currently, no treatment options are available for the underlying cause of the disorder, and care is limited to
palliative options with significant burden on caregivers.
The prevalence of AADC deficiency has been estimated to be approximately 5,000 patients worldwide, with a live-birth
incidence of up to 1 in 40,000 worldwide. While several diagnostic tests for AADC deficiency are available, we believe
the condition remains largely undiagnosed or misdiagnosed and may be confused with cerebral palsy.
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Upstaza 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 Upstaza 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 Upstaza 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 Upstaza 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
baseline, at one-year and at five-years after Upstaza 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 Upstaza, 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 Upstaza 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 Upstaza was dyskinesia and these events completely resolved over time. No serious adverse events have
been attributed to Upstaza.
The ongoing clinical trial, AADC-011, is a single-center, open-label trial to assess the efficacy and safety of Upstaza in
patients with AADC deficiency. The primary outcomes for this trial include assessing a change in the PDMS-2 score and
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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 Upstaza in young
patients. In response to the FDA’s request, we provided additional information concerning the use of the commercial
cannula for Upstaza in young patients. In October 2022, we held a type C meeting with the FDA to discuss the details of
a potential submission package for Upstaza. At such meeting, the FDA asked for additional bioanalytical data in support
of comparability between the drug product used in the clinical studies and the commercial drug product. We have
completed these analyses and provided the results to the FDA for review. We expect to submit a BLA to the FDA in the
first half of 2023.
Upstaza 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.
Due to its orphan medicinal product designation by the EMA, we rely on a ten-year exclusive marketing period for Upstaza
in the EEA, which may potentially be extended for two additional years if we receive approval for a pediatric exclusivity
incentive. If Upstaza for the treatment of AADC deficiency receives FDA approval, we expect that Upstaza 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
seven-year Orphan Drug Act exclusivity to commercialize Upstaza in the United States, 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 process.
Tegsedi and Waylivra
In August 2018 we entered into a Collaboration and License Agreement with Akcea Therapeutics, Inc., or Akcea, a
subsidiary of Ionis Pharmaceuticals, Inc., or Ionis, for the commercialization by us of Tegsedi, Waylivra 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-Tegsedi and Waylivra” below for further discussion
with respect to this collaboration and license agreement.
Tegsedi
Tegsedi, a product of Ionis’ 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,
the Brazilian health regulatory authority, 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. We began to make
commercial sales of Tegsedi for the treatment of hATTR amyloidosis in Brazil in the second quarter of 2022 and we
continue to make Tegsedi available in certain other countries within Latin America and the Caribbean 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
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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. In August 2021, ANVISA approved Waylivra as the first treatment for FCS
in Brazil and we began to make commercial sales of Waylivra in Brazil in the third quarter of 2022 while continuing to
make Waylivra available in certain other countries within Latin America and the Caribbean through EAP programs. Our
marketing authorization for Waylivra in Brazil is subject to renewal every five years.
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, we received approval of Waylivra for the treatment of FPL in Brazil in December 2022. FPL is a rare genetic
metabolic disease characterized by selective, progressive loss of body fat (adipose tissue) from various areas of the body
leading to ectopic fat deposition in liver and muscle and development of insulin resistance, diabetes, dyslipidemia and
fatty liver disease. Individuals with FPL often have reduced subcutaneous fat in the arms and legs and the head and trunk
regions may or may not have loss of fat. Conversely, affected individuals may also have excess subcutaneous fat
accumulation in other areas of the body, especially the neck, face and intra-abdominal regions.
Evrysdi
Evrysdi was approved by the FDA in August 2020 for the treatment of SMA in adults and children two months and older
and by the European Commission in March 2021 for the treatment of 5q SMA in patients two months and older with a
clinical diagnosis of SMA Type 1, Type 2 or Type 3 or with one to four SMN2 copies. Evrysdi also received marketing
authorization for the treatment of SMA in Brazil in October 2020 and Japan in June 2021. In May 2022, the FDA approved
a label expansion for Evrysdi to include infants under two months old with SMA and we expect the EMA to make a
regulatory decision on approval for a label expansion for Evrysdi to include infants under two months old with SMA in
the 2023. Evrysdi is a product of our SMA program and our collaboration with Roche and the SMA Foundation. For
additional information, see “Item 1. Business – Our Collaborations, License Agreements and Funding Arrangements –
Roche and the SMA Foundation.”
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
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infants and toddlers. Approximately 1 in 10,000 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, 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.
Diversified Development Pipeline
Our pipeline has a number of development programs in the clinical stages. These include splicing, Bio-e, metabolic, gene
therapy and oncology programs 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
disease-modifying therapies approved to delay the onset or slow the progression of HD. We believe that there are
approximately 135,000 HD patients globally. 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. We announced the results from our Phase 1 study of PTC518 in healthy volunteers in September 2021
demonstrating dose-dependent lowering of huntingtin messenger ribonucleic acid and protein levels, that PTC518
efficiently crosses blood brain barrier at significant levels and that PTC518 was well tolerated. We initiated a Phase 2
study of PTC518 for the treatment of HD in the first quarter of 2022, which consists of an initial 12-week placebo-
controlled phase focused on safety, pharmacology and pharmacodynamic effects followed by a nine-month placebo-
controlled phase focused on PTC518 biomarker effect. Enrollment in the Phase 2 study remains active and ongoing outside
of the United States. Enrollment within the United States is paused as the FDA has requested additional data to allow the
Phase 2 study to proceed; discussions are ongoing with the FDA to allow the resumption of U.S. enrollment. We expect
data from the initial 12-week phase of the Phase 2 study in the second quarter of 2023.
Our splicing platform clinical development program also includes several studies evaluating Evrysdi in a broad SMA
patient population covering the ages from newborns to 60 years old that remain ongoing. In addition to the Firefish
(infantile onset SMA; age at enrollment of one to seven months) and Sunfish (later onset SMA; age at enrollment of two
to 25 years) studies that established the safety profile of Evrysdi, the 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) studies may potentially be used to support future applications for label extensions.
an
the
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. Updated two-year results were presented in October 2022 at the World Muscle conference demonstrating an
overall stabilization in the mean score of exploratory efficacy outcomes from baseline to Month 24. 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,
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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 has completed recruitment. Interim data from Rainbowfish showed
that 80 percent of pre-symptomatic infants with SMA treated with Evrysdi for at least 12 months achieved motor
milestones such as sitting without support, rolling, crawling, standing unaided, and walking independently.
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 2/3 randomized, placebo-controlled trial of vatiquinone in approximately 60 children with
mitochondrial disease associated seizures, called MIT-E. We have completed enrollment in this trial after previously
experiencing delays in enrollment due to the COVID-19 pandemic. All subjects were followed for one month to ensure a
baseline seizure frequency, and have been randomized to receive vatiquinone or placebo for six months. We anticipate
results from the Phase 2/3 trial to be available in the second quarter of 2023. Mitochondrial disease associated seizures is
a highly morbid condition of refractory seizures in patients with inherited mitochondrial disease. We estimate that there
are approximately 20,000 patients with mitochondrial disease associated seizures globally. 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 120 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 have
completed enrollment for the MOVE-FA trial and we anticipate results to be available in the second quarter of 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 utreloxastat, a small molecule orally bioavailable compound that
targets 15-LO and is in development for the potential treatment of adult CNS patients. In the third quarter of 2021, we
completed a Phase 1 trial in healthy volunteers to evaluate the safety and pharmacology of utreloxastat. Utreloxastat was
found to be well-tolerated with no reported serious adverse events while demonstrating predictable pharmacology. We
initiated a Phase 2 trial of utreloxastat for ALS in the first quarter of 2022 and enrollment is ongoing. ALS is a rapidly
progressing neurodegenerative disease caused by oxidative damage which leads to neuronal cell death and muscular
atrophy. We believe that there are approximately 150,000 ALS patients globally.
Metabolic Platform
Our metabolic platform seeks to identify potential treatments for metabolic disorders. The most advanced molecule in our
metabolic platform is sepiapterin, a precursor to intracellular tetrahydrobiopterin, which is a critical enzymatic cofactor
involved in metabolism and synthesis of numerous metabolic products. Sepiapterin has been pursued as a possible
treatment for orphan metabolic diseases associated with defects in the tetrahydrobiopterin biochemical pathways, including
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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 58,000 PKU patients globally. In December 2019,
it was announced that the Phase 2 trial for sepiapterin 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 initiated a registration-directed Phase 3 trial for sepiapterin for PKU in the third
quarter of 2021 with the primary endpoint in the study of achieving statistically-significant reduction in blood Phe level.
The primary analysis population includes those patients who have a greater than 30% reduction in blood Phe levels during
the Part 1 run-in phase of the trial. In January 2023, we announced preliminary data from the Part 1 run-in phase of this
trial, including that the mean reduction in blood Phe levels in an initial cohort of subjects during the Part 1 would be
recognized as clinically meaningful if maintained in Part 2 of the trial. We now expect results from Part 2 of this trial to
be available in May 2023 as the trial is overenrolled and additional time is required for the entirety of the primary analysis
population to complete the study.
Gene Therapy Platform
Our gene therapy platform focuses on the development of innovative therapies for rare, debilitating diseases of the CNS.
In addition to Upstaza, our gene therapy platform includes an asset targeting Friedreich ataxia continues to undergo
preclinical studies. We continue to work towards initiating a clinical study for this program. Additionally, the gene therapy
platform includes our program targeting 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.
Oncology Platform
Unesbulin is our most advanced oncology agent. Unesbulin 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
unesbulin in a Phase 1 multi-center study in patients with advanced solid tumors. Unesbulin is also being evaluated in
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 unesbulin had synergistic effects in
combination with dacarbazine. Approximately 4,000 patients are diagnosed with LMS annually in the United States. We
completed a Phase 1 dose escalation study of unesbulin for LMS in the fourth quarter of 2021. Unesbulin in combination
with dacarbazine was found to be well-tolerated and a dose was selected for subsequent trials. We initiated a registration-
directed Phase 2/3 trial of unesbulin for the treatment of LMS in the first quarter of 2022 and enrollment is ongoing.
We are also assessing unesbulin for the treatment of DIPG. 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. We
completed a Phase 1 dose-escalation trial in DIPG patients in the fourth quarter of 2021. The initiation of our registration-
directed Phase 2 trial of unesbulin for DIPG was delayed as we continued to track the progress of patients in our Phase 1
trial and analyze the corresponding data. We now expect to initiate a registration-directed Phase 2/3 trial of unesbulin for
the treatment of DIPG in the fourth quarter of 2023.
While we have decided to deprioritize the emvododstat program for the treatment of acute myeloid leukemia, or AML, we
are exploring other potential treatments for AML as part of our oncology platform.
We received grant funding of $5.4 million for our oncology platform from the Wellcome Trust. To the extent that we
develop and commercialize certain 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. During the year ended December 31, 2022, we incurred
$2.5 million of development milestones in connection with the enrollment of patients in the registration-directed Phase
2/3 trial of unesbulin for the treatment of LMS, which is recorded in other long-term liabilities on the balance sheet and
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will be payable 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 milestone payments of up to an aggregate of $14.5 million
may become payable by us to Wellcome Trust under this agreement. For additional information, see “Item 1. Business –
Our Collaborations and Funding Arrangements.”
As part of our continuous portfolio review, we have decided to deprioritize our program for emvododstat for the treatment
of COVID-19.
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. In September 2022, as part of our specific obligation, we submitted a report on Stage 1 and data
from Stage 2 in connection with a Type II variation to the EMA to support conversion of the conditional marketing
authorization for Translarna to a standard marketing authorization.
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
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was to 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 did not qualify for inclusion in the mITT were 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 was
analyzed as a secondary endpoint for both the mITT and ITT populations at the end of Stage 1 and will also be analyzed
at the end of Stage 2. A separate analysis evaluates 10-meter run/walk results in participants with a baseline 6MWD below
300 meters. An additional analysis evaluates a composite endpoint of average change in times to run/walk 10 meters, climb
4 stairs, and descend 4 stairs. We 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, serves as an additional secondary objective.
NSAA scores were analyzed as secondary endpoints for both the mITT and ITT populations at the end of Stage 1 and will
also be analyzed as at the end of 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 also assess the risk of loss of
NSAA items over 72 weeks and 144 weeks.
The safety profile of Translarna has been evaluated throughout Stage 1 and will continue to be evaluated for Stage 2 as a
secondary objective.
Certain exploratory endpoints are also assessed in Study 041. In patients aged 7 years and above, change from baseline in
upper limb function is assessed using both functional testing and parent/caregiver-reported questionnaires. In patients
under 7 years of age, muscle strength is assessed by change from baseline in myometry parameters. At pre-qualified sites
only, magnetic resonance imaging are used to assess change from baseline in muscle fat fraction. The effects of Translarna
on pulmonary function are assessed by change from baseline in forced vital capacity. In addition, subject- and
parent/caregiver-reported questionnaires and at-home diaries are assessed to evaluate the effect of Translarna on health-
related quality of life (HRQL) changes from baseline.
Stratification. In Stage 1, participants were randomized 1:1 to placebo or Translarna (10, 10, 20 mg/kg). The randomization
was stratified based on type of concomitant corticosteroid used at baseline (deflazacort versus prednisone/prednisolone),
maximum of the two valid 6-minute walk tests performed at baseline day 1 and day 2 (<300 meters versus (cid:149)300 to <350
meters, versus (cid:149)350 to <400 meters, versus (cid:149)400 meters), and time to stand from supine at baseline (<5 seconds versus (cid:149)5
seconds).
Results. In June 2022, we announced top-line results from Stage 1. Within Stage 1, Translarna showed a statistically
significant treatment benefit across the entire ITT population as assessed by the 6MWT as assessed by the NSAA.
Additionally, Translarna showed a statistically significant treatment benefit across the ITT population within the 10-meter
run/walk and 4-stair stair climb, while also showing a positive trend in the 4-stair stair descend although not statistically
significant. Within the mITT population, Translarna demonstrated a positive trend across all endpoints, however, statistical
significance was not achieved. Translarna was also well tolerated.
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.
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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, Study 016, involving patients who participated in ACT DMD is also ongoing, across
multiple sites in the United States and Canada with patients on commercial supply. We ended the two open label extension
trials involving patients who had participated in our prior trials for nmDMD and have transitioned U.S. and Canadian
patients from these trials to Study 016 while other patients have transitioned to commercial supply via commercial
pathways or EAP programs.
Completed clinical trials of Translarna in nonsense mutation Duchenne muscular dystrophy
Phase 2 pediatric study
As part of our pediatric development commitments under our marketing authorization in the EEA and to support the
potential expansion of the Translarna label to younger patients with nmDMD, we initiated a Phase 2 pediatric clinical
study to evaluate the safety and pharmacokinetics of Translarna in patients two to five years of age. The study, initiated in
June 2016, included a four-week screening period, a four-week study period, and a 48-week extension period for patients
who complete the four-week study period (52 weeks total treatment). In July 2018, the EMA approved a label-extension
request to our marketing authorization for Translarna in the EEA to include patients from two to up to five years of age,
based on data from this study.
Phase 3 clinical trial of Translarna for nmDMD (ACT DMD)
In October 2015, we announced results from ACT DMD, also referred to as Study 020, our Phase 3, double-blind, placebo-
controlled, 48-week clinical trial to evaluate the safety and efficacy of Translarna in patients with nmDMD. ACT DMD
involved 228 patients at 53 sites across 18 countries.
In the overall intent-to-treat, or ITT, study population, the primary endpoint of change from baseline at week 48 in the
6MWT, showed a 15 meter benefit in favor of Translarna, which did not meet statistical significance.
A summary of the safety and efficacy results from ACT DMD is outlined below.
Safety and tolerability. The results of ACT DMD confirmed the favorable safety profile of Translarna seen in our
48-week, 174-patient Phase 2b double-blind, placebo controlled clinical trial evaluating the long-term safety and efficacy
of Translarna in patients with nmDMD completed in 2009, or the Phase 2b trial.
Translarna was generally well tolerated at both dose levels in our Phase 2b clinical trial. There were no study
discontinuations due to adverse events. Most treatment-emergent adverse events were mild or moderate in severity.
Investigators’ attributions of drug-related adverse effects were generally similar across the placebo and Translarna arms.
The most common adverse events in this trial were vomiting (46.6% overall), headache (29.3%), diarrhea (24.1%),
nasopharyngitis (20.7%), fever (19.0%), cough (19.0%) and upper abdominal pain (17.8%). These events were generally
balanced across treatment arms and are typical of pediatric illnesses. Adverse events with at least a 10% incidence in any
treatment arm that were seen with increased frequency from the placebo group to the Translarna 40 mg dose group to the
Translarna 80 mg dose group were nausea (12.3% for placebo, 14.0% for the Translarna 40 mg group and 16.7% for the
Translarna 80 mg group), abdominal pain (7.0% for placebo, 12.3% for the Translarna 40 mg group and 16.7% for the
Translarna 80 mg group), pain in extremity (10.5% for placebo, 12.3% for the Translarna 40 mg group and 13.3% for the
Translarna 80 mg group), flatulence (7.0% for placebo, 8.8% for the Translarna 40 mg group and 11.7% for the Translarna
80 mg group) and nasal congestion (7.0% for placebo, 8.8% for the Translarna 40 mg group and 10.0% for the Translarna
80 mg group). There were no serious adverse events observed during the trial that were considered possibly or probably
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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 (cid:149)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)% 10,3(89.6)% 20,4(88.7)%
54 (47.0)% 6,1(53.0)% 11,5(50.0)%
37 (32.2)% 3,5(30.4)% 7,2(31.3)%
167(.0)%
—
9 (7.8)%
—
76(.1)%
—
47 (40.9)% 4,4(38.3)% 9,1(39.6)%
30 (26.1)% 2,0(17.4)% 5,0(21.7)%
18 (15.7)% 2,7(23.5)% 4,5(19.6)%
187(.8)%
20(.9)%
83(.5)%
—
6 (5.2)% 1,2(10.4)%
10(.9)%
1 (0.9)%
43(.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.
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.
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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
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.
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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, “Subgroup, retrospective, post-hoc, and certain statistical analyses may not be reliable and
typically will not form the basis for regulatory approval.”
Participation Criteria and Stratification. Certain key inclusion criteria were specified in the ACT DMD trial protocol for
enrollment: the patient had to be 7 through 16 years of age; at the screening visit the patient had to be able to walk no more
than 80% of predicted 6MWD compared to healthy boys matched for age and height, but had to be able to walk at least
150 meters during the 6MWT; and the patient must have used systemic corticosteroids for a minimum of six months prior
to start of treatment. The ACT DMD trial protocol provided for the exclusion of patients from the trial if, among other
things, they recently used systemic aminoglycoside antibiotics, recently initiated or changed corticosteroid therapy or
previously received Translarna treatment. Patients enrolled in ACT DMD underwent 48 weeks of blinded treatment prior
to the final analysis and the randomization was stratified based on age (<9 years versus (cid:149)9), baseline 6MWD (<350 versus
(cid:149)350 meters), and duration of prior use of corticosteroids (<12 months versus (cid:149)12 months).
Study 045
In the fourth quarter of 2018, following the FDA’s recommendation to collect dystrophin data using validated
quantification methods, we initiated Study 045, a Phase 2 open label clinical study of 20 boys with nmDMD from ages
two to seven, to evaluate the ability of ataluren to increase dystrophin protein levels in boys with nmDMD. 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
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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.
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
We use multiple drug discovery platforms to discover and develop therapies to target diseases with high-unmet need.
Intervening at DNA, RNA and energy production pathways are post-transcriptional control processes, which are the events
that occur in a cell following the transcription of DNA into RNA. These processes regulate, for example, how long RNA
molecules exist in the cell, how precursor messenger RNA, or pre-mRNA, molecules are processed (spliced), and how
efficiently mRNA molecules are translated into proteins. Additionally, 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.
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
23
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
exons through a process called alternative splicing which results in mature mRNA that encodes different, related proteins.
Splicing can be therapeutically targeted, in many human diseases, including SMA, Huntington’s disease, muscular
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 our knowledge of the mechanism of splicing and how small molecules interact
with the cellular splicing machinery, we have identified additional small molecule drug candidates 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 many therapeutic areas.
Nonsense suppression
The protein coding region of mRNA contains the information for the amino acid sequence of the protein product,
Additionally, certain sequences in the mRNA encode signals to start protein production and others to stop protein
production. Mutations in DNA can result in stop signals within the mRNA that cause protein production to be stopped
prematurely. These are termed premature stop codons.
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 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.
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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
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.
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, a license agreement with
National Taiwan University, or NTU, for Upstaza, 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 sepiapterin. We also have received grant funding from Wellcome Trust pursuant to funding
agreements under which we have continuing obligations.
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
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
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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. 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.
As of December 31, 2022, we had recognized a total of $210.0 million in milestone payments and $172.9 million royalties
on net sales pursuant to the SMA License Agreement. As of December 31, 2022, there are no remaining development and
regulatory event milestones that we can receive. The remaining potential sales milestones as of December 31, 2022 are
$250.0 million upon achievement of certain sales events.
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.
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. Since inception, the SMA Foundation has earned $28.5 million, $24.5 million which was paid and
$4.0 million which was accrued as of December 31, 2022. 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
Overview. Pursuant to the license and technology transfer agreement, originally entered into between Agilis
Biotherapeutics, Inc., or Agilis, NTU and Professor Wuh-Liang (Paul) Hwu, in December 2015, or 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 Upstaza for the treatment of
AADC deficiency, under the NTU Collaboration Agreement (as defined below), 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 Upstaza for the treatment of AADC deficiency, either by
the FDA or by the EMA, by December 31, 2024. In July 2022, the European Commission approved Upstaza for the
treatment of AADC deficiency for patients 18 months and older within the EEA, satisfying that obligation.
Funding Obligations. NTU received a lump sum of $100,000 upon execution of the NTU Licensing Agreement, as well
as $2.0 million milestones payments based on the achievement of certain clinical and regulatory milestones, including
$1.2 million that became due and payable in July 2022 upon the European Commission’s approval of Upstaza for the
treatment of AADC deficiency. Additionally, NTU will be entitled to receive contingent payments from us based on
(i) annual license maintenance fees, (ii) a low double-digit percentage royalty of annual net sales of Licensed Products,
and (iii) 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
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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 Upstaza 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 Upstaza 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.
We are also a party to collaborative research agreements with NTU, or the NTU Collaboration Agreements, that govern
the collaboration between us and NTU with respect to the research and clinical trials for AADC deficiency gene therapy.
NTU is responsible for performing the research and clinical trials and we are responsible for providing related funding.
As of December 31, 2022, an aggregate amount of $3.2 million in funding payments has been paid to NTU pursuant to
the NTU Collaboration Agreements.
Tegsedi and Waylivra
Overview. PTC Therapeutics International Limited, our subsidiary, entered into a Collaboration and License Agreement,
or the Tegsedi-Waylivra Agreement, dated August 1, 2018 by and between us and 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 Tegsedi-Waylivra 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 Tegsedi-Waylivra Agreement, Akcea has granted to us an exclusive right and
license, with the right to grant certain sublicenses, under Akcea’s product-specific intellectual property to develop,
manufacture and commercialize the Products in the PTC Territory. In addition, Akcea has granted to us a non-exclusive
right and license, with the right to grant certain sublicenses, under Akcea’s core intellectual property and manufacturing
intellectual property to develop, manufacture and commercialize the Products in the PTC Territory and to manufacture the
Products worldwide in accordance with a supply agreement with Akcea. Akcea has in-licensed certain of the Akcea
intellectual property from its 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 Tegsedi-Waylivra 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 was 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 and an
additional $4.0 million upon our receipt of marketing authorization from ANVISA in August 2021 for the treatment of
FCS. 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 Tegsedi-Waylivra 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 Tegsedi-Waylivra 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
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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 Tegsedi-Waylivra 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 Tegsedi-Waylivra 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 Pharmaceuticals, Inc., or 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 sepiapterin, 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 followed by an
obligation to pay a reduced royalty rate for a specified period of time thereafter. 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.
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 certain small molecule
compounds under our oncology platform, including unesbulin. 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 unesbulin (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
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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 certain 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. During the year ended December 31, 2022, we incurred $2.5 million of development milestones in
connection with the enrollment of patients in the registration-directed Phase 2/3 trial of unesbulin for the treatment of
LMS, which is recorded in other long-term liabilities on the balance sheet. Additional milestone payments of up to an
aggregate of $14.5 million may become payable by us to Wellcome Trust under this agreement.
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
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.
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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.
In addition to the upfront consideration paid to Marathon upon the closing of the Emflaza transaction, 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, subject to the terms and conditions of the Emflaza Asset Purchase
Agreement. In 2022, we paid Marathon a single $50.0 million sales-based milestone in accordance with 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.
In addition to the upfront consideration paid to Agilis equityholders upon 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.
As of December 31, 2022, we have paid former equity holders of Agilis a total of $52.4 million in connection with the
achievement of 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
$311.0 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. In October 2022, we paid the former Agilis equityholders $50.0 million in regulatory milestone payments as
a result of the European Commission’s marketing approval of Upstaza for the treatment of AADC deficiency in July 2022.
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We expect to pay the former Agilis equityholders an additional $20.0 million upon the acceptance for filing by the FDA
of a BLA for Upstaza for the treatment of AADC deficiency, which we expect to occur in the first half of 2023.
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.
In addition to the upfront consideration paid to BioElectron upon the closing of the asset acquisition, 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.
In addition to the upfront consideration paid to the Censa securityholders upon the closing of the Censa Merger, 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 sepiapterin’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 million in development and regulatory milestones for each additional indication
of sepiapterin, (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 sepiapterin, on a country-by-country basis, which contingent payment will equal to
a mid-double digit percentage of any such sublicense fees. In February 2023, we completed enrollment of our Phase 3
placebo-controlled clinical trial for sepiapterin for PKU. In connection with this event, we are obligated to pay a $30.0
million development milestone to the former Censa securityholders, which we have the option to pay in cash or shares of
our common stock. We also expect to make additional payments to the former Censa securityholders of $50.0 million in
the aggregate upon the potential achievement in 2023 of certain development and regulatory milestones relating to
sepiapterin.
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, 2023, our patent portfolio included a total of 143 active U.S. patents and 63 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
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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 include 42 issued U.S. patents relating to composition of matter, methods
of use, formulations, dosing regimens and methods of manufacture and multiple pending U.S. patent applications relating
to 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 expected
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. Our patent rights relating to ataluren 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 15 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 co-owned by us and Roche include 4 issued U.S. patents relating to composition of
matter, methods of use, and methods of manufacture and pending U.S. patent applications. 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 co-own 2
European patents relating to composition of matter, and uses of risdiplam. 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 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.
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 have obtained SPCs or expect to obtain SPCs in all applicable
European countries. 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 to commercialize Emflaza in the United States. See “Item 1. Business-Government
Regulation” for further information regarding the exclusivity periods that we expect to rely on.
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We rely on orphan drug exclusivity in the EEA for Upstaza for the treatment of AADC deficiency. If Upstaza 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 Upstaza in the United States. If approved elsewhere, we expect to rely on orphan drug exclusivity
in other countries or regions where such exclusivity is available. See “Item 1. Business-Government Regulation” for
further information regarding the exclusivity periods that we expect to rely on.
We may rely, in some circumstances, on trade secrets to protect our technology. However, trade secrets can be difficult to
protect. We seek to protect our proprietary technology and processes, in part, 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.
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 Upstaza. For a further discussion
of the material agreements relating to our in-licensing of Upstaza 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
Other than as described below with respect to certain of our gene therapy product candidates, 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.
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 most of 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
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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 for use 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 automatic renewal provision subject to the termination rights of each
party. We expect to fulfill all of our requirements for Emflaza suspension product pursuant to the other agreement. Through
the seventh year anniversary of FDA approval of Emflaza, we are obligated to pay to the manufacturer of the Emflaza
suspension product royalty payments, on a quarterly basis, based on a percentage (ranging from low to middle-low double
digits) of, or a fixed payment with respect to, our annual net sales of suspension product in the United States, subject to
reduction in accordance with the terms of the agreement. The royalty payments for the suspension product are subject to
a minimum aggregate annual payment ranging from €0.5 million to €1.5 million per year.
If our drug substance provider or either of our drug product manufacturers was to be unable to provide drug substance or
manufacture Emflaza product in sufficient quantities to meet projected demand, future sales could be adversely affected,
which in turn could have a detrimental impact on our ability to maintain our marketing authorization in the United States
and on our ability to commercialize Emflaza, which in turn would have a material adverse effect on our business, financial
results and results of operations. Further, as we presently have no patent rights to protect the approved use of Emflaza, we
rely on market exclusivity periods available to us under the Orphan Drug 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 subject to supply chain disruptions. 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. We maintain inventories for such materials such that any delays with raw materials will not affect or delay
our manufacturing. No material shortages or delays of raw materials were encountered in 2022 and no manufacturing
delays are currently expected in 2023. 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 do not currently have any agreements with third-party manufacturers for the long-term commercial supply of
Translarna or any of our product candidates, although we may seek to establish such arrangements in the future. In the
event that we are unable to procure supply from a validated manufacturer, we would seek to identify and qualify
replacement suppliers, however this process would likely delay our ability to supply Translarna to patients or advance our
clinical trials. We may be unable to conclude agreements for commercial or clinical supply of Translarna with third-party
manufacturers, or we may be unable to do so on acceptable terms.
We currently have contracts with multiple pharmacy and hospital distributors in the EU that distribute Translarna for
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.
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Pursuant to the Tegsedi-Waylivra Agreement, we have entered into a master supply agreement with Akcea whereby Akcea
or its affiliates will 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 have a commercial manufacturing services agreement with MassBiologics of the University of Massachusetts Medical
School, or MassBio, to provide sufficient quantities of our Upstaza program materials to meet anticipated clinical trial and
commercial scale demands. We also manufacture clinical material at our leased biologics manufacturing and laboratory
space located in Hopewell Township, New Jersey, or the Hopewell Facility, for certain of our gene therapy product
candidates. We still rely on third-party manufacturers to complete product testing for all of our gene therapy product
candidates that we manufacture at the Hopewell Facility as well as to provide sufficient quantities of certain program
materials that we have not yet transitioned to the Hopewell Facility. We have personnel with manufacturing and quality
experience to oversee our contract manufacturers.
We further utilize the Hopewell Facility to produce plasmid DNA and AAV vectors for gene therapy applications for
external customers.
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.
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 2022, 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 six 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.
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During 2022, 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 return of a material amount of product
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, the Brazilian Ministry of Health is continuing to experience significant administrative 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. Similarly, Translarna orders placed through a distributor for the Ministry of
Health of the Russian Federation are also intended to cover multiple months of therapy. Any fluctuations in quarterly net
product sales in Russia resulting from these centralized group purchase orders may also be exacerbated by any delays.
Market Access Considerations
Translarna for the treatment of nmDMD is currently available on a commercial basis in multiple countries outside of the
United States. We consider our products to be commercially available when we are permitted to market treatment to
patients.
Translarna for the treatment of nmDMD is also currently available through EAP programs in select countries where funded
named patient or cohort programs exist, both within the EEA and in other territories. These programs generally reference
the EMA’s determinations with respect to our marketing authorization in the EEA. As of today, Translarna is available
under EAP or similar styled programs in various countries outside of the United States. Generally, EAP programs allow
for access to Translarna pursuant to a named patient program, under which a physician requests access to Translarna on
behalf of the specific, or “named” patient or pursuant to a cohort program, which allows for a broader temporary
authorization for use for nmDMD meeting the inclusion criteria. Our EAP programs are named patient or similar styled
programs in all territories other than France, which is a cohort program.
Our ability to make Translarna available via commercial or EAP programs is largely dependent upon our ability to maintain
our marketing authorization in the EEA for Translarna for the treatment of nmDMD in ambulatory patients aged two years
and older. The marketing authorization is subject to annual review and renewal by the European Commission following
reassessment by the EMA as well as the specific obligation to conduct and submit the results of Study 041. In September
2022, we submitted a Type II variation to the EMA to support conversion of the conditional marketing authorization for
Translarna to a standard marketing authorization, which included a report on Stage 1 and data from Stage 2 of Study 041.
We expect an opinion from the CHMP in the first half of 2023. 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 launches of
products 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 our products pursuant to our marketing authorizations in the EEA in any
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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. 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, which is approved in the United States, 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.
We have generated revenue from net sales of Upstaza for the treatment of AADC deficiency in the EEA since May 2022.
Upstaza is approved for the treatment of AADC deficiency for patients 18 months and older within the EEA and the United
Kingdom. Our future revenues from Upstaza depends largely on our ability to obtain and maintain reimbursement from
governments and third-party insurers as described above.
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. We have received marketing authorization from ANVISA for Tegsedi for the treatment of stage 1 or
stage 2 polyneuropathy in adult patients with hATTR amyloidosis in Brazil and Waylivra for the treatment of FCS and
FPL in Brazil. We make commercial sales of Tegsedi for the treatment of hATTR amyloidosis in Brazil and Waylivra for
the treatment of FCS in Brazil. The marketing authorizations of Tegsedi and Waylivra in Brazil are 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 for the treatment of FCS 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 for the treatment of FCS, is subject to certain conditions.
We record revenue net of estimated third party discounts and rebates. Allowances are recorded as a reduction of revenue
at the time revenues from product sales are recognized. These allowances are adjusted to reflect known changes in factors
and may impact such allowances in the quarter those changes are known.
For important information regarding market access and pricing and reimbursement considerations see “Item 1. Business-
Government Regulation-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
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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:
(cid:120) 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 and Sarepta (Casimersen (SRP 4045) for the treatment of DMD in patients with exon 45
skipping. Viltepso (viltolarsen) from NS Pharma is also approved in Japan. Other biopharmaceutical companies
are developing treatments addressing the underlying cause of disease for different mutations in the DMD gene,
(NS-065/NCNP-01) and
including, Daiichi Sankyo
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 Pfizer (PF-06939926), Solid Biosciences
(SGT-001) and Sarepta (SRP-9001), whose gene therapy has been submitted for accelerated approval to the FDA.
(cid:120) 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. An NDA for vamorolone has been
submitted to and accepted by the FDA, and the Prescription Drug User Fee Act, or PDUFA, date for a decision
by the FDA is October 26, 2023.
(DS-5141)), Nippon Shinyaku
(Viltolarsen
(cid:120) Upstaza. Currently, no other treatment options are available for the underlying cause of AADC deficiency.
Additionally, we are not aware of any late-stage development product candidates for AADC deficiency.
(cid:120) Waylivra for FCS. Waylivra faces 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.
(cid:120) Waylivra for FPL. Currently, no other treatment options are available for the underlying cause of FPL.
Additionally, we are not aware of any late-stage development product candidates for FPL.
(cid:120) 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 as was
well as AMVUTTRA (vutrisiran) which Alnylam received approval for in the United States and Brazil in 2022
for the treatment of the polyneuropathy of hATTR amyloidosis in adults. 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
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polyneuropathy including BridgeBio Pharma (AG 10), Proclara Biosciences (NPT 189), Prothena (PRX 004) and
SOM Biotech (tolcapone).
(cid:120) Evrysdi. Evrysdi, an orally bioavailable treatment, faces competition from treatments that are not orally
bioavailable, including Spinraza (nusinersen), a drug developed by Ionis and marketed by Biogen, which has
received FDA approval to treat SMA and Zolgensma (onasemnogene abeparvovec), a gene therapy drug
developed by AveXis, Inc., (acquired by Novartis in 2018), which 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), Roche
Pharmaceuticals (RO7204239) and Cytokinetics (reldesemtiv).
(cid:120) PTC518 for Huntington’s disease. There are currently no disease-modifying therapies approved to delay the
onset or slow the progression of Huntington disease. However, uniQure (AMT-130), Roche and Ionis
(tominersen) and Wave Life Sciences (WVE-003) are all developing product candidates for treatment of
Huntington disease.
(cid:120) Vatiquinone for Friedreich ataxia. While there are currently no disease modifying treatment options available
for Friedreich ataxia, omaveloxolone, which is being developed by Reata Pharmaceuticals is a late stage product
candidate being investigated for the treatment of Friedreich ataxia. An NDA for omaveloxolone has been
submitted to and accepted by the FDA, and the PDUFA date for a decision by the FDA is February 28, 2023.
(cid:120) Vatiquinone for mitochondrial disease associated seizures. There are no disease modifying drugs approved for
the treatment of mitochondrial disease associated seizures and we are not aware of any late-stage development
product candidates for mitochondrial disease associated seizures.
(cid:120) Utreloxastat for ALS. Current standard of care for ALS is Rilutek (riluzole), currently available as a generic and
other formulations and Radicava (edaravone) and Relyvrio (AMX-0035) within the United States. Amylyx
Pharmaceuticals (AMX-0035) has also submitted an MAA to EMA with a decision expected in the first half of
2023. There are multiple other late stage product candidates being developed for the treatment of ALS including
Ionis (Jacifusen), Clene Nanomedicine (CNM-Au8), MediciNova (Ibudilast), AB Science (AB-1010 mastinib
mesylate), Prilenia Therapeutics (Pridopidine) and Biogen (tofersen). An NDA for tofersen has been submitted
to and accepted by the FDA, and the PDUFA date for a decision by the FDA is April 25, 2023.
(cid:120) Sepiapterin for PKU. If approved, sepiapterin 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.
(cid:120) Unesbulin for LMS. First line treatment for LMS is surgery where appropriate and then chemotherapy options
including doxorubicin, gemcitabine, dacarbazine and docetaxel for unresectable metastatic disease. For second
line treatment, two drugs are approved for soft tissue sarcoma including LMS and these are Yondelis (trabectedin)
and Votrient (pazopanib). Most LMS patients require multiple lines of therapy.
(cid:120) Unesbulin for DIPG. There is no approved treatment for DIPG and very little improvement have been observed
over the past 40 years. The current standard of care is radiation therapy which can shrink the tumor, though
response is transient.
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 sales and
export and import of biopharmaceutical products such as those we are developing. In addition, sponsors of
biopharmaceutical products and drug products participating in Medicaid and Medicare are required to comply with
mandatory price reporting, discount, and rebate requirements. The process of obtaining regulatory approvals and the
subsequent compliance with appropriate federal, state, local and ex-U.S. statutes and regulations require the expenditure
of substantial time and financial resources. See “Item 1A. Risk Factors-Risks Related to Regulatory Approval of our
Product and our Product Candidates” for important information regarding some of the risks to our business arising as a
result of government regulation.
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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. 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.
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 issued a number of guidance documents to assist companies navigating product development and manufacturing
concerns raised by COVID-19.
The new drug and biologic approval process
In the United States, an 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:
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
completion of nonclinical 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 or BLA, and satisfactory completion of an FDA Advisory Committee
meeting, if applicable;
satisfactory completion of an FDA inspection or remote regulatory assessment 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 or remote regulatory assessment of selected clinical sites and
selected clinical investigators to determine GCP compliance; and
FDA review and approval of the NDA or BLA to permit commercial marketing for particular indications for use.
Nonclinical Studies and IND Submission
Nonclinical tests include laboratory evaluations of product chemistry, pharmacology, stability, toxicity and product
formulation, as well as animal or other nonclinical 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 nonclinical tests,
manufacturing information, analytical data, proposed clinical protocols, and any available clinical data or literature on the
product candidate. Some nonclinical 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,
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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. Clinical holds also may be imposed by the FDA at any time before or during trials due to safety
concerns or non-compliance.
Clinical Trials
Clinical trials involve the administration of an 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.
Sponsors must also provide FDA with diversity action plans. In accordance with GCP requirements, 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. Special clinical
trial ethical considerations also must be taken into account if a study involves children. 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, be divided, or be combined. Phase 1 clinical trials may be conducted in patients or
healthy volunteers to evaluate the product’s safety, dosage tolerance, structure-activity relationships, mechanism of action,
absorption, metabolism distribution, excretion, and pharmacokinetics and, if possible, seek to gain an early indication of
its effectiveness. Phase 2 clinical trials usually involve controlled trials in a larger but still relatively small number of
subjects from the relevant patient population to evaluate dosage tolerance and appropriate dosage; identify possible short-
term adverse effects and safety risks; and provide a preliminary evaluation of the efficacy of the drug or biologic product
for specific indications. Phase 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. 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
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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. 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.
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. More recently, a program was established whereby a platform technology
that is incorporated within or utilized by an approved drug or biologic product may be designated as a platform technology,
provided that certain conditions are met, in which case development and approval of subsequent products using such
technology may be expedited.
Concurrent with clinical trials, companies usually complete additional nonclinical 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
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. Applicable user fees must also be paid before the FDA will commence its review. 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 Prescription Drug User Fee Act, or 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 biologic product establish that the drug or biologic 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
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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
biologic products approved through the accelerated approval process are subject to certain post-approval requirements,
including completion of Phase 4 clinical trials to demonstrate clinical benefit. By the date of approval of an accelerated
approval product, FDA must specify the conditions for the required post approval studies, including enrollment targets,
the study protocol, milestones, and target completion dates. FDA may also require that the confirmatory Phase 4 studies
be commenced prior to FDA granting a product accelerated approval. Reports on the progress of the required Phase 4
confirmatory studies must be submitted to FDA every 180 days after approval. 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 statutorily defined
streamlined process. Failure to conduct the required Phase 4 confirmatory studies or to conduct such studies with due
diligence, as well as failure to submit the required update reports can subject a sponsor to penalties. Promotional materials
for a drug or biologic approved under the accelerated approval pathway are subject to FDA prior review.
Sponsors can also 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
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
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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 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
deficiencies, which refiling would be subject to FDA review before it is accepted for filing. 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 within 6 months of the 60 day filing date.
The FDA does not always meet its PDUFA goal dates. 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.
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.
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This requirement does not generally apply to products for an indication for which orphan designation has been granted.
However, compliance may be required if approval is sought for other indications for which the product has not received
orphan designation.
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, 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. Orphan products are not exempt from this requirement.
The FDA will typically inspect or conduct a remote regulatory assessment of one or more clinical sites to assure
compliance with GCP before approving an NDA or BLA. The FDA also will inspect or conduct a remote regulatory
assessment of 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.
The FDA may refer applications for novel drug products or biologic products to an advisory committee for
recommendation as to whether the application should be approved and under what conditions. Specifically, for a product
candidate for which no active ingredient (including any ester or salt of active ingredients) has previously been approved
by the FDA, the FDA must either refer that product candidate to an advisory committee or provide in an action letter, a
summary of the reasons why the FDA did not refer the product candidate to an advisory committee. The FDA may also
refer other product candidates to an advisory committee if FDA believes that the advisory committee’s expertise would be
beneficial. The 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 or remote regulatory assessment 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. An approval letter authorizes
commercial marketing of the product with specific prescribing information for specific indications. 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. Even with submission of additional information, the
FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval.
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, and continues to issue, various guidance documents regarding the
development and commercialization of 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 and nonclinical assessment of
gene therapies; the design and conduct of clinical trials, 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 guidance documents that address
gene therapy considerations during the COVID-19 pandemic and a guidance specific to the development of gene therapy
products for neurodegenerative diseases.
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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 that a product’s benefits outweigh its risks. A REMS
may be required to include various elements, such as a medication guide or patient package insert, a communication plan
to educate healthcare 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 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. All statements regarding products must be
consistent with the FDA approved label, must be truthful and non-misleading, and must be adequately substantiated with
a fair balance between product benefit claims and risks, among other requirements. This means, for example, that a
manufacturer cannot make claims about the use of its marketed products or their relative benefits compared to other
treatments outside of their FDA approved indications and label and without adequate comparative studies, and it would
not be able to discuss or provide information on off-label uses or safety benefits of such products in a promotional context.
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
FDA and other governmental authority enforcement actions.
In addition, the distribution of prescription pharmaceutical products is subject to the Prescription Drug Marketing Act, or
PDMA, which, in addition to state requirements, regulates the distribution of samples at the federal level. Reports must
also be submitted to FDA on sample distribution. 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
and will be required to enable interoperable electronic product tracing at the package level by November 2023. 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 on product packages in both a human-
readable and on a machine-readable data carrier. 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.
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.
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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. 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 or remote regulatory assessments by government
authorities to ensure compliance with cGMP requirements and other laws. 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.
Sponsors are further subject to various requirements related to FDA drug shortage and manufacturing volume reporting,
supply chain security, such as risk management plan requirements, and the promotion of supply chain redundancy.
Legislation and executive actions have also been issued to encourage domestic manufacturing.
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 of nmDMD, Emflaza for the
treatment of DMD, Upstaza for the treatment of AADC deficiency, Evrysdi for the treatment of SMA, vatiquinone for the
treatment of Friedreich ataxia and treatment of seizures in patients with mitochondrial disease, utreloxastat for the
treatment of ALS, PTC-FA for the treatment of Friedreich ataxia, PTC-AS for the treatment of Angelman syndrome,
sepiapterin for the treatment of hyperphenylalaninemia, including hyperphenylalaninemia caused by PKU and unesbulin
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. 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
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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. Notably, a 2021 judicial decision, Catalyst Pharms., Inc. v. Becerra, challenged and reversed an FDA decision
on the scope of orphan product exclusivity for the drug, Firdapse. Under this decision, orphan drug exclusivity for Firdapse
blocked approval of another company’s application for the same drug for the entire disease or condition for which orphan
drug designation was granted, not just the disease or condition for which approval was received. In a January 2023 Federal
Register notice, however, the FDA stated that it intends to continue to apply its regulations tying the scope of orphan-drug
exclusivity to the uses or indications for which a drug is approved. The exact scope of orphan drug exclusivity will likely
be an evolving area.
Orphan product sameness decisions are also an evolving space. The FDA recently issued a final guidance document on
how the agency will determine the “sameness” of gene therapy products. Pursuant to the guidance, “sameness” will depend
on the products’ transgene expression, viral vectors groups and variants, and other product features that may have a
therapeutic effect. Generally, minor differences between gene therapy products will not result in a finding that two products
are different. Any FDA sameness determinations could impact our ability to receive approval for our product candidates
and to obtain or retain orphan drug exclusivity.
Rare Pediatric Disease Voucher Program
Under the FDCA, the FDA awards priority review vouchers to sponsors of rare pediatric disease products that meet certain
criteria. To qualify, the rare disease must be serious or life-threatening in which the serious or life-threatening
manifestations primarily affect individuals aged from birth to 18 years. Also, the product must contain no active ingredient
(including any ester or salt of the active ingredient) that has been previously approved in any other application and the
application must meet certain additional qualifying criteria, including eligibility for FDA priority review. If FDA
determines that a product is for a rare pediatric disease and the qualifying application criteria are met, upon a sponsor’s
request, FDA may award the sponsor a priority review voucher. This voucher may be redeemed to receive priority review
(i.e., a review time of 6 months as compared to 10 months for standard review) of a subsequent marketing application for
a different product. Use of a priority review voucher is subject to an FDA user fee. These vouchers are transferable.
Accordingly, sponsors may sell these vouchers for substantial sums of money. Vouchers may also be revoked by FDA
under certain circumstances and sponsors of approved rare pediatric disease products must submit certain reports to FDA.
Changes to the FDCA, however, have limited future 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, 2024, and approved
no later than September 30, 2026, unless the law is reauthorized by Congress. Accordingly, while Upstaza currently has a
rare pediatric disease designation, if we cannot secure FDA BLA approval prior to September 30, 2026, 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
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drug’s label is protected by patent or exclusivities. ANDAs are termed “abbreviated” because they are generally not
required to include nonclinical and clinical 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 applicant’s 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. The applicant may also elect to submit a “section viii” statement certifying that its proposed label does not
contain (or carves out) any language regarding the patented method-of-use rather than certify to a listed method-of-use
patent. 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 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.
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 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 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.
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BPCIA Exclusivity
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.
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 nonclinical 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.
The FDA maintains a publicly-available online database of licensed biological products, which is commonly referred to
as the “Purple Book.” The Purple Book lists product names, dates of licensure, and applicable periods of exclusivity.
Further, the reference product sponsor must provide patent information and patent expiry dates to FDA following the
exchange of patent information between biosimilar and reference product sponsors. This information is then published in
the Purple Book.
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, measures have been proposed and implemented to
facilitate 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.
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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, and only those claims reading on the approved drug may be extended. 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.
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, Upstaza for the
treatment of AADC deficiency, Evrysdi for the treatment of SMA, vatiquinone for the treatment of Friedreich ataxia,
utreloxastat for the treatment of ALS, PTC-AS for the treatment of Angelman syndrome, sepiapterin for the treatment of
patients with hyperphenylalaninemia, including hyperphenylalaninemia caused by PKU, and unesbulin for the treatment
of LMS. 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, in the event of
a successful application for a centralized EU marketing authorization, 10 years of EU market exclusivity. 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
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therapeutic indication may be reduced to six years if, at the end of the fifth year, it is established that the orphan designation
criteria are no longer met, including where it is shown that the product is sufficiently profitable not to justify maintenance
of market exclusivity. In addition, a competing similar medicinal product may in limited circumstances be authorized prior
to the expiration of the market exclusivity period, including if it is shown to be safer, more effective or otherwise clinically
superior to our product. Our product candidates can lose orphan designation, and the related benefits, prior to us obtaining
a marketing authorization if it is demonstrated that the orphan designation criteria are no longer met.
Clinical Trial Developments. The structure and general regulation of clinical trials for both small molecule and biological
medicines in the EU is similar to that in the United States. Separately, a new regulation, (EU) 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 (which came into effect
on January 31, 2022) 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).
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 healthcare 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:
(cid:120) 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.
(cid:120) 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.
(cid:120) 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.
(cid:120) 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
allowing 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.
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, increases in rebates paid, 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 healthcare programs similarly obligate us to
report drug pricing information that is used as the basis for their reimbursement of pharmacies and other healthcare
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 healthcare 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 may 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
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 federal civil 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 calculated ceiling price to certain federal agencies, including the
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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 accurately report drug
pricing or 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. Certain states have also enacted drug price transparency laws that require reporting of pricing
information, including certain increases in a drug’s wholesale acquisition cost and the reasons causing the price increase.
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, repeal efforts may occur again, and legal challenges to the Affordable Care Act may contribute to
the uncertainty of the ongoing implementation and impact of the Affordable Care Act and underscore 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” and, in
certain circumstances, required inclusion of patient copay assistance in Medicaid best price (effective January 1, 2023),
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. This rule now has been rescinded, but other efforts to address the costs of pharmaceuticals have been adopted,
including the Inflation Reduction Act of 2022, or the IRA. These and any additional healthcare reform measures could
further constrain our business or limit the amounts that federal and state governments will pay for healthcare products and
services, which could result in additional pricing pressures.
Any regulatory approval of a product is limited to specific diseases and indications for which such product has been
deemed safe and effective by the FDA. Coverage by federal healthcare programs, however, may be more limited than the
indications for which a drug is approved by the FDA or comparable ex-U.S. regulatory authorities’ coverage of the same
products. Sales of any products for which we may receive regulatory approval for commercial sale will depend in part on
the extent to which the costs of the products will be covered and reimbursed by third-party payors, including government
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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.
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, under the Clinical Trials
Regulation 536/2014, the sponsor of an EU trial must submit a summary of the results to an EU database within a year of
the end of the trial. In addition, where the trial was intended to be used for obtaining a marketing authorization the applicant
must submit the clinical study report 30 days after MA has been granted, refused or withdrawn. Subject to our limited
ability to review and redact a narrow sub-set of confidential commercial information, these new EU policies will result in
the EMA’s public disclosure of certain of our clinical study reports, clinical trial data summaries and clinical overviews
for recently completed and future MAA submissions. The move toward public disclosure of development data could
adversely affect our business in many ways, including, for example, resulting in the disclosure of our confidential
methodologies for development of our products, preventing us from obtaining intellectual property right protection for
innovations, requiring us to allocate significant resources to prevent other companies from violating our intellectual
property rights, adding even more complexity to processing health data from clinical trials consistent with applicable data
privacy regulations, and enabling competitors to use our data to gain approvals for their own products.
Fraud and Abuse Laws
Any present or future arrangements or interactions with third-party payors, healthcare professionals, healthcare
organizations, patients and other 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.
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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 in whole or in part
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, 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 statute discount safe harbor. Recent legislation delayed
implementation of this portion of the rule until January 1, 2026, and further proposed legislation would permanently
prohibit implementation of the rule beyond 2026. 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 civil False
Claims Act. Federal enforcement agencies have shown increased interest under the federal Anti-Kickback Stature and the
federal civil False Claims Act in pharmaceutical companies’ product and patient assistance programs, including
reimbursement and co-pay support services and donations to independent charitable patient assistance programs. A number
of investigations into these programs have resulted in significant civil and criminal settlements. Most 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, including to
commercial plans. Sanctions under these federal and state laws may include civil monetary penalties, exclusion of a
manufacturer and its products from participation in federal healthcare programs, debarment from federal government
procurement and non-procurement programs, 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, knowingly making,
using, or causing to be made or used a false record or statement material to a false or fraudulent claim, or making a false
statement to avoid, decrease or conceal an obligation to pay money to the federal government. Claims under the federal
civil False Claims Act may be initiated by whistleblowers, who receive substantial financial incentives to come forward,
through “qui tam” actions that can be pursued by the whistleblower even if the government declines to prosecute the case.
Intent to deceive is not necessary to establish civil liability, which may be predicated on deliberate indifference or 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 healthcare companies. These investigations have
involved, for example, allegations of improper financial relationships with referral sources, providing free product to
customers with the expectation that the customers would bill federal programs for the free product, as well as the promotion
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of products for unapproved uses and reporting false pricing information. A violation of the federal Anti-Kickback Statute
is a per se violation of civil False Claims Act. Potential liability under the federal civil 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 federal
government procurement and non-procurement programs 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 included a provision requiring certain providers and suppliers of items and services to federal
healthcare programs to report and return overpayments within sixty days after they are “identified” (the “Overpayment
Statute”), after which the recipient of the overpayment incurs federal civil False Claims Act liability. 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 final rules) 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, unless a
manufacturer is a direct recipient of payment by an agency such as a research grant, but may impact a manufacturer’s
customers and potential customers who are Medicare providers, suppliers, and plans. In a proposed rule issued on
December 27, 2022, CMS is proposing to revise the standard for “identification” which could significantly reduce the time
to investigate and report any possible overpayment, thereby increasing the risk of incurring federal civil False Claims Act
liability for healthcare providers and suppliers.
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 certain 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, certified registered
nurse anesthetists and certified nurse midwives licensed in the United States and to US teaching hospitals, as well as
ownership and investment interests held by physicians and members of their immediate family. Payments made to
physicians, other principal investigators and certain research institutions for research, including 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 each payment, transfer of value or ownership or
investment interest not timely and accurately 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 marketing-related activities, such as gift bans, 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 of conduct and
several other states are considering similar proposals. 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, 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 of, or payment for, healthcare benefits, knowingly and willfully embezzling or stealing from
a healthcare benefit program, willfully obstructing a criminal investigation of a healthcare 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 certain 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, or GDPR, United Kingdom’s implementation of the GDPR and equivalent 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. The consent must also be capable of being withdrawn. There are also other requirements for lawful
processing, including transparency obligations, data minimization requirements, data transfer restrictions and compliance
obligations 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
potential 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
European, UK and Swiss legislation only permits data export to countries where there is adequate protection or where
other mechanisms are in place such as data transfer agreements in the approved form such as standard contractual clauses
or the UK approved clauses. In July 2020, the European Court declared the EU-US data ‘Privacy Shield’ invalid meaning
that data transfers to the United States require other lawful data transfer mechanisms. 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.
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 for
pharmaceutical manufacturers 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.
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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.
Human Capital Resources
As of December 31, 2022, we had 1,410 employees, of whom 1,402 were employed on a full-time basis, as well as 128
consultants and contractors, of whom 113 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. Our employees complete Gallup, Inc.’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. Our
Brazilian office was recognized as a “great place to work” by the Great Place to Work Institute in 2021 and 2022.
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, targeted leadership development for identified current and
emerging leaders, 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. To help
newly hired employees, our global onboarding team conducts monthly surveys and focus groups and each newly hired
employee is paired with a “buddy” to assist in their transition. Additionally, we require specialized leadership training for
all employees that are responsible for the management of others within our organization. Our executive team routinely
reviews employee turnover throughout the organization to monitor employee satisfaction.
We believe that 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, fitness reimbursement and benefits and
policies to support parental leave, mental health and wellness, family planning and child bonding. Total rewards offerings
are established by employee positions, skill levels, experience, knowledge, and geographic location. We also provide
flexible work arrangements to our employees, including remote work options when practicable. In addition, to assist our
employees during times of personal disasters that impact them and their families, we have established an employee relief
program that is funded by our employees with corporate matches.
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 oversees our culture and community team. The mission of our culture and community team is to collaborate with
cross functional partners and create intentional efforts to connect and engage with employees who want to find community
and apply their passion to make a difference. A core element of this mission is our equality, diversity and inclusion, or
ED&I, program which is managed by an ED&I professional, who routinely meets with our executive committee. Our
ED&I program seeks to enable all employees to feel a sense of purpose and belonging through their connections with our
internal communities. This program is guided by a steering committee comprised of senior leaders, volunteer ED&I
ambassadors and representatives from our seven Employee Resource Groups, or ERGs, each of which associates with a
different underrepresented community. Our ERGs meet monthly and serve to offer a safe place for our employees to have
conversations about social issues, celebrate cultural observances and to grow as individuals. We believe that our ERGs
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and our ED&I program help our employees to better understand and celebrate each other, resulting in a more cohesive
work environment.
We continue to provide opportunities for talented individuals through our global Talent Pipeline Program, or the TPP. The
TPP is a global fellowship 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 are recruited from a global diverse group of institutions and networks and are provided mentorship, job
coaching, career counseling, and leadership training for one year. Participants from the TPP are often offered full-time
positions based upon our workforce needs. The TPP was originally established in 2020 to benefit students that graduated
during the COVID-19 pandemic.
We have continued to maintain a COVID-19 task force as COVID-19 outbreaks continue to manifest throughout the world.
Our COVID-19 task force 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 and for the maintenance of our business
continuity. Additionally, our COVID-19 task force continues to monitor and evaluate safety protocols and procedures to
protect our workers as well as business essential operations. Our COVID-19 task force periodically provides updates to
our executive team and our board of directors and provides timely communications to our employees. We have encouraged
and, where possible, required all employees to be fully vaccinated against COVID-19.
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.
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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.
If we do not successfully maintain our marketing authorizations for our products and obtain new marketing authorizations
for our product candidates and new uses of our approved 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, scope and outcome 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;
our ability or the ability of our third-party manufacturers to successfully produce commercial and clinical supply
of drug on a timely basis sufficient to meet the needs of our commercial and clinical activities;
successful identification of eligible patients;
acceptance of the drug as a treatment for the approved indication by patients, the medical community and third-
party payors;
effectively competing with other therapies;
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
whether we are able to maintain market exclusivity periods under the Orphan Drug Act or equivalent protections
in other jurisdictions;
(cid:120) whether negative results from our clinical or pre-clinical trials of a product for one indication affect the perception
of such product in another indication, including with respect to determinations by regulators, including the FDA
and EMA, with respect to our ongoing or future regulatory submissions for marketing authorization of our
products for any indication;
(cid:120) 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;
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(cid:120) 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; and
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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.
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.
Delays or failures in obtaining regulatory approval would prevent us from commercializing our product candidates in
the applicable territory and our ability to generate revenue will be materially impaired. Moreover, should we need to
conduct additional development work, other than those we have planned, we expect to incur significant costs, which
may have a material adverse effect on our business and results of operations.
There is significant risk that we will be unable to obtain approval for our product candidates 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. Product development 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, or manufacturing development can occur at any stage. Preclinical and clinical studies may also reveal
unfavorable product candidate characteristics, including safety concerns, or may not demonstrate product candidate
efficacy. In some instances, there can be significant variability in results between different clinical trials of the same
product candidate due to numerous factors. The outcome of preclinical testing and early clinical trials may not be predictive
of the success of later clinical trials, and interim results of a clinical trial do not necessarily predict final results. Moreover,
preclinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that have
believed their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed
to obtain marketing authorization of their products.
The approval process is also subject to the substantial discretion of regulatory authorities and the approval procedures vary
among countries, can involve additional testing, and the time for approval may materially differ and be subject to
administrative delays that we cannot control. 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 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, 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 or conduct of remote regulatory assessments 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.
For example, we have been seeking FDA approval for Translarna for nmDMD with the FDA since 2010 and the FDA has
repeatedly disagreed with our interpretation of our results. 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. Study 045 did not meet its pre-specified primary
endpoint. In June 2022, we announced top-line results from the placebo-controlled trial of Study 041. Following this
announcement, we submitted a meeting request to the FDA to gain clarity on the regulatory pathway for a potential re-
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submission of an NDA for Translarna. The FDA provided initial written feedback that Study 041 does not provide
substantial evidence of effectiveness to support NDA re-submission. We recently had an informal meeting with the FDA,
during which we discussed the potential path to an NDA re-submission for Translarna. Based on the meeting discussion,
we plan to request an additional Type C meeting with the FDA in the near future to review the totality of data collected to
date, including dystrophin and other mechanistic data as well as additional analyses that could support the benefit of
Translarna.
With respect to Upstaza, in a late 2019 interaction with the FDA, the FDA requested additional information concerning
the use of the commercial delivery system for Upstaza in young patients. In response to the FDA’s request, we provided
additional information concerning the use of the commercial cannula for Upstaza in young patients. In October 2022, we
held a type C meeting with the FDA to discuss the details of a potential submission package for Upstaza. At such meeting,
the FDA asked for additional bioanalytical data in support of comparability between the drug product used in the clinical
studies and the commercial drug product. We have completed these analyses and provided the results to the FDA for
review. We expect to submit a BLA to the FDA in the first half of 2023.
There is no guarantee that we will be able to achieve our milestones at all or within our anticipated timeframes, or that
regulators may have additional questions to which we will need to respond. There is also substantial risk that the results
of our future or current studies will not ultimately support the approval of a product candidate. Any delays in obtaining
regulatory approval, or if we never obtain regulatory approval, could have a material adverse effect on our business,
financial condition and results of operations.
We may use certain specialized pathways to develop our product candidates or to seek approval. We may not qualify
for these pathways or such pathways may not ultimately speed the time to approval or result in product candidate
approval.
In the United States, we may pursue the accelerated approval pathway for certain of our product candidates, such as
Translarna. However, the FDA may find that our product candidates do not qualify for accelerated approval. Moreover,
even if we do ultimately receive accelerated approval, we would need to meet certain post approval requirements, such as
completing a post-approval study confirming our product candidates’ clinical benefit that may require substantial time,
effort, and funds. Under a newly enacted law, the FDA must specify the conditions for the required post approval studies,
including enrollment targets, the study protocol, milestones, and target completion dates, by the time of approval and the
FDA may require that the post-approval studies be commenced before the date of approval. If this study does not confirm
the product’s clinical benefit or if the study is not conducted in accordance with the FDA’s requirements, it would be
subject to the risk of expedited FDA withdrawal. Additional regulatory requirements also include the pre-submission of
promotional materials to the FDA and potential restrictions, such as distribution restrictions, to assure the product’s safe
use. In recent years, the accelerated approval pathway has come under significant FDA and public scrutiny. Accordingly,
depending on the results of our studies, the FDA may be more conservative in granting accelerated approval or, if granted,
may be more apt to withdrawal approval if clinical benefit is not confirmed. Due to these and other uncertainties, we are
unable to estimate the timing or potential for product candidates for which we may use the accelerated approval pathway
or the cost or effort required to receive FDA approval. Further, even if we receive accelerated approval, there is no
guarantee that we would be able to maintain such approval.
For our gene therapy product candidates, we may pursue an exceptional circumstances marketing authorization from the
EMA. If a product candidate is eligible for 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.
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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 may produce negative or inconclusive results, regulators may disagree with our interpretation of
results, our studies may fail to reach the necessary level of statistical significance, or we may not be able to
demonstrate that our product candidates are safe, effective, or provide an advantage over current standard of care
or other therapies;
our clinical trials may not meet their primary endpoints. For example, for Translarna, the primary efficacy
endpoint in the intent to treat, or ITT, population did not achieve statistical significance in the Phase 2b trial
(completed in 2009), Phase 3 trial in ACT DMD (completed in 2015), or Study 045 (completed in 2021);
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;
clinical trial sites or enrolled patients may be negatively affected by outbreaks of COVID-19 or other outbreaks
of contagious disease, resulting in delays and disruptions in completing clinical trials, such as the delays we
experienced in enrolling our registration-directed Phase 2/3 placebo-controlled trial of vatiquinone in children
with mitochondrial disease associated seizures trial as some patients were unable or hesitant to travel to clinical
trial sites due to the COVID-19 pandemic;
(cid:120) we may be unable to enroll a sufficient number of patients in our clinical trials, the number of patients required
for clinical trials 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, not comply with trial procedures, misrepresent their
eligibility, or be lost to follow-up at a higher rate than we anticipate;
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(cid:120) we may enroll patients in foreign countries in which clinical sites may have less experience with studies or the
disease at issue, or may use a different standard of care; regulatory authorities may not accept the data generated
at foreign 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 or continue a clinical trial, may require additional data or
studies, or may require changes to our studies, including applications and protocols;
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(cid:120) we may be unable to engage trial sites and contract research organizations or they may withdraw from our studies;
(cid:120) we, regulators, institutional review boards, institutional biosafety committees, or independent ethics committees
may require the suspension or termination of studies 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;
regulators may require us to perform additional or unanticipated studies, develop additional manufacturing
information, or make changes to our manufacturing process to obtain approval;
there may be changes in the applicable regulatory authorities’ approval requirements, which may render our data
insufficient to obtain marketing approval;
the FDA or comparable regulatory authorities may disagree with our intended indications;
regulators may fail to approve or subsequently find fault with the manufacturing processes or facilities for clinical
and future commercial supplies;
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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(cid:120) we may decide to abandon the development of a product candidate or development program.
These risks may be increased for product candidates intended for the treatment of diseases for which there is little clinical
experience, where we are using new endpoints or methodologies, or where the product candidates are new or novel. For
example, there are no marketed therapies approved to treat the underlying cause of nmDMD and there is limited clinical
trial experience with respect to 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. Furthermore, the regulatory
requirements regarding gene therapies are continually evolving and regulatory authorities have only approved a limited
number of gene therapies. Moreover, because gene therapy products are a relatively new development, less is known
about such products and product candidates and, accordingly there is an increased risk that such products may not perform
as expected. Regulatory review agencies and the 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.
We may also experience increased risks to the extent that product candidates require a specialized delivery device or
method. For example, Upstaza 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. We may need to train sufficient brain surgeons to perform the
procedure properly, which may expose us to additional regulatory risks as our interactions with such healthcare providers
must comply with all applicable laws and regulations. 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. Delivery of
Upstaza to the putamen also requires certain medical devices, which may result in our product candidate being deemed to
be a combination product by the FDA, requiring compliance with the FDA’s device regulations and collaboration with
medical device manufacturers.
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.
Subgroup, retrospective, post-hoc, and certain statistical analyses may not be reliable and typically will not form the
basis for regulatory approval.
In the event that a study’s primary endpoint is not met, companies may undertake certain analyses to further understand
the data and potential reasons for the study results, including retrospective, post-hoc, and subgroup analyses. Because
these analyses are not pre-planned and studies may not be adequately designed for these analyses, they may not be reliable
and typically will not form the basis for regulatory approval. For example, 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. The FDA, however, did not agree that these
analyses supported approval.
Some of our favorable statistical data from these trials also are based on nominal p-values. Nominal p-values are subject
to certain limitations, and which, because of these limitations, regulatory authorities typically give less weight to nominal
p-values, compared to regular p-values. 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
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point timed function test were nominal p-values. The FDA found that certain post-hoc adjustments, our retrospective
analyses and our reliance on nominal p-values for some of our statistical data did not support approval.
An unfavorable view of our data and analyses by regulatory authorities has and could continue to negatively impact our
ability to obtain or maintain marketing authorizations, which would have a material adverse effect on our revenue and
would materially harm our business, financial results and results of operations.
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 due to the
inability to enroll a sufficient number of patients. Patient enrollment is affected a number of factors including:
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the size of the patient population (many of our studies concern rare conditions with small patient populations);
the availability of approved treatments;
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 and the willingness of patients to enroll in a clinical trial during outbreaks of COVID-19;
efforts to facilitate timely enrollment in clinical trials;
patient referral practices of physicians;
competition from other clinical trials;
the ability to monitor patients adequately during and after treatment; and
proximity and availability of clinical trial sites for prospective patients.
For example, we previously experienced delays in enrolling our registration-directed Phase 2/3 trial of vatiquinone in
children with mitochondrial disease associated seizures as some patients were unable or hesitant to travel to clinical trial
sites due to the COVID-19 pandemic. We anticipate results from the Phase 2/3 trial to be available in the second quarter
of 2023.
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 would result in significant delays or may
require us to abandon one or more clinical trials altogether.
If serious adverse side effects are identified during the development of any product candidate or for any product for
which we have or may obtain marketing approval, we may need to abandon or limit our development and/or marketing
of that product or product candidate.
If our products or our product candidates are associated with undesirable side effects or have characteristics that are
unexpected, regulatory authorities, institutional review boards, institutional biosafety committees, or independent ethics
committees may place our studies on clinical hold, withdraw or suspend study approvals, or require that we modify our
protocols. 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 study recruitment challenges, marketing authorization denial,
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 risk evaluation
and mitigation strategies, or REMS, costly post-marketing studies or clinical trials and surveillance to monitor the safety
of the product. Adverse effects may also prevent the adoption of a product, if it is approved. 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. Furthermore, we may be sued and held liable for harm caused by our products to patients
as a result of the identification of undesirable side effects, which may cause reputational harm.
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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.
The risk of finding adverse side effects may be particularly heightened in the case of gene therapies. For instance, new
gene copies may produce too much or too little of the desired protein or RNA, or the production of the desired protein or
RNA may change over time. Because the treatment is irreversible, there may be challenges in managing side effects.
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, new gene copies may disrupt other normal biological molecules and processes.
Adverse side effects may also be experienced by patients as a result of the process for administering the therapy or related
procedures.
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. For instance, possible adverse side effects
that could occur include an immunologic or complement-mediated reactions early after administration which, could
substantially limit the effectiveness of the treatment. Depending on the vector, 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. 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 further adversely impact our product
candidates in the form of increased government regulation, unfavorable public perception, potential regulatory delays,
stricter labeling requirements, and a decrease in demand.
If, following approval, we or others identify previously unknown side effects, if such side-effects are severe, or if known
side effects are more frequent or severe than in the past then our marketing authorizations 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. 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.
Certain of our products and product candidates, such as our gene therapies and other biologic product candidates, may
be difficult to produce, presenting manufacturing challenges that may delay product development and regulatory
approval.
Manufacturers of pharmaceutical products must comply with strictly enforced manufacturing and quality requirements,
including cGMP requirements, state and federal regulations, as well as ex-U.S. requirements when applicable. These may
be particularly difficult to meet for complex products such as biologic and gene therapy products. Any failure to meet the
applicable manufacturing and quality requirements could lead to a delay or interruption in development programs, delays
in receiving regulatory approval, and consequences should we receive marketing approval.
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The manufacture of biologic and gene therapy products is technically complex, requires extreme precision to meet
specification requirements and necessitates substantial expertise and capital investment. Production difficulties caused by
unforeseen events, even if seemingly minimal, may delay the availability of material for clinical studies and commercial
product. For example, 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.
In addition, 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
alternative 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 alternative 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
material. Any switch from our current manufacturer would result in a significant delay, would require regulatory authority
approval, and cause material additional costs.
Furthermore, some of the raw materials and other components required in our manufacturing process are derived from
diverse biologic sources that may be difficult to procure and may be subject to contamination or recall. Any material
shortage, supply chain disruption, 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 and commercialization of
products.
In 2021, we began cGMP manufacturing of clinical material at the Hopewell Facility for certain of our gene therapy
product candidates other than Upstaza. We still rely on third-party manufacturers to complete product testing for all of our
gene therapy product candidates that we manufacture at the Hopewell Facility as well as to provide sufficient quantities
of certain program materials that we have not yet transitioned to the Hopewell Facility. To the extent we rely on contract
manufacturers, we have personnel with manufacturing and quality experience to oversee our contract manufacturers.
With respect to the Hopewell Facility, we have limited experience conducting our own manufacturing and could encounter
problems and delays. The Hopewell Facility requires substantial investment and significant expertise, and our management
devotes substantial time to its operation. There is substantial competition for skilled personnel within gene therapy
manufacturing and we may not be able to attract and retain these personnel on acceptable terms. Moreover, operating a
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 not be available or on acceptable terms.
Additionally, we have limited experience producing plasmid DNA and AAV vectors for third party customers, and we
have yet to manufacture cGMP gene therapy product materials for our own clinical trials or commercialization. If we are
unable to manufacture these product materials to the required specifications for the third parties we contract with, our
business, financial condition, and results of operations could be materially adversely affected and we may become subject
to regulatory or contractual actions, may need to expend significant time and costs to remedy issues, and we may forgo
sales, incur liabilities or lose customers, which would materially adversely affect our business, financial condition and
results of operations.
Finally, we and our third party manufacturers may experience any number of unforeseen issues, unforeseen delays,
including 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.
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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.
The marketing label for Translarna approved by the European Commission is limited 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, 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. If the market opportunities for Translarna
for the treatment of nmDMD are smaller than we believe they are, our business and anticipated revenues will be negatively
impacted. If we decide to seek to expand the approved product label of Translarna for the treatment of nmDMD in the
future, the timing of, and our ability to generate, the necessary data or results required to obtain expanded regulatory
approval is currently uncertain. Given the small number of patients who have nmDMD, and the smaller number of patients
who meet the criteria for treatment under our current marketing authorization, our commercial opportunity is limited. It is
critical to the commercial success of Translarna for nmDMD that we successfully identify and treat these patients.
In order to continue to generate revenue from Translarna, we must maintain our current marketing authorizations in a
number of countries and we also may need to receive or maintain 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. In June 2022, the European Commission renewed our marketing authorization, making it effective, unless
extended, through August 5, 2023. This marketing authorization is further subject to a specific obligation to conduct and
submit the results of Study 041. In June 2022, we announced top-line results from the placebo-controlled trial of Study
041. In September 2022, we submitted a Type II variation to the EMA to support conversion of the conditional marketing
authorization for Translarna to a standard marketing authorization, which included a report on the placebo-controlled trial
of Study 041 and data from the open-label extension. We expect an opinion from the Committee for Medicinal Products
for Human Use in the first half of 2023.
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.
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.
Even if we are successful in obtaining and maintaining marketing authorizations, our products may not 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. If these products do not achieve an adequate level of
acceptance, we may not generate significant product revenues or any profits from operations.
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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, as well as cost effectiveness compared to alternative treatments;
the prevalence and severity of any side effects, as well as perceived safety;
limitations or warnings contained in, as well as permitted claims based on the product’s FDA-approved labeling;
distribution and use restrictions imposed by the FDA or which we voluntarily implement;
the ability to offer our products or product candidates for sale at competitive prices;
the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies.
For example, gene therapy remains a novel technology, must be administered directly to the brain via a surgery
and public perception may be influenced by claims that gene therapy is unsafe, which may cause gene therapy to
not gain acceptance by the public or the medical community;
the convenience and ease of administration compared to alternative treatments;
the strength of marketing and distribution support;
sufficient third-party coverage or reimbursement and, where applicable, our ability to obtain pricing approvals
which is separate from the marketing authorization process;
adverse publicity about our and our competitors’ products or product candidates or favorable publicity about
competitive products or product candidates. 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 vectors;
the results of studies of the product in other indications or similar products; and
any restrictions on concomitant use of other medications.
Obtaining coverage and reimbursement for a product from third-party payers is a time-consuming and costly process.
Failure to obtain adequate reimbursement may significantly impact the adoption and sale of products. Market acceptance
and obtaining reimbursement coverage may be particularly challenging in the case of gene therapies, where the cost of a
single administration may be substantial and adequate coverage and reimbursement will be essential for patients to afford
the treatment. Payors may require us to provide supporting scientific, clinical and cost-effectiveness data, which we may
not be able to provide. Moreover, ethical, social and legal concerns about certain treatments, such as gene therapy, could
result in additional regulations restricting or prohibiting sale of our products.
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. 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.
Our ability to negotiate, secure and maintain third-party coverage and reimbursement may also be affected by political,
economic and regulatory developments. Governments continue to impose cost containment measures, and third-party
payors are increasingly challenging prices charged for medicines and examining their cost effectiveness, in addition to
their safety and efficacy. These and other similar developments could significantly limit the degree of market acceptance
of our products or any of our other product candidates that receive marketing authorization.
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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 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 will
be adversely affected. If we are unable to establish and maintain adequate sales, marketing and distribution capabilities,
whether independently or with third parties, we may not be able to generate product revenue consistent with our
expectations and may not become profitable.
There are risks involved with establishing our own sales and marketing capabilities and entering into arrangements with
third parties to perform these services. For example, recruiting and training an internal commercial team is expensive and
time consuming and could delay commercialization efforts. If a commercial launch for any product or product candidate
for which we recruit a commercial team and establish marketing capabilities is delayed or does not occur for any reason,
we would have prematurely or unnecessarily incurred these commercialization expenses. This may be costly, and our
investment would be lost if we cannot retain or reposition such personnel.
The arrangements that we have entered into, or may enter into, with third parties to perform sales and marketing services
will generate lower product revenues or profitability of product revenues to us than if we were to market and sell any
products that we develop ourselves. In addition, we may not be successful in entering into arrangements with third parties
to sell and market our product candidates or may be unable to do so on terms that are favorable to us. We have little control
over such third parties, and any of them may fail to devote the necessary resources and attention to sell and market our
products effectively.
If we do not establish sales and marketing capabilities successfully, either on our own or in collaboration with third parties,
we will not be successful in commercializing our products or product candidates. Factors that may materially affect our
efforts to commercialize our products include:
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our ability to recruit, train and retain adequate numbers of effective sales and marketing personnel;
our ability to monitor the legal and regulatory compliance of sales and marketing personnel;
an inability to secure adequate coverage and reimbursement by government and private health plans;
reduced realization on government sales from mandatory discounts, rebates and fees, and from price concessions
to private health plans and pharmacy benefit managers necessitated by competition for access to managed
formularies;
the clinical indications for which the products are approved and the claims that we may make for the products;
limitations or warnings, including distribution or use restrictions, contained in the products’ approved labeling;
any distribution and use restrictions imposed by the FDA or to which we agree as part of a mandatory REMS or
voluntary risk management plan;
liability for sales or marketing personnel who fail to comply with the applicable legal and regulatory
requirements;
our ability to implement third-party marketing and distribution relationships on favorable terms, or at all, in
territories where we do not pursue direct commercialization;
the ability of our commercial team to obtain access to or persuade adequate numbers of physicians to prescribe
our current or any future products;
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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 any of our products are 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, Upstaza, 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, including the Russia-Ukraine conflict and related sanctions that have been imposed
by various countries in response thereto;
financial risks such as longer payment cycles, difficulty collecting accounts receivable, potentially high inflation
rates and exposure to fluctuations in foreign currency exchange rates;
difficulty in staffing and managing international operations;
various effects and responsive measures relating to COVID-19 outbreaks;
potentially negative consequences from changes in or interpretations of tax laws;
changes in international medical reimbursement policies and programs;
unexpected changes in healthcare 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, the Brazilian Ministry of Health is continuing to experience significant administrative delays processing
centralized group purchase orders. Almost all of our product revenue for Translarna in Brazil 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.
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.
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.
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Furthermore, in some countries, including Brazil and Russia, 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 and our ability to successfully negotiate
favorable pricing and reimbursement processes on a timely basis in the countries in which we have or may obtain
regulatory approval, including the United States, EEA and other territories.
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.
Laws and regulations governing export restrictions and economic sanctions may preclude us from developing and
selling certain products, generating revenue from such products, and manufacturing certain materials outside of the
United States.
Many countries, including the United States, restrict the export or import of products to or from certain countries through,
for example, bans, sanction programs, and boycotts. Such restrictions may preclude us from supplying products or
generating revenue in certain countries or may require an export license prior to the export of the controlled item. Various
laws, regulations and executive orders also restrict the use and dissemination outside of the United States, or the sharing
with certain non-U.S. nationals, of information classified for national security purposes, as well as certain products and
technical data relating to those products. Furthermore, if we, or third parties acting on our behalf, do not comply with these
restrictions, we may be subject to substantial civil and criminal penalties and suspension or debarment from government
contracting.
Our activities outside of the United States, require that we dedicate resources to comply with these laws. Many of our
customers and suppliers are ex-U.S. entities or have significant ex-U.S. operations. Although these restrictions have not
affected our operations in the past, there is a risk that they could do so in the future as additional geographic regions and
entities may become subject to such restrictions. The imposition of new or additional economic and trade sanctions against
our major customers or suppliers or financial counterparties or intermediaries could result in our inability to sell to, and
generate revenue from such customers or purchase materials from such suppliers. For example, we make sales of
Translarna through a distributor to the Ministry of Health of the Russian Federation to access Russian nmDMD patients.
Our ability to generate and realize revenue in Russia may be materially and adversely impacted as many countries,
including the United States, have imposed and may continue to consider imposing additional enhanced export controls on
certain products and sanctions on certain industry sectors and parties in Russia in connection with the Russia-Ukraine
conflict. We also contract with government-owned hospitals and third-party manufacturers located in China, which has
recently been involved in political conflict with the United States. This conflict has increased the likelihood of restrictions
that could materially and adversely affect our clinical trial sites located in China, our ability to obtain certain supplies, our
ability to manufacture certain product candidates and our ability to potentially commercialize products in China. If our
activities are affected because of these or other such restrictions, sanctions, or controls, our business, financial condition
and results of operations could be materially and adversely affected. As a result of restrictive export laws, our customers
may also seek to obtain a greater supply of similar or substitute products from our competitors that are not subject to these
restrictions, which could materially and adversely affect our business, financial condition and results of operations.
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
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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 and Sarepta (Casimersen (SRP 4045) for the treatment of DMD in patients with
exon 45 skipping. Viltepso (viltolarsen) from NS Pharma is also approved in Japan. Other biopharmaceutical companies
are developing treatments for the underlying cause of disease for different mutations in the DMD gene, 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 Pfizer (PF-06939926), Solid Biosciences (SGT-001) and Sarepta (SRP-9001), whose gene therapy has been
submitted for accelerated approval to the FDA.
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. An NDA for vamorolone has been
submitted to and accepted by the FDA, and the Prescription Drug User Fee Act, or PDUFA, date for a decision by the
FDA is October 26, 2023.
Currently, no other treatment options are available for the underlying cause of AADC deficiency. Additionally, we are not
aware of any late-stage development product candidates for AADC deficiency.
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, Waylivra for FCS faces 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.
Currently, no other treatment options are available for the underlying cause of FPL. Additionally, we are not aware of any
late-stage development product candidates for FPL. 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 as well as AMVUTTRA (vutrisiran) which Alnylam received approval for in the United States and
Brazil in 2022 for the treatment of the polyneuropathy of hATTR amyloidosis in adults. 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 BridgeBio Pharma (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.
Evrysdi, an orally bioavailable treatment, faces competition from treatments that are not orally bioavailable, including
Spinraza (nusinersen), a drug developed by Ionis and marketed by Biogen, which has received FDA approval to treat SMA
and Zolgensma (onasemnogene abeparvovec), a gene therapy drug developed by AveXis, Inc., (acquired by Novartis in
2018), which 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), Roche Pharmaceuticals (RO7204239) and Cytokinetics (reldesemtiv)..
For additional discussion regarding the competition we face with respect to our current product candidates, see “Item 1.
Business-Competition.”
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
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products and product candidates, which could result in our competitors establishing a strong market position before we
are able to enter the market.
We believe that many competitors are attempting to develop therapeutics for the target indications of our products and
product candidates, including academic institutions, government agencies, public and private research organizations, large
pharmaceutical companies and smaller more focused companies.
Many of our competitors may have significantly greater financial resources and expertise in research and development,
manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approved
products than we do. Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more
resources being concentrated among a smaller number of our competitors. Smaller and other early stage companies may
also prove to be significant competitors, particularly through collaborative arrangements with large and established
companies. These third parties compete with us in recruiting and retaining qualified scientific and management personnel,
establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary
to or necessary for our programs.
Our products or product candidates may become subject to unfavorable pricing regulations, third-party reimbursement
practices or healthcare reform initiatives, which would harm our business.
We may not obtain adequate coverage or reimbursement for our products, or we may be required to sell our products at an
unsatisfactory price. In addition, obtaining pricing, coverage and reimbursement approvals can be a time consuming and
expensive process. Our business would be materially adversely affected if we do not receive these approvals on a timely
basis.
The regulations and practices that govern marketing authorizations, pricing, coverage and reimbursement for new drug
products vary widely from country to country. Current and future legislation may significantly change the approval
requirements in ways that could involve additional costs and cause delays in obtaining approvals. Some countries,
including almost all of the member states of the EEA, require approval of the sale (list) price of a drug before it can be
marketed. In many countries, the pricing review period begins after marketing or product licensing approval is granted. In
some ex-U.S. markets, including the European market, prescription pharmaceutical pricing remains subject to continuing
governmental control even after initial approval is granted. As a result, we might obtain marketing authorization for a
product in a particular country, but then be subject to price regulations, in some countries at national as well as regional
levels, that delay our commercial launch of the product, possibly for lengthy time periods, and negatively impact the
revenues we are able to generate from the sale of the product in that country. Adverse pricing limitations may hinder our
ability to recoup our investment in one or more products 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 healthcare organizations
and other third-party payors and organizations. Government authorities and other third-party payors, such as private health
insurers and managed healthcare 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 our products 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
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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. 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.
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.
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 healthcare 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 healthcare programs establish ceiling prices or 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 manufacturers of single source
and innovator multiple source drugs enter into a Master agreement and Federal Supply Schedule, or FSS, agreement with
the Secretary for Veterans Affairs and charge no more than statutory ceiling prices to the Department of Veteran Affairs,
the Department of Defense and certain other federal agencies.
Similarly, in order for a covered outpatient drug to receive federal reimbursement under the Medicare Part B and Medicaid
programs, 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
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(OECD) with a GDP per capita that is at least sixty percent of the U.S. GDP per capita. This rule now has been rescinded
but other measures, including the Inflation Reduction Act of 2022, or IRA, have been enacted to address the costs of
pharmaceuticals. Such rules 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
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. Legal challenges to the Affordable Care Act continue to arise and there may 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.
Additionally, the Budget Control Act of 2011, among other things, created measures for spending reductions by Congress.
Failure of the Joint Select Committee on Deficit Reduction to reach required deficit reduction goals triggered the
legislation’s automatic reduction to several government programs. This legislation resulted in aggregate reductions to
Medicare payments to providers of up to 2% per fiscal year, which went into effect in April 2013 and will remain in effect
through 2031. However, pursuant to the CARES Act and subsequent legislation, these Medicare sequester reductions were
suspended through the end of March 2022 and from April 2022 through June 2022, a 1% cut was in effect, with the full
2% cut remaining thereafter. The American Taxpayer Relief Act of 2012, among other things, reduced Medicare payments
to several providers and increased the statute of limitations period for the government to recover overpayments to providers
from three to five years. These new laws may result in additional reductions in Medicare and other healthcare funding and
otherwise affect the prices we may obtain for any of our product candidates for which we may obtain regulatory approval
or the frequency with which any such product candidates is prescribed or used.
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, Upstaza for the treatment of AADC deficiency 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
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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. In October 2020, the Department of Health and
Human Services, or HHS, and the FDA published a final rule allowing states and other entities to develop a Section 804
Importation Program, or SIP, to import certain prescription drugs from Canada into the United States. The final rule is
currently the subject of ongoing litigation, but at least six states (Vermont, Colorado, Florida, Maine, New Mexico, and
New Hampshire) have passed laws allowing for the importation of drugs from Canada with the intent of developing SIPs
for review and approval by the FDA. Further, on November 20, 2020, HHS finalized a regulation removing safe harbor
protection for price reductions from pharmaceutical manufacturers to plan sponsors under Part D, either directly or through
pharmacy benefit managers, unless the price reduction is required by law. The implementation of the rules has been delayed
by the Biden administration from January 1, 2022 to January 1, 2023 in response to ongoing litigation. The rule also creates
a safe harbor for price reductions reflected at the point-of-sale, as well as a new safe harbor for certain fixed fee
arrangements between pharmacy benefit managers and manufactures, the implementation of which has been delayed until
January 1, 2026 by the Infrastructure Investment and Jobs Act.
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, 2022, we had an accumulated deficit
of $2,657.0 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, our initial public offering, proceeds from the
Royalty Purchase Agreement, net proceeds from our borrowings under the Credit Agreement, or the Blackstone Credit
Agreement, dated as of October 27, 2022, among us, as the Borrower, the subsidiaries of the Borrower from time to time
party thereto, as Guarantors, the Lenders from time to time party thereto and Wilmington Trust, National Association, as
Administrative Agent, the private placements of our preferred stock and common stock, collaborations, bank and
institutional lender debt, other convertible debt, grant funding and clinical trial support from governmental and
philanthropic organizations and patient advocacy groups in the disease areas addressed by our product candidates. We
have relied on revenue generated from net sales of Translarna for the treatment of nmDMD in territories outside of the
United States since 2014, Emflaza for the treatment of DMD in the United States since 2017, and Upstaza for the treatment
of AADC deficiency in the EEA since May 2022. We have also relied on revenue associated with milestone and royalty
payments from Roche pursuant to the SMA License Agreement under our SMA program. 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
and our collaboration and royalty revenues. We expect to continue to generate operating losses through 2023 and, while
we anticipate that operating losses generated in future periods should decline versus prior periods, we may never generate
profits from operations or maintain profitability. The net losses we incur may fluctuate significantly from period to period.
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
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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
authorizations in the EEA for Translarna for the treatment of nmDMD in ambulatory patients aged two years and older, in
Russia for the treatment of nmDMD in patients aged two years and older and in Brazil for the treatment of nmDMD in
ambulatory patients two years and older and for continued treatment of patients that become non-ambulatory. 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. 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.
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 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, Brazil and Russia. We are also preparing a BLA for Upstaza for the treatment of AADC
deficiency in the United States and we anticipate submitting a BLA to the FDA in the first half of 2023. 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.
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 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. With respect to borrowings under the Blackstone Credit Agreement, cash interest payments are payable on the
applicable interest payment dates for each loan thereunder. In addition, we will be required under conditions specified in
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the Blackstone Credit Agreement to fund a reserve account up to certain amounts specified therein. The funds in the reserve
account are available to prepay the Loans at any time at our option, and are, if funded, subject to release upon certain
further conditions. Upon any such release, such funds are freely available for use by us subject to the generally applicable
terms and conditions of the Blackstone Credit Agreement. Furthermore, the Blackstone Credit Agreement covenant
requiring us to have consolidated liquidity of at least $100.0 million as of the last day of each fiscal quarter will be increased
to $200.0 million if we consummate acquisitions meeting certain consideration thresholds described in the Blackstone
Credit Agreement.
In February 2023, we completed enrollment of our Phase 3 placebo-controlled clinical trial for sepiapterin for PKU. In
connection with this event and in accordance with the 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 Pharmaceuticals, Inc., or
Censa, Shareholder Representative Services LLC, we are obligated to pay a $30.0 million development milestone to the
former Censa securityholders, which we have the option to pay in cash or shares of our common stock. We also expect to
make additional payments to the former Censa securityholders of $50.0 million in the aggregate upon the potential
achievement in 2023 of certain development and regulatory milestones relating to sepiapterin. Furthermore, we expect to
pay the former equityholders of Agilis an additional $20.0 million upon the acceptance for filing by the FDA of a BLA
for Upstaza for the treatment of AADC deficiency, which we expect to occur in the first half of 2023.
In addition, our expenses will increase if and as we:
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seek to satisfy contractual and regulatory obligations that we assumed through 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, Brazil and Russia 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 manufacture program materials for certain of our gene therapy product candidates
as well as program materials for third parties;
initiate or continue the research and development of our splicing, gene therapy, Bio-e, metabolic and oncology
programs as well as studies in our products for maintaining authorizations, including Study 041, label extensions
and additional indications;
seek to discover and develop additional product candidates;
seek to expand and diversify our product pipeline through strategic transactions;
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(cid:120) maintain, expand and protect our intellectual property portfolio; and
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add operational, financial and management information systems and personnel, including personnel to support
our product development and commercialization efforts.
Our expenses may also increase as a result of economic conditions, such as potentially high inflation rates within the
jurisdictions that we operate or unfavorable fluctuations in foreign currency exchange rates.
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;
(cid:120) 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
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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;
(cid:120) 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 as well as studies in our products for additional indications;
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(cid:120) 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, will be sufficient to fund our operating expenses and capital expenditure
requirements for at least the next twelve months. We have based this estimate on assumptions that may prove to be wrong,
and we could use our capital resources sooner than we currently expect.
Our future capital requirements will depend on many factors, including:
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our ability to commercialize and market our products and product candidates;
our ability to negotiate, secure and maintain adequate pricing, coverage and reimbursement terms, on a timely
basis, with third-party payors for our products and product candidates;
our ability to maintain the marketing authorization in the EEA for Translarna for the treatment of nmDMD,
including whether the EMA determines on an annual basis that the benefit-risk balance of Translarna supports
renewal of our marketing authorization in the EEA, on the current approved label;
the timing and outcome of Study 041;
our ability to obtain marketing authorization for Upstaza for the treatment of AADC deficiency in the United
States;
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;
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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 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 manufacture program materials for certain of our gene therapy
product candidates as well as program materials for third parties;
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 as well as studies in our products for maintaining
authorizations, label extensions and additional indications;
our ability to satisfy our obligations under the Blackstone Credit Agreement;
our ability to satisfy our obligations under the indenture governing our 2026 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-
patent market exclusivity for our products and product candidates, we will be unable to commercialize and generate
revenue from the sales of those products.
Accordingly, we may need to continue to rely on additional financing in connection with our continuing operations and to
achieve our business objectives. In addition, we may seek additional capital due to favorable market conditions or based
on strategic considerations, even if we believe that we have sufficient funds for our current or future operating plans.
Additional financing may not be available to us on acceptable terms or at all. If we are unable to raise capital when needed
or on attractive terms, we could be forced to delay, reduce or eliminate our research and development programs or our
commercialization efforts.
Our indebtedness under the Blackstone Credit Agreement could adversely affect our financial condition or restrict
future operations.
On October 27, 2022, or the Closing Date, we entered into the Blackstone Credit Agreement for fundings of up to $950.0
million consisting of a committed loan facility of $450.0 million and further contemplating the potential for up to $500.0
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million of additional financing, to the extent that we request such additional financing and subject to the lenders’ agreement
to provide such additional financing and to mutual agreement on terms.
The Blackstone Credit Agreement provides for a senior secured term loan facility funded on the Closing Date in the
aggregate principal amount of $300.0 million, or the Initial Loans, and a committed delayed draw term loan facility of up
to $150.0 million, or the Delayed Draw Loans and, together with the Initial Loans, the Loans, to be funded at our request
within 18 months of the Closing Date subject to specified conditions. In addition, the Blackstone Credit Agreement
contemplates the potential for further financings by Blackstone, by providing for incremental discretionary uncommitted
further financings of up to $500.0 million.
The Loans mature on the date that is seven years from the Closing Date. Borrowings under the Blackstone Credit
Agreement bear interest at a variable rate equal to, at our option, either an adjusted Term SOFR rate plus seven and a
quarter percent (7.25%) or the Base Rate plus six and a quarter percent (6.25%), subject to a floor of one percent (1%) and
two percent (2%) with respect to Term SOFR rate and Base Rate (each as defined in the Blackstone Credit Agreement),
respectively.
All obligations under the Blackstone Credit Agreement are secured by security interests in certain of our assets, including
(1) intellectual property and other assets related to Translarna, Emflaza, Upstaza, sepiapterin and, until certain release
conditions are met, vatiquinone, in each case, together with any other forms, formulations, or methods of delivery of any
such products, and regardless of trade or brand name, (2) future acquired intellectual property (but not internally developed
intellectual property unrelated to other intellectual property collateral) and other related assets, and (3) the equity interests
held by us in certain of our subsidiaries. The Blackstone Credit Agreement contains certain negative covenants with which
we must remain in compliance. The Blackstone Credit Agreement also requires that we maintain consolidated liquidity of
at least $100.0 million as of the last day of each fiscal quarter, which shall be increased to $200.0 million upon our
consummating acquisitions meeting certain consideration thresholds described therein. In addition, we will be required
under conditions specified in the Blackstone Credit Agreement to fund a reserve account up to certain amounts specified
therein. The funds in the reserve account are available to prepay the Loans at any time at our option, and are, if funded,
subject to release upon certain further conditions. Upon any such release, such funds are freely available for use by us
subject to the generally applicable terms and conditions of the Blackstone Credit Agreement. The Blackstone Credit
Agreement contains certain customary representations and warranties, affirmative covenants and provisions relating to
events of default.
In the event of an acceleration of amounts due under the Blackstone Credit Agreement as a result of an event of default,
we may not have sufficient funds or may be unable to arrange for additional financing to repay the Loans or to make any
accelerated payments, and the lenders could seek to enforce security interests in the collateral securing the Loans, which
would have a material adverse effect on our business, financial condition and results of operations.
In addition, our indebtedness under the Blackstone Credit Agreement could have significant adverse consequences,
including, among other things:
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requiring us to dedicate a substantial portion of cash and cash equivalents and marketable securities to the
payment of interest on, and principal of, the Loans, which will reduce the amounts available to fund working
capital, capital expenditures, product development efforts and other general corporate purposes;
obligating us to negative covenants restricting our activities, including limitations on dispositions, mergers or
acquisitions, encumbering our intellectual property, incurring indebtedness or liens, paying dividends, making
investments and engaging in certain other business transactions;
limiting our flexibility in planning for, or reacting to, changes in our business and our industry;
placing us at a competitive disadvantage compared to our competitors who have less debt or competitors with
comparable debt at more favorable interest rates; and
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limiting our ability to borrow additional amounts for working capital, capital expenditures, research and
development efforts, acquisitions, debt service requirements, execution of our business strategy and other
purposes.
Any of these factors could materially and adversely affect our business, financial condition and results of operations.
We intend to satisfy our current and future debt obligations with our existing cash, cash equivalents and available for sale
securities, potential future product revenue and funds from external sources. However, our inability to satisfy such
obligations for any reason would have a material adverse effect on our business, financial condition and results of
operations.
We may engage in strategic transactions to acquire assets, businesses, or rights to products, product candidates or
technologies or form collaborations or make investments in other companies or technologies that could harm our
operating results, dilute our stockholders’ ownership, increase our debt, or cause us to incur significant expense.
As part of our business strategy, we may engage in additional strategic transactions to expand and diversify our product
pipeline, including through the acquisition of assets, businesses, or rights to products, product candidates or technologies
or through strategic alliances or collaborations, similar to our acquisitions of Emflaza, Agilis, Censa and BioElectron’s
assets and the Tegsedi-Waylivra 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.
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.
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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. Our senior secured term loan facility with Blackstone as well as
any additional debt financing, if available, may involve agreements that include covenants limiting or restricting our ability
to take specific actions, such as incurring additional debt, entering into agreements involving licenses to our intellectual
property, making capital expenditures or declaring dividends.
If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements
with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs
or product candidates; or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds
through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product
development or future commercialization efforts or grant rights to develop and market product candidates that we would
otherwise prefer to develop and market ourselves.
Our ability to use our net operating losses and certain other tax attributes to offset potential taxable income and related
income taxes that would otherwise be due is subject to limitation under the provisions of Sections 382 and 383 of the
Internal Revenue Code as a result of ownership changes of the Company and could be subject to further annual
limitations under such provisions. In addition, we may not generate sufficient future taxable income to use our net
operating losses and certain other tax attributes.
If a corporation undergoes an “ownership change” within the meaning of Sections 382 and 383 of the Internal Revenue
Code of 1986, as amended, or Sections 382 and 383, the corporation’s ability to utilize any net operating losses, or 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. We generated taxable income that is subject
to income tax in 2022, but continue to maintain NOLs from previous years that will be carried forward.
Changes in our effective income tax rates 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
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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.
On December 22, 2017, the United States government enacted the 2017 Tax Act, which significantly reformed the U.S.
Internal Revenue Code of 1986, as amended, or the Code. The Tax Act, among other things, contained significant changes
to corporate taxation. As part of Congress’s response to the COVID-19 pandemic, economic relief was enacted in 2020
and 2021. Such legislation contains numerous tax provisions. In addition, the IRA was signed into law in August 2022.
The IRA introduced new tax provisions, including a 1% excise tax imposed on certain stock repurchases by publicly traded
corporations. The 1% excise tax generally applies to any acquisition by the publicly traded corporation (or certain of its
affiliates) of stock of the publicly traded corporation in exchange for money or other property (other than stock of the
corporation itself), subject to a de minimis exception. Thus, the excise tax could apply to certain transactions that are not
traditional stock repurchases.
Regulatory guidance under the 2017 Tax Act, the IRA, and such additional legislation is and continues to be forthcoming,
and such guidance could ultimately increase or lessen the impact of these laws on our business and financial condition. In
addition, it is uncertain if and to what extent various states will confirm the IRA, the Tax Act, and additional tax legislation.
Regulatory guidance under the 2017 Tax Act, which was enacted on December 22, 2017, the FFCR Act, the CARES Act,
the CAA, and the ARPA is and continues to be forthcoming, and such guidance could ultimately increase or lessen the
impact of these laws on our business and financial condition. It is also possible that Congress will enact additional
legislation in connection with the COVID-19 pandemic, and as a result of the changes in the U.S. presidential
administration and control of the U.S. Senate, additional tax legislation may also be enacted.
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, 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.
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 the conduct of Study 041. 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 In June 2022, we announced top-line results from the placebo-
controlled trial of Study 041. Within the placebo-controlled trial, Translarna showed a statistically significant treatment
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benefit across the entire intent to treat population as assessed by the 6-minute walk test, assessing ambulation and
endurance, and in lower-limb muscle function as assessed by the North Star Ambulatory Assessment, a functional scale
designed for boys affected by DMD. Additionally, Translarna showed a statistically significant treatment benefit across
the intent to treat population within the 10-meter run/walk and 4-stair stair climb, each assessing ambulation and burst
activity, while also showing a positive trend in the 4-stair stair descend although not statistically significant. Within the
primary analysis group, Translarna demonstrated a positive trend across all endpoints, however, statistical significance
was not achieved. Translarna was also well tolerated. In September 2022, we submitted a Type II variation to the EMA to
support conversion of the conditional marketing authorization for Translarna to a standard marketing authorization, which
included a report on the placebo-controlled trial of Study 041 and data from the open-label extension. We expect an opinion
from the Committee for Medicinal Products for Human Use in the first half of 2023. Given that statistical significance
was not achieved in the placebo-controlled portion of Study 041 within the primary analysis group, the EMA may deny
our request for conversion and our annual reassessment by the EMA of the benefit-risk balance of the authorization may
be negatively impacted as well.
We may also still experience unknown complications with open-label extension period Study 041, which would have a
materially adverse effect on our ability to maintain our marketing authorization in the EEA. We are further required to
implement measures, including pharmacovigilance plans, which are detailed in the risk management plan.
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.
We may not be able to obtain orphan drug exclusivity for our products or product candidates in either the United States
or the EU.
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 Translarna for the treatment of nmDMD, Upstaza for the treatment of AADC, Evrysdi for the treatment of SMA, PTC-
AS for the treatment of Angelman syndrome, sepiapterin for the treatment of patients with hyperphenylalaninemia,
including hyperphenylalaninemia caused by PKU, vatiquinone for the treatment of Friedreich ataxia, utreloxastat for the
treatment of ALS and unesbulin for the treatment of LMS. The FDA has also granted an orphan drug designation to
Emflaza for the treatment of DMD, vatiquinone for the treatment of seizures in patients with mitochondrial disease,
unesbulin for the treatment of DIPG and PTC-FA for the treatment of Friedreich ataxia. We may also seek orphan drug
exclusivity for other product candidates, if we believe that the product candidate may qualify. We, however, may not be
able to obtain orphan drug designation in the future for any of our other product candidates. Obtaining orphan drug
exclusivity, both in the EU and in the United States, may be important to a product candidate’s future success.
In the EU, if an orphan designated product subsequently receives the first marketing authorization for the indication for
which it has received such a designation, the product is entitled to 10 years of market exclusivity, which, subject to certain
exceptions, precludes the EMA from accepting another marketing application for a similar medicinal product, even if the
new marketing application relies on independently generated data submitted as part of a full marketing authorization
application dossier. The EU exclusivity period can be reduced to six years, at the end of the fifth year, if a drug no longer
meets the criteria for orphan drug designation, including if the drug is sufficiently profitable so that market exclusivity is
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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, under FDA’s current policy, 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 orphan designated approved 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. For example, the FDA recently issued a final
guidance document specific to sameness determinations. Depending on product characteristics, sameness may be
determined by the FDA on a case by case basis, making it difficult to predict when FDA may approve a product and
whether periods of exclusivity will effectively block competitors seeking to market products that are the same or similar
to ours for the same intended use. Moreover, following the Catalyst Pharms., Inc. v. Becerra and FDA’s subsequent
statement that it intends to continue to apply its regulations tying the scope of orphan-drug exclusivity to the uses or
indications for which a drug is approved, as further described in this filing, the exact scope of orphan drug exclusivity may
be an evolving space. Accordingly, whether any of our products or product candidates will be deemed to be the same as
another product or product candidate is uncertain and the scope of any potential or received orphan drug exclusivity period
may be subject to revision.
Obtaining orphan drug designation 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 one of our approved
products with orphan 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.
For certain of our products, periods of orphan drug exclusivity are important. For instance, for Emflaza, we rely on non-
patent market exclusivity periods under the Orphan Drug Act to commercialize Emflaza in the United States. Emflaza’s
seven-year period of orphan drug exclusivity related to the treatment of DMD in patients five years and older expires in
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February 2024 while its orphan drug exclusivity related to the treatment of DMD in patients two years of age to less than
five expires in June 2026. If we are not able to maintain orphan drug exclusivity for Emflaza or if another company is
able to overcome this exclusivity, we may be materially harmed.
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.
All pharmaceutical products for which marketing authorization has been granted 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. For example, we
were 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. Additionally, our marketing authorizations
for Translarna, Tegsedi and Waylivra in Brazil and our marketing authorization for Translarna in Russia 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.
Regulatory authorities conduct ongoing reviews and inspections or remote regulatory assessments of marketed products,
as well as sponsors and manufacturing facilities. Regulatory authorities also conduct inspections of manufacturing
facilities and clinical trial sites before approving a product, which can delay approval. If compliance issues are found, it
could also result in refusal to approve marketing applications, 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
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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 and do 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 healthcare
fraud and abuse laws, as well as state consumer protection laws.
In addition, later discovery of previously unknown adverse events or other problems with our products, manufacturers or
manufacturing processes, or failure to comply with regulatory requirements, both before and after product approval, may
yield various results which could negatively affect our business, including:
restrictions on such products, manufacturers or manufacturing processes;
changes to or restrictions on the labeling or marketing of a product;
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(cid:120) 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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(cid:120) warning, cyber or untitled letters;
(cid:120) withdrawal of the products from the market or marketing suspensions;
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(cid:120) 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
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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 may face competition from biosimilar, generic, and similar products approved through abbreviated pathways, as
well as products approved pursuant to full applications.
Our approved products may face competition from products approved via abbreviated pathways as well as products
approved pursuant to full applications. For example, our biologic products may face competition from biosimilar or
interchangeable products. Sponsors seeking approval of biosimilar or interchangeable products to ours would reference
our product in their applications. The applicable laws, however, establish certain protections for reference biologic
products. For example, there is a complex and involved framework for sponsors to bring patent infringement actions and
actions for declaratory judgment. Accordingly, 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 for biologic products is a period of 12 years of exclusivity for reference products that begins
on the date that the reference product was first licensed by the FDA. During this time, the 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. This exclusivity period, however, is subject to certain limitations.
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 biologic 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. 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.
For small molecule drug products, a pharmaceutical manufacturer may file an abbreviated new drug application, or ANDA,
seeking approval of a generic copy of one of our approved products. A manufacturer could also submit an NDA under
section 505(b)(2), referencing the FDA’s finding of safety and efficacy for one of our drug products, while also conducting
its own studies to support any product changes. Any ANDA or 505(b)(2) NDA products referencing our approved products
would be required to submit patent certifications to the FDA. Unless the applicant does not seek approval until any of our
Orange Book listed patents expire or, to the extent possible, carve out any of our Orange Book listed method of use patents,
such an applicant would be required to submit what is known as a “Paragraph IV certification,” challenging the validity
or enforceability of, or claiming non-infringement of, the listed patent or patents. This would provide us with an
opportunity to sue to enforce our patents, which would stay any FDA approval for 30 months from the patent or application
owner’s receipt of the notice of the paragraph IV certification, the expiration of the patent, when the infringement case
concerning each such patent is favorably decided in the applicant’s favor or settled, or such shorter or longer period as
may be ordered by a court. While this would delay the approval of the generic or 505(b)(2) product, such actions would
require significant time and cost.
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Our small molecule drug products may also be eligible for certain periods of regulatory exclusivity (e.g., five years for
new chemical entities, three years for changes to an approved drug requiring a new clinical study, and seven years for
orphan drugs), which preclude FDA approval (or in some circumstances, FDA filing and review of) an ANDA or 505(b)
(2) NDA relying on the FDA’s finding of safety and effectiveness for the innovative drug. These exclusivities, however,
are also subject to certain limitations. For instance, they would not block FDA acceptance and approval of full NDA
applications.
Even with the various protections in place, we may not be successful in securing or maintaining proprietary patent
protection for our products and product candidates necessary to prevail should we need to bring any challenges under the
above FDA regulatory structures. We may also not receive any anticipated periods of regulatory exclusivity. Competition
that our products may face from biosimilar, interchangeable, generic, or 505(b)(2) NDA 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 drug and biologic competition in the market,
in an effort to bring down the cost of pharmaceutical products.
Commercialization of Translarna and Upstaza 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 or Upstaza for the treatment of AADC
deficiency 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 or Upstaza for the treatment of AADC
deficiency 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 or Upstaza 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 completion. Pricing negotiations may continue after reimbursement has been obtained. We cannot predict the
timing of Translarna’s or Upstaza’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 and Upstaza for the treatment of AADC deficiency 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
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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. In addition, adverse clinical and regulatory developments may exacerbate these risks.
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 Upstaza 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 professionals and third-party payors play a primary role in the recommendation and prescription of any
products or product candidates. Our arrangements with customers, healthcare 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 result in business practices and operations that expose 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.
There are numerous 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, as well as self-
regulatory codes. Efforts to ensure that we and 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
healthcare professionals 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, procurement and non-procurement programs would adversely affect, perhaps materially, our ability to
commercialize, sell or distribute any drug. Even if we were not determined to have violated these laws, government
investigations into these issues typically require the expenditure of significant time and resources and generate negative
publicity, which could also have an adverse effect on our business, financial condition and results of operations.
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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 our products or
product candidates, restrict or regulate post-approval activities and affect our ability to profitably sell any products or
product candidates 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 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 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, legal challenges to the Affordable Care Act may contribute to the uncertainty of the ongoing
implementation and impact of the Affordable Care Act and also underscore 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” and, in certain circumstances, required
inclusion of patient copay assistance in Medicaid best price (effective January 1, 2023), 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.
In 2020, the Trump administration issued several executive orders intended to lower the costs of prescription products and
certain provisions in these orders have been incorporated into regulations. These regulations include an interim final rule
implementing a most favored nation model for prices that would tie Medicare Part B payments for certain physician-
administered pharmaceuticals to the lowest price paid in other economically advanced countries, effective January 1, 2021.
That rule, however, has been subject to a nationwide preliminary injunction and, on December 29, 2021, CMS issued a
final rule to rescind it. With issuance of this rule, CMS stated that it will explore all options to incorporate value into
payments for Medicare Part B pharmaceuticals and improve beneficiaries' access to evidence-based care.
More recently, on August 16, 2022, the IRA was signed into law by President Biden. The new legislation has implications
for Medicare Part D, which is a program available to individuals who are entitled to Medicare Part A or enrolled in
Medicare Part B to give them the option of paying a monthly premium for outpatient prescription drug coverage. Among
other things, the IRA requires manufacturers of certain drugs to engage in price negotiations with Medicare (beginning in
2026), with prices that can be negotiated subject to a cap; imposes rebates under Medicare Part B and Medicare Part D to
penalize price increases that outpace inflation (first due in 2023); and replaces the Part D coverage gap discount program
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with a new discounting program (beginning in 2025). The IRA permits the Secretary of the HHS to implement many of
these provisions through guidance, as opposed to regulation, for the initial years.
Specifically, with respect to price negotiations, Congress authorized Medicare to negotiate lower prices for certain costly
single-source drug and biologic products that do not have competing generics or biosimilars and are reimbursed under
Medicare Part B and Part D. CMS may negotiate prices for ten high-cost drugs paid for by Medicare Part D starting in
2026, followed by 15 Part D drugs in 2027, 15 Part B or Part D drugs in 2028, and 20 Part B or Part D drugs in 2029 and
beyond. This provision applies to drug products that have been approved for at least 9 years and biologics that have been
licensed for 13 years, but it does not apply to drugs and biologics that have been approved for a single rare disease or
condition. Nonetheless, since CMS may establish a maximum price for these products in price negotiations, we would be
fully at risk of government action if our products are the subject of Medicare price negotiations. Moreover, given the risk
that could be the case, these provisions of the IRA may also further heighten the risk that we would not be able to achieve
the expected return on our drug products or full value of our patents protecting our products if prices are set after such
products have been on the market for nine years.
Further, the legislation subjects drug manufacturers to civil monetary penalties and a potential excise tax for failing to
comply with the legislation by offering a price that is not equal to or less than the negotiated “maximum fair price” under
the law or for taking price increases that exceed inflation. The legislation also requires manufacturers to pay rebates for
drugs in Medicare Part D whose price increases exceed inflation. The new law also caps Medicare out-of-pocket drug
costs at an estimated $4,000 a year in 2024 and, thereafter beginning in 2025, at $2,000 a year.
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:
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controls on government funded reimbursement for drugs;
caps or mandatory discounts under certain government sponsored programs;
controls on healthcare providers;
challenges to the pricing of drugs or limits on reimbursement of 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, Upstaza 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 our products or product candidates,
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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 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.
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 Censa, 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. Censa
securityholders may also be entitled to receive contingent consideration payments from us in the future. We may never
realize the anticipated benefits of the acquisition of Censa and by investing our resources in sepiapterin, we may be required
to forgo or delay other opportunities.
In addition, we have previously commenced clinical trials that were not successful for a number of reasons, including
inconsistent or negative data and difficulties identifying qualified patients. 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.
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 been granted marketing authorization for a limited
number of commercial products and have not achieved profitability. 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 authorizations for our
current products 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 face risks related to health epidemics and other widespread outbreaks of contagious disease, which have previously,
and may once again, 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 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
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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, vaccine mandates, 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 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, at one point in time, 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 has had an adverse impact
on our clinical trial plans and timelines. 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. For example, we previously experienced
delays in enrolling our registration-directed Phase 2/3 randomized, placebo-controlled trial of vatiquinone in children with
mitochondrial disease associated seizures as some patients were unable or hesitant to travel to clinical trial sites due to the
COVID-19 pandemic. We anticipate results from the Phase 2/3 trial to be available in the second quarter of 2023. 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 healthcare providers and institutions has been limited in certain regions of the world, we have had to transition
to virtual and online promotion to reach existing and potential customers in those areas. 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. For example, in response to the COVID-19 pandemic, China has at times imposed complete lockdowns
of cities that have experienced a high number of COVID-19 cases. We contract with third-party manufacturers located in
China that may be forced to shut down for an unknown amount of time if the Chinese government determines that there
is a COVID-19 outbreak where they are located. Additionally, we have experienced delays in certain of our preclinical
programs due to a shortage in non-human primates. Many manufacturers have also experienced shortages of key equipment
and ingredients needed for product manufacturing. 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 to regulatory approval. In
response to the global uncertainty caused by the COVID-19 pandemic, 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 example, due to delays related to responsive measures to the COVID-19 pandemic taken in Europe in
2021, including travel bans and quarantines, the CHMP required additional time to complete its pre-approval inspections
and imposed a clock stop extension with respect to our MAA for the treatment of AADC deficiency in the EEA. To the
extent that inspections of facilities by governmental authorities are required, the review of our marketing applications or
supplements may further be delayed as regulatory authorities, such as FDA, have significantly limited facility inspections
during the pandemic.
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We cannot predict the severity and duration of future COVID-19 outbreaks or other widespread outbreaks of contagious
diseases. If COVID-19 outbreaks or other outbreaks are 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
or other future potential outbreaks of contagious diseases will have on our business and their potential to materially
adversely affect our business, financial condition, results of operations, and prospects.
We contract with third parties for the manufacture and distribution of our products and certain of 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 the 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 most of the
manufacturing, packaging, labeling and distribution of our products and certain of our product candidates to third parties,
including our commercial supply of Translarna, Emflaza and Upstaza. In 2021, we began cGMP manufacturing of clinical
material at the Hopewell Facility for certain of our gene therapy product candidates. We also utilize the Hopewell Facility
to produce plasmid DNA and AAV vectors for gene therapy applications for external customers. We still rely on third-
party manufacturers to complete product testing for all of our gene therapy product candidates that we manufacture at the
Hopewell Facility as well as to provide sufficient quantities of certain program materials that we have not yet transitioned
to Hopewell. With respect to the Hopewell Facility, we are required to directly comply with the applicable regulatory
authorities’ manufacturing requirements and are subject to inspection in the same way that our contract manufacturers are.
Utilizing our own manufacturing will require a significant continued investment and we may not be successful in
maintaining our own manufacturing capacity, especially given the complexities of gene therapy manufacturing. For
additional information, see the risk factor under “Risks Related to the Development and Commercialization of our Products
and Product Candidates” titled, “Certain of our products and product candidates, such as our gene therapies and other
biologic product candidates, may be difficult to produce, presenting manufacturing challenges that may delay product
development and regulatory approval.”
We do 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, regulatory authorities routinely
inspect manufacturing and other drug/biologic facilities. Our manufacturers and manufacturing facilities must also be
approved by such regulatory authorities pursuant to inspections that will be conducted after we submit our marketing
applications and will be subject to continuing 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 generally accepted worker safety standards, cGMP, 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
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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 our reputation and 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 products or 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, particularly as the pharmaceutical
manufacturing industry becomes increasingly more consolidated. To the extent that we decide to manufacture our own
clinical and commercial supply of Upstaza 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 the relevant regulatory authority, 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. See “Item 1. Business—Manufacturing” for additional
information regarding the manufacturing of our products and product candidates.
Even if we are able to establish and maintain arrangements with third-party manufacturers, distributors and other third
parties, reliance on such third parties entails additional risks, including:
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reliance on the third party for regulatory compliance and quality assurance;
the possible breach of the agreements by the third party;
the possible misappropriation of our proprietary information, including our trade secrets and know-how;
the possibility of commercial supplies of our products not being distributed to commercial vendors or end users
in a timely manner, resulting in lost sales;
the possibility of clinical supplies not being delivered to clinical sites on time, leading to clinical trial
interruptions;
the possibility of third-party resources not being devoted in the manner necessary to satisfy our requirements
within the expected time frame;
the possibility of third parties not providing us with accurate or timely information regarding their inventories,
the number of patients who are using our products, or serious adverse events and/or product complaints regarding
our products;
the possibility of third parties being unable to satisfy their financial obligations to us or to others; and
the possible termination or nonrenewal of a critical agreement by the third party at a time that is costly or
inconvenient to us.
Many additional factors could cause production or distribution interruptions with the manufacture and distribution of any
of our products and product candidates, including human error, natural disasters, labor disputes, acts of terrorism or war,
equipment malfunctions, contamination, supply chain disruption, including disruptions caused by the COVID-19
pandemic, or raw material and component shortages. We have previously experienced delays in receiving certain raw
materials in connection with supply chain disruptions caused by the COVID-19 pandemic, however, these delays did not
affect or delay our manufacturing given our inventories for such materials at the time. If future supply chain disruptions
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create prolonged delays, the supplies of our products or products candidates may be significantly and adversely affected
and our business, results of operations and financial condition could be materially adversely affected.
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 our products or product candidates 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.
In addition, to the extent that any contract manufactures that we engage develop proprietary manufacturing processes or
procedures, should we need to change manufacturers, we may not be able to transfer 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 regulatory authority 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,
Upstaza, Tegsedi, Waylivra and certain of our product candidates may adversely affect our business, financial condition,
results of operations and limit our ability to grow including our ability to develop product candidates and commercialize
our products that receive regulatory approval on a timely and competitive basis.
We rely on third parties to conduct our preclinical and clinical trials, and those third parties may not perform
satisfactorily, including failing to meet deadlines for the completion of such trials.
We do not independently conduct preclinical or clinical trials for our products or product candidates. We rely on third
parties, such as contract research organizations, clinical data management organizations, medical institutions and clinical
investigators, to perform this function. While we have agreements governing the activities of such third parties, we have
limited influence and control over their actual performance and activities. For instance, our third-party service providers
are not our employees, and except for remedies available to us under our agreements with such third parties we cannot
control whether or not they devote sufficient time and resources to our ongoing clinical, non-clinical, and preclinical
programs. If these third parties do not successfully carry out their contractual duties, meet expected deadlines or conduct
our preclinical studies or clinical trials in accordance with regulatory requirements or our stated protocols, if they need to
be replaced or if the quality or accuracy of the data they obtain is compromised due to the failure to adhere to our protocols,
regulatory requirements or for other reasons, our trials may be repeated, extended, delayed, or terminated, we may not be
able to obtain, or may be delayed in obtaining, marketing approvals for our product candidates, we may not be able to, or
may be delayed in our efforts to, successfully commercialize our product candidates, or we or they may be subject to
regulatory enforcement actions. As a result, our results of operations and the commercial prospects for our product
candidates would be harmed, our costs could increase and our ability to generate revenues could be delayed. To the extent
we are unable to successfully identify and manage the performance of third-party service providers in the future, our
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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 will 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 or remote regulatory assessments 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.
Furthermore, third parties that we rely on for our clinical development activities may also have relationships with other
entities, some of which may be our competitors. If these third parties do not successfully carry out their contractual duties,
meet expected deadlines or conduct our clinical trials in accordance with regulatory requirements or our stated protocols,
we will not be able to obtain, or may be delayed in obtaining, marketing authorizations for our product candidates and will
not be able to, or may be delayed in our efforts to, successfully commercialize our product candidates. Our product
development costs will increase if we experience delays in testing or obtaining marketing authorizations.
We also rely on other third parties to store and distribute drug supplies for our clinical trials. Any performance failure on
the part of our distributors could delay clinical development or marketing authorizations of our products or product
candidates or commercialization of our products, producing additional losses and depriving us of potential product
revenue.
We 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.
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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;
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 will substantially rely on it as well as other third-party providers that perform
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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
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 and other civil lawsuits against us could cause us to incur substantial liabilities and to limit clinical
trials or commercialization of any current or future products. Our insurance program may not be extensive enough to
adequately protect us against these risks.
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, any gene therapy product materials that we manufacture for third parties
at the Hopewell Facility 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, products or gene therapy product
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materials caused injuries, we will incur substantial liabilities. Regardless of merit or eventual outcome, liability claims
may result in:
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reduced resources of our management to pursue our business strategy;
decreased demand for our products or any product candidates that we may develop;
decreased demand for the gene therapy product materials that we manufacture for third parties at the Hopewell
Facility;
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.
We have a broad insurance program covering risks appropriate to our research and development activities, clinical
programs, and aggregate annual limits of $25.0 million covering our products and sales. We also have industry standard
insurance policies covering other aspects of our business and operations based on our locations, activities and other
relevant factors. With respect to all insurance matters, we are advised by our insurance brokers and our insurance advisor,
who we retain and compensate on a non-commission basis. However, our insurance program may not adequately cover
the risks that we face for a variety of reasons, including:
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certain risks and related losses, such as delays to our clinical and development programs, are too speculative or
unquantifiable for us to adequately insure against;
if we were to face multiple claims, renewing or replacing our insurance may become more expensive, the terms
(including deductibles and limits) we receive may worsen, and we may even have difficulty securing any coverage
at all;
our insurance limits may not be adequate to cover all liabilities and defense costs that we may incur; and
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(cid:120) we may need to further increase our insurance coverage if we commercialize our current products in additional
jurisdictions, our sales increase, or we commercialize new products.
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.
In addition, we could be subject to other costly civil litigation, including contractual claims with respect to our expected
manufacturing of gene therapy product materials for potential external customers. If our customers believe that we have
violated our contractual terms, they may seek reimbursement for the cost of our gene therapy product materials or other
related losses, the cost of which could be significant.
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, manufacturing 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
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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.
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.
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, Emflaza, Upstaza, Tegsedi and Waylivra and, if approved, 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.
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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 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 proprietary
technology and products. This process is expensive and time-consuming, and we may not be able to file and prosecute all
necessary or desirable patent applications. It is also possible that we will fail to file a patent application on patentable
aspects of our research and development. Moreover, if we license technology or product candidates from third parties,
these license agreements may not permit us to control the filing and prosecution of patent applications, or to maintain or
enforce the patents. 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, 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 commercial value of our
patent rights are highly uncertain. Our pending and future patent applications may not result in patents being issued which
prevent others from commercializing competitive technologies and products. Changes in patent laws or their interpretation
in the United States and other countries may diminish the value of our patents.
The laws of ex-U.S. countries may not protect our rights to the same extent as the laws of the United States. For example,
patent law in many countries restricts the patentability of methods of treatment of the human body more than U.S. law
does. In addition, we may not pursue or obtain or be able to pursue or obtain patent protection in all major markets.
Assuming the other requirements for patentability are met, currently, the first to file a patent application is generally
entitled to the patent. However, prior to March 16, 2013, in the United States, the first to invent was entitled to the patent.
Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the
United States and other jurisdictions are typically not published until 18 months after filing, or in some cases not at all.
Therefore, we cannot know with certainty whether we were the first to make the inventions claimed in our patents or
pending patent applications, or that we were the first to file for patent protection of such inventions. In addition, the Leahy-
Smith America Invents Act of 2011, or the Act, which reformed certain patent laws in the U.S., may create additional
uncertainty. The significant changes engendered by the Act include switching from a “first-to-invent” system to a “first-
to-file” system, and the implementation of new procedures that permit competitors to challenge our patents in the USPTO
after grant, including inter partes review and post grant review.
Moreover, we may be subject to a third party prior art submissions in a patent office, or may become involved in patent
office proceedings, including oppositions, derivation proceedings, reexamination, inter partes review, post grant review,
interference 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.
Even if our patent applications issue as patents, they may not issue in a form that will provide us with any meaningful
protection or prevent competitors from competing with us. Our competitors may be able to circumvent our owned or
licensed patents by developing alternative technologies or products in a non-infringing manner. Other companies may also
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 European Union, or 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.
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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 or violating our
intellectual property and other rights may ultimately be unsuccessful. We may also fail to take the required actions 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 Court of Justice of the EU, or CJEU, but the CJEU dismissed our appeal in January 2020 and
released the information to the requester.
An issued patent may be challenged, and our owned and licensed patents may be challenged 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. Given the amount of time required for the
development, testing and regulatory review of new product candidates, patents protecting such candidates might expire
before or shortly after such candidates are commercialized. As a result, our patent portfolio may not provide us with
sufficient rights to exclude others from commercializing products similar or identical to ours.
We may become involved in lawsuits to protect or enforce our intellectual property, which could be expensive, time
consuming and unsuccessful.
Competitors may infringe our 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.
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. We may not be aware of all intellectual property rights potentially
relating to our product and our product candidates. Typically, patent applications in the United States and other
jurisdictions are not published until 18 months after filing, or in some cases not at all, and new patent applications are
continuously publishing. Thus, we may not be aware of patents or patent applications relating to our product or our product
candidates. There may be pending or future patent applications that, if issued, would block us from commercializing our
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.
We may become party to, or threatened with, future adversarial proceedings or litigation regarding intellectual property
rights or other proprietary with respect to our products and technology. Third parties may assert infringement claims
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against us based on existing or future intellectual property rights. We may allege that a third party patent we are alleged to
infringe is invalid and/or we may be able to avail ourselves in the United States of the safe harbor exemption provided by
the Hatch-Waxman Act as a basis for non-infringement. In order to successfully challenge the validity of a third party
issued U.S. patent that we are alleged to infringe, 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 in a post grant proceeding.
There is no assurance that a court or the USPTO would find these claims to be invalid or unpatentable, respectively.
If we are found to infringe a third party’s intellectual property rights, or in order to avoid or settle litigation, we may seek
to obtain a license to continue developing and marketing our products and technology. However, we may not be able to
obtain any such license on commercially reasonable terms or at all. Also, any license obtained may 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 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.
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 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 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 such proceedings. 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 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 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
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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,
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.
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. Emflaza’s seven-
year period of orphan drug exclusivity related to the treatment of DMD in patients five years and older expires in February
2024. Emflaza’s orphan drug exclusivity related to the treatment of DMD in patients two years of age to less than five
expires in June 2026.
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 our products 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.
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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, or 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 in most jurisdictions, we may not be able to
successfully overcome them. In addition, in the U.S. Patent and Trademark Office and Trademark Offices in many other
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. Further, if we do not secure registrations for our trademarks, we may encounter
difficulty enforcing our trademark rights against third parties in the jurisdictions where we do not have registered rights.
If we are not able to obtain adequate trademark protection or regulatory approval for our brand names, we may be
required to re-brand affected products, which could cause delays in getting such products to market and substantially
increase our costs.
To protect our rights in any trademark we intend to use for our products or product candidates, we may seek to register
such trademarks. Trademark registration is territory-specific and we must apply for trademark registration in the United
States as well as any other country where we intend to commercialize our product or product candidates. Failure to obtain
trademark registrations may place our use of the trademarks at risk or make them subject to legal challenges, which could
force us to choose alternative names for our product or product candidates. In addition, the FDA, and other regulatory
authorities outside the United States, conduct an independent review of proposed product names for pharmaceuticals,
including an evaluation of the potential for confusion with other pharmaceutical product names for medications, which
could result in medication errors in prescribing, 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 Upstaza and our other 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 Upstaza for the treatment of AADC deficiency and our other gene therapy product
candidates. In particular, we have in-licensed certain intellectual property rights and know-how from National Taiwan
University, or NTU, relevant to Upstaza 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 Upstaza
for the treatment of AADC deficiency and our other 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 Upstaza for the treatment of AADC deficiency, 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
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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 Upstaza 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 Upstaza for the
treatment of AADC deficiency, or if the agreement is terminated, we may be unable to successfully develop and
commercialize the affected product candidates.
If we fail to comply with our obligations in our intellectual property licenses and funding arrangements with third
parties, we could lose rights that are important to our business.
We are a party to a number of license agreements and expect to enter into additional licenses in the future. Our existing
licenses impose, and we expect that future licenses will impose, various diligence, milestone payment, royalty, insurance
and other obligations on us. If we fail to comply with these obligations, the licensor may have the right to terminate the
license, in which event we might not be able to market any product that is covered by these agreements, which could
materially adversely affect the value of the product candidate being developed under such license agreement. Termination
of these license agreements or reduction or elimination of our licensed rights may result in our having to negotiate new or
reinstated licenses with less favorable terms or cause us to lose rights in important intellectual property or technology.
We have also received grant funding for some of our development programs from philanthropic organizations and patient
advocacy groups pursuant to agreements that impose development and commercialization diligence obligations on us. If
we fail to comply with these obligations, the applicable organization could require us to grant to the organization exclusive
rights under certain of our intellectual property, which could materially adversely affect the value to us of product
candidates covered by that intellectual property even if we are entitled to a share of any consideration received by such
organization in connection with any subsequent development or commercialization of the product candidates.
Some of our patented technology was developed with U.S. federal government funding. When new technologies are
developed with U.S. government funding, the government obtains certain rights in any resulting patents, including a
nonexclusive license authorizing the government to use the invention for non-commercial purposes. These rights may
permit the government to disclose our confidential information to third parties and to exercise “march-in” rights to use or
allow third parties to use our patented technology. The government can exercise its march-in rights if it determines that
action is necessary because we fail to achieve practical application of the U.S. government-funded technology, because
action is necessary to alleviate health or safety needs, to meet requirements of federal regulations or to give preference to
U.S. industry. In addition, U.S. government-funded inventions 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 2026 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 2026 Convertible Notes upon a fundamental change, which could adversely affect
our business, financial condition and results of operations.
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 2026 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 2026 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
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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.
Upon conversion of the 2026 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 2026 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 2026 Convertible Notes, to pay the 2026 Convertible
Notes at maturity or to pay cash upon conversions of 2026 Convertible Notes. In addition, our ability to repurchase 2026
Convertible Notes or to pay cash upon conversions of 2026 Convertible Notes may be limited by law, by regulatory
authority or by agreements governing our future indebtedness. Our failure to repurchase 2026 Convertible Notes at a time
when the repurchase is required by the indenture, to make interest payments on the 2026 Convertible Notes when due
under the indenture or to pay any cash payable on future conversions of the 2026 Convertible Notes as required by the
indenture would constitute a default under each indenture governing the 2026 Convertible Notes and the Blackstone Credit
Agreement. An event of default under the applicable indenture governing the 2026 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 2026 Convertible Notes, make interest payments on the 2026 Convertible
Notes or make cash payments upon conversions of the 2026 Convertible Notes.
Even if holders of the 2026 Convertible Notes do not elect to convert their 2026 Convertible Notes, we could be required
to reclassify all of the outstanding principal of the 2026 Convertible Notes as a current rather than long-term liability in
accordance with applicable accounting rules, 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.
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The price of our common stock may be volatile and fluctuate substantially, which could result in substantial losses for
purchasers of our common stock and lawsuits against us and our officers and directors.
Our stock price has been and will likely continue to be volatile. The stock market in general and the market for smaller
pharmaceutical and biotechnology companies in particular have experienced extreme volatility that has often been
unrelated to the operating performance of particular companies. As a result of this volatility, our stockholders may not be
able to sell their common stock at or above the price at which they purchased it. The market price for our common stock
may be influenced by many factors, including:
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expectations with respect to our gene therapy platform, including any potential regulatory submissions and
potential approvals, including those related to Upstaza;
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, Russia
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 and conduct, 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;
the commercialization of Evrysdi and the development of the SMA program with Roche and the SMA
Foundation;
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, including negative results that investors may
associate with our product candidates;
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, including potentially high inflation rates; and
the other factors described in this “Risk Factors” section.
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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
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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.
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 the Blackstone Credit Agreement preclude us
from paying dividends, other than permitted dividends set forth in the agreement. In addition, the terms of any future debt
agreements may preclude us from paying dividends. As a result, capital appreciation, if any, of our common stock will be
our stockholders’ sole source of gain for the foreseeable future.
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.
Additionally, certain shares that we issued in connection with our acquisitions or other strategic transactions have not yet
been sold and are currently restricted as a result of securities laws. These shares may 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, including
sales made under 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 million from time to time, through the Sales Agent 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, or the issuance of
shares of our common stock upon conversion of our outstanding 2026 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.
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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. Additionally, we entered
into a lease agreement for approximately 103,000 square feet of laboratory and office space in Bridgewater, New Jersey.
The rental term for such facility commenced on May 1, 2020 with an initial term of seven years and two consecutive five
year renewal periods at our option. We 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 also lease two entire buildings comprised of approximately 360,000 square feet of shell condition,
modifiable space at a facility located in Warren, New Jersey. The rental term for such facility commenced on June 1, 2022,
with an initial term of seventeen years followed by three consecutive five-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 2024. We also lease additional office space in the U.S. and other countries to support our operations as a
global organization, but these leases are not material to us.
Item 3. Legal Proceedings
From time to time in the ordinary course of our business, we are subject to claims, legal proceedings and disputes. We are
not currently aware of any material legal proceedings which we are a party to or of which any of our property is the subject.
Item 4. Mine Safety Disclosures
None.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuers Purchases of Equity
Securities
Market Information
Our common stock has been publicly traded on the 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 17, 2023, there were 98 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.
Item 6. [Reserved]
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis is meant to provide material information relevant to an assessment of the
financial condition and results of operations of our company, including an evaluation of the amounts and certainty of cash
flows from operations and from outside resources, so as to allow investors to better view our company from management’s
perspective. 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 innovate to identify new therapies and to globally commercialize products is the foundation that drives investment in a
robust and diversified pipeline of transformative medicines. Our mission is to provide access to best-in-class treatments
for patients who have little to no treatment options. Our strategy is to leverage our strong scientific and clinical expertise
and global commercial infrastructure to bring therapies to patients. We believe that this allows us to maximize value for
all of our 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 for rare diseases relating to neurology, metabolism 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
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aged two years and older and in Russia for the treatment of nmDMD in patients aged two 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. Translarna also has marketing authorization in Brazil for the
treatment of nmDMD in ambulatory patients two years and older and for continued treatment of patients that become non-
ambulatory. During the year ended December 31, 2022, we recognized $288.6 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, 2022, Emflaza
achieved net sales of $218.3 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 2022, the European Commission renewed our
marketing authorization, making it effective, unless extended, through August 5, 2023. 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. In June 2022, we announced top-line results
from the placebo-controlled trial of Study 041. Within the placebo-controlled trial, Translarna showed a statistically
significant treatment benefit across the entire intent to treat population as assessed by the 6-minute walk test, assessing
ambulation and endurance, and in lower-limb muscle function as assessed by the North Star Ambulatory Assessment, a
functional scale designed for boys affected by DMD. Additionally, Translarna showed a statistically significant treatment
benefit across the intent to treat population within the 10-meter run/walk and 4-stair stair climb, each assessing ambulation
and burst activity, while also showing a positive trend in the 4-stair stair descend although not statistically significant.
Within the primary analysis group, Translarna demonstrated a positive trend across all endpoints, however, statistical
significance was not achieved. Translarna was also well tolerated. In September 2022, we submitted a Type II variation to
the EMA to support conversion of the conditional marketing authorization for Translarna to a standard marketing
authorization, which included a report on the placebo-controlled trial of Study 041 and data from the open-label extension.
We expect an opinion from the Committee for Medicinal Products for Human Use in the first half of 2023.
Each country, including each member state of the EEA, has its own pricing and reimbursement regulations. In order
to commence commercial sale of product pursuant to our Translarna marketing authorization in any particular country in
the EEA, we must finalize pricing and reimbursement negotiations with the applicable government body in such country.
As a result, our commercial launch will continue to be on a country-by-country basis. We also have made, and expect to
continue to make, product available under early access programs, or EAP programs, both in countries in the EEA and other
territories. Our ability to negotiate, secure and maintain reimbursement for product under commercial and EAP programs
can be subject to challenge in any particular country and can also be affected by political, economic and regulatory
developments in such country.
There is substantial risk that if we are unable to renew our EEA marketing authorization during any annual renewal
cycle, or if our product label is materially restricted, or if Study 041 does not provide the data necessary to maintain our
marketing authorization, we would lose all, or a significant portion of, our ability to generate revenue from sales of
Translarna in the EEA and other territories.
Translarna is an investigational new drug in the United States. During the first quarter of 2017, we filed a 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. Study 045 did not meet its pre-specified primary endpoint. In June 2022, we
announced top-line results from the placebo-controlled trial of Study 041. Following this announcement, we submitted a
meeting request to the FDA to gain clarity on the regulatory pathway for a potential re-submission of an NDA for
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Translarna. The FDA provided initial written feedback that Study 041 does not provide substantial evidence of
effectiveness to support NDA re-submission. We recently had an informal meeting with the FDA, during which we
discussed the potential path to an NDA re-submission for Translarna. Based on the meeting discussion, we plan to request
an additional Type C meeting with the FDA in the near future to review the totality of data collected to date, including
dystrophin and other mechanistic data as well as additional analyses that could support the benefit of Translarna.
We have a pipeline of gene therapy product candidates for rare monogenic diseases that affect the CNS, including
Upstaza for the treatment of Aromatic L-Amino Decarboxylase, or AADC, deficiency, a rare central nervous system, or
CNS, disorder arising from reductions in the enzyme AADC that results from mutations in the dopa decarboxylase gene,
for patients 18 months and older within the EEA. In July 2022, the European Commission approved Upstaza for the
treatment of AADC deficiency for patients 18 months and older within the EEA. In November 2022, the Medicines and
Healthcare Products Regulatory Agency approved Upstaza for the treatment of AADC deficiency for patients 18 months
and older within the United Kingdom. We are also preparing a biologics license application, or BLA, for Upstaza for the
treatment of AADC deficiency in the United States. In October 2022, we held a type C meeting with the FDA to discuss
the details of a potential submission package for Upstaza. At such meeting, the FDA asked for additional bioanalytical
data in support of comparability between the drug product used in the clinical studies and the commercial drug product.
We have completed these analyses and provided the results to the FDA for review. We expect to submit a BLA to the FDA
in the first half of 2023.
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 a Collaboration and License Agreement, or the Tegsedi-Waylivra
Agreement, dated August 1, 2018, by and between us and Akcea Therapeutics, Inc., or Akcea, a subsidiary of Ionis
Pharmaceuticals, Inc. Tegsedi has received marketing authorization in the United States, European Union, or EU, and
Brazil for the treatment of stage 1 or stage 2 polyneuropathy in adult patients with hereditary transthyretin amyloidosis, or
hATTR amyloidosis. We began to make commercial sales of Tegsedi for the treatment of hATTR amyloidosis in Brazil
in the second quarter of 2022 and we continue to make Tegsedi available in certain other countries within Latin America
and the Caribbean through EAP programs. In August 2021, ANVISA, the Brazilian health regulatory authority, approved
Waylivra as the first treatment for familial chylomicronemia syndrome, or FCS, in Brazil and we began to make
commercial sales of Waylivra in Brazil in the third quarter of 2022 while continuing to make Waylivra available in certain
other countries within Latin America and the Caribbean through EAP programs. In December 2022, ANVISA approved
Waylivra for the treatment of familial partial lipodystrophy, or FPL. Waylivra has also received marketing authorization
in the EU for the treatment of FCS.
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 by the FDA in August 2020 for
the treatment of SMA in adults and children two months and older and by the European Commission in March 2021 for
the treatment of 5q SMA in patients two months and older with a clinical diagnosis of SMA Type 1, Type 2 or Type 3 or
with one to four SMN2 copies. Evrysdi also received marketing authorization for the treatment of SMA in Brazil in October
2020 and Japan in June 2021. In May 2022, the FDA approved a label expansion for Evrysdi to include infants under two
months old with SMA and we expect the EMA to make a regulatory decision on approval for a label expansion for Evrysdi
to include infants under two months old with SMA in 2023. 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 announced the results
from our Phase 1 study of PTC518 in healthy volunteers in September 2021 demonstrating dose-dependent lowering of
huntingtin messenger ribonucleic acid and protein levels, that PTC518 efficiently crosses blood brain barrier at significant
levels and that PTC518 was well tolerated. We initiated a Phase 2 study of PTC518 for the treatment of HD in the first
quarter of 2022, which consists of an initial 12-week placebo-controlled phase focused on safety, pharmacology and
pharmacodynamic effects followed by a nine-month placebo-controlled phase focused on PTC518 biomarker effect.
Enrollment in the Phase 2 study remains active and ongoing outside of the United States. Enrollment within the United
States is paused as the FDA has requested additional data to allow the Phase 2 study to proceed; discussions are ongoing
with the FDA to allow the resumption of U.S. enrollment. We expect data from the initial 12-week phase of the Phase 2
study in the second quarter of 2023.
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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 utreloxastat. We initiated a registration-directed Phase 2/3 placebo-controlled
trial of vatiquinone in children with mitochondrial disease associated seizures in the third quarter of 2020. We have
completed enrollment in this trial after previously experiencing delays in enrollment due to the COVID-19 pandemic. We
anticipate results from the Phase 2/3 trial to be available in the second quarter of 2023. 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 results from this trial to be available in the second quarter of 2023. In the third quarter of 2021, we completed a
Phase 1 trial in healthy volunteers to evaluate the safety and pharmacology of utreloxastat. Utreloxastat was found to be
well-tolerated with no reported serious adverse events while demonstrating predictable pharmacology. We initiated a Phase
2 trial of utreloxastat for amyotrophic lateral sclerosis in the first quarter of 2022 and enrollment is ongoing.
The most advanced molecule in our metabolic platform is sepiapterin, a precursor to intracellular tetrahydrobiopterin,
which is a critical enzymatic cofactor involved in metabolism and synthesis of numerous metabolic products, for orphan
diseases. We initiated a registration-directed Phase 3 trial for sepiapterin for PKU in the third quarter of 2021 with the
primary endpoint in the study of achieving statistically-significant reduction in blood Phe level. The primary analysis
population includes those patients who have a greater than 30% reduction in blood Phe levels during the Part 1 run-in
phase of the trial. In January 2023, we announced preliminary data from the Part 1 run-in phase of this trial, including that
the mean reduction in blood Phe levels in an initial cohort of subjects during the Part 1 would be recognized as clinically
meaningful if maintained in Part 2 of the trial. We now expect results from Part 2 of this trial to be available in May 2023
as the trial is overenrolled and additional time is required for the entirety of the primary analysis population to complete
the study.
Unesbulin is our most advanced oncology agent. We completed our Phase 1 trials evaluating unesbulin in
leiomyosarcoma, or LMS, and diffuse intrinsic pontine glioma, or DIPG, in the fourth quarter of 2021. We initiated a
registration-directed Phase 2/3 trial of unesbulin for the treatment of LMS in the first quarter of 2022 and enrollment is
ongoing. The initiation of our registration-directed Phase 2/3 trial of unesbulin for DIPG was delayed as we continued to
track the progress of patients in our Phase 1 trial and analyze the corresponding data. We now expect to initiate a
registration-directed Phase 2/3 trial of unesbulin for the treatment of DIPG in the fourth quarter of 2023.
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 for rare
diseases.
COVID-19 Impact
The global pandemic caused by a strain of novel coronavirus, COVID-19, has impacted the timing of certain of our
clinical trials and regulatory submissions as well as other aspects of our business 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. For additional information, see “Item 1A. Risk
Factors - We face risks related to health epidemics and other widespread outbreaks of contagious disease, which have
previously, and may once again, 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 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 2022, 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. We also generated revenue
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from sales of Upstaza for the treatment of AADC deficiency in the EEA and have recognized revenue associated with
milestone and royalty payments from Roche pursuant to 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 our SMA
program.
See “Item 1. Business—Commercial Matters—Market Access Considerations” for additional information and
“Item 1A. Risk Factors—Commercialization of Translarna and Upstaza 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 or Upstaza for the
treatment of AADC deficiency 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 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, 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. We did not issue or sell any shares of common stock pursuant to
the Sales Agreement during the years ending December 31, 2021 and December 31, 2022. 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, 2022.
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.
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, or the Participating Rightholders, of Agilis Biotherapeutics, Inc., or Agilis, 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, Shareholder Representative
Services LLC, or the Agilis Merger Agreement.
On May 29, 2020, we acquired Censa Pharmaceuticals, Inc., or 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 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.
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
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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.
In June 2021, we filed a Certificate of Amendment to our Restated Certificate of Incorporation, which increased the
number of authorized shares of our common stock from 125,000,000 to 250,000,000 shares.
In October 2022, we entered into a credit agreement, or the Blackstone Credit Agreement, for fundings of up to $950.0
million consisting of a committed loan facility consisting of a senior secured term loan facility funded on October 27,
2022, or the Closing Date, in the aggregate principal amount of $300.0 million, and a delayed draw term loan facility of
up to $150.0 million to be funded at our request within 18 months of the Closing Date subject to specified conditions, and
further contemplating the potential for up to $500.0 million of additional financing, to the extent that we request such
additional financing and subject to the Lenders’ agreement to provide such additional financing and to mutual agreement
on terms among us and certain of our subsidiaries, or, collectively with us, the Loan Parties, and funds and other affiliated
entities advised or managed by Blackstone Life Sciences and Blackstone Credit, or collectively, Blackstone, and such
lenders, together with their permitted assignees, the Lenders, and Wilmington Trust, National Association, as the
administrative agent for the Lenders. 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.
In connection with the execution of the Blackstone Credit Agreement, we and certain entities affiliated with the
Lenders, or the Purchasers, also entered into a stock purchase agreement on the Closing Date for the sale and issuance of
1,095,290 shares of common stock to the Purchasers at a price of $45.65 per share, for an aggregate purchase price of
approximately $50.0 million. The per share price represents the closing price of our common stock on the Nasdaq Global
Select Market on October 26, 2022.
To date, we have financed our operations primarily through our offering of the 2026 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, net proceeds from our borrowings under the Blackstone Credit
Agreement, private placements of our convertible preferred stock and common stock, collaborations, bank and institutional
lender debt, other convertible debt, grant funding and clinical trial support from governmental and philanthropic
organizations and patient advocacy groups in the disease areas addressed by our product candidates. We have relied on
revenue generated from net sales of Translarna for the treatment of nmDMD in territories outside of the United States
since 2014, Emflaza for the treatment of DMD in the United States since 2017 and Upstaza for the treatment of AADC
deficiency in the EEA since May 2022. We have also relied on revenue associated with milestone and royalty payments
from Roche pursuant to the SMA License Agreement, under our SMA program.
As of December 31, 2022, we had an accumulated deficit of $2,657.0 million. We had a net loss of $559.0 million,
$523.9 million, and $438.2 million for the fiscal years ended December 31, 2022, 2021, and 2020, 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 leased 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 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 are also preparing a BLA for Upstaza for the treatment of AADC deficiency in the United
States and we anticipate submitting a BLA to the FDA in the first half of 2023. 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
125
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 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 August 15, 2022, we repaid the outstanding
principal amount and accrued interest, totaling $152.3 million, of the 3.00% convertible senior notes due August 15, 2022,
or the 2022 Convertible Notes, that was due upon maturity in accordance with the terms of the 2022 Convertible Notes.
Borrowings under the Blackstone Credit Agreement bear interest at a variable rate equal to, at our option, either an
adjusted Term SOFR rate plus seven and a quarter percent (7.25%) or the Base Rate plus six and a quarter percent (6.25%),
subject to a floor of one percent (1%) and two percent (2%) with respect to Term SOFR rate and Base Rate (each as defined
in the Blackstone Credit Agreement), respectively.
In October 2022, we paid the former equityholders of Agilis $50.0 million in regulatory milestone payments as a
result of the European Commission’s marketing approval of Upstaza for the treatment of AADC deficiency in July 2022.
In 2022, we also paid Marathon Pharmaceuticals, LLC (now known as Complete Pharma Holdings, LLC), or Marathon, a
single $50.0 million sales-based milestone in accordance with the 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.
In February 2023, we completed enrollment of our Phase 3 placebo-controlled clinical trial for sepiapterin for PKU.
In connection with this event and in accordance with the Censa Merger Agreement, we are obligated to pay a $30.0 million
development milestone to the former Censa securityholders, which we have the option to pay in cash or shares of our
common stock.
We expect to make additional payments to the former Censa securityholders of $50.0 million in the aggregate upon
the potential achievement in 2023 of certain development and regulatory milestones relating to sepiapterin. Furthermore,
we expect to pay the former equityholders of Agilis an additional $20.0 million upon the acceptance for filing by the FDA
of a BLA for Upstaza for the treatment of AADC deficiency, which we expect to occur in the first half of 2023.
We have never been profitable and 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, 2022, we had recognized a total of
$210.0 million in milestone payments and $172.9 million royalties on net sales pursuant to the SMA License Agreement.
As of December 31, 2022, there are no remaining research and development event milestones that we can receive. The
remaining potential sales milestones as of December 31, 2022 are $250.0 million upon achievement of certain sales events.
126
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.
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:
(cid:120)
(cid:120)
(cid:120)
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 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, 2022, 2021, and 2020.
Global DMD Franchise
Metabolic
Gene Therapy
Bio-e
Oncology
Splicing
Emvododstat for COVID-19
Discovery
Total research and development
2022
Year ended
December 31,
2021
(in thousands)
$
$
78,544 $
81,810
183,487
67,209
34,395
76,208
12,667
117,176
651,496 $
83,791 $
49,458
150,566
60,964
18,618
53,429
38,348
85,510
540,684 $
2020
80,742
59,135
213,206
29,322
16,467
18,567
13,590
46,614
477,643
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:
(cid:120)
the scope, rate of progress and expense of our clinical trials and other research and development activities;
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(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
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
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 2026 Convertible Notes outstanding, the Blackstone Credit Agreement, the 2022 Convertible
Notes that we repaid in August 2022 and from our credit and security agreement, or the MidCap Credit Agreement, with
MidCap Financial Trust that was terminated in July 2020 offset by interest income earned on investments.
Critical accounting policies and significant judgments and estimates
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:
(cid:120) Revenue recognition related to net product revenue
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(cid:120) Liability for sale of future royalties
(cid:120) Contingent consideration from business combinations
(cid:120)
Indefinite-lived intangible assets annual impairment assessment
Revenue recognition related to 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.
During the years ended December 31, 2022, 2021, and 2020, net product sales in the United States were $218.3
million, $187.3 million, and $139.0 million, respectively, consisting solely of sales of Emflaza, and net product sales
outside of the United States were $316.9 million, $241.6 million, and $194.4 million respectively, consisting of sales of
Translarna, Tegsedi, Waylivra, and Upstaza. Translarna net product revenues made up $288.6 million, $236.0 million, and
$191.9 million of the net product sales outside the United States for the years ended December 31, 2022, 2021, and 2020,
respectively. During the year ended December 31, 2022, two countries, the United States and Russia, accounted for at least
10% of our net product sales, representing $218.3 million and $59.7 million, respectively. During the years ended
December 31, 2021 and 2020, only the United States accounted for at least 10% of our net product sales.
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. 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.
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
129
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 is amortized using the effective interest method over the life of the arrangement, in accordance with
the respective guidance. We utilize the prospective method to account for subsequent changes in the estimated future
payments to be made to RPI.
Contingent consideration from business combinations
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. The fair
value of 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 our estimated development timelines for the acquired product candidate. The fair value of the net sales milestones
and royalties is based on probability adjusted sales estimates and estimated discount rates and utilizes 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.
Indefinite-lived intangible assets annual impairment assessment
Indefinite-lived intangible assets consist of IPR&D acquired in business combinations. Intangible assets with
indefinite lives, including IPR&D, are tested for impairment if impairment indicators arise and, at a minimum, annually.
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. Several methods may be used to determine the estimated fair value
of the IPR&D. 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. The estimated fair value is then compared to the carrying value of IPR&D.
We performed an annual impairment test for our indefinite-lived intangible assets as of October 1, 2022. In the fourth
quarter of 2022, we recorded a partial impairment on the Upstaza indefinite lived intangible asset of $33.4 million, which
is recorded as intangible asset impairment in the statement of operations. The impairment was related to a decrease in
projected cash flows due to refinements in current market assumptions and the timing of patient treatments. To calculate
the impairment amount, we utilized a discounted cash flow model under the income method, which primarily utilized
Level 3 fair value inputs. Some of the more significant assumptions inherent in the development of the model included the
estimated annual cash flows, particularly net revenues and operations costs, the appropriate discount rate to select in order
to measure the risk inherent in the future cash flows, and the probability of success. Refer to note 18 for further information
regarding our intangible assets.
For a description of our significant accounting policies, see note 2 to our consolidated financial statements.
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Year ended December 31, 2022 compared to year ended December 31, 2021
The following table summarizes revenues and selected expense and other income data for the year ended
December 31, 2022 and 2021:
(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
Intangible asset impairment
Interest expense, net
Other expense, net
Income tax benefit (expense)
Year ended
December 31,
Change
2022
535,228 $
$
50,052
113,521
44,678
116,554
651,496
325,998
(25,900)
33,384
(90,871)
(49,207)
28,470
2021
428,904 $
55,046 $
54,643 $
2022 vs. 2021
106,324
(4,994)
58,878
32,328 $
54,751 $
540,684 $
285,773 $
(500) $
— $
(86,022) $
(57,875) $
(5,561) $
12,350
61,803
110,812
40,225
(25,400)
33,384
(4,849)
8,668
34,031
Net product revenue. Net product revenue was $535.2 million for the year ended December 31, 2022, an increase of
$106.3 million, or 25%, from net product revenue of $428.9 million for the year ended December 31, 2021. Translarna net
product revenues were $288.6 million for the year ended December 31, 2022, an increase of $52.6 million, or 22%,
compared to $236.0 million for the year ended December 31, 2021. These results were driven by treatment of new patients
in existing geographies and continued geographic expansion. Emflaza net product revenues were $218.3 million for the
year ended December 31, 2022, an increase of $31.0 million, or 17%, compared to $187.3 million for the year ended
December 31, 2021. These results were driven by new patient prescriptions, continued high compliance, and appropriate
weight-based dosing. The remaining increase of $22.7 million was due to an increase in net product sales of Tegsedi,
Waylivra, and Upstaza.
Collaboration revenue. Collaboration revenue was $50.1 million for the year ended December 31, 2022, a decrease
of $5.0 million, or 9%, from collaboration revenue of $55.0 million for the year ended December 31, 2021. The decrease
is due to a decrease in actual milestones that were achieved in the year ended December 31, 2022 compared to the year
ended December 31, 2021, respectively. A sales milestone of $50.0 million was recognized for the achievement of
$750.0 million in worldwide annual net sales from Evrysdi in the year ended December 31, 2022. In March 2021, the first
commercial sale of Evrysdi in the EU was made. This event triggered a $20.0 million milestone payment to us from Roche.
Additionally, in June 2021, the Japanese Ministry of Health, Labor and Welfare approved Evrysdi for the treatment of
SMA in Japan. In August 2021, the first commercial sale of Evrysdi in Japan triggered a $10.0 million milestone payment
to us from Roche. In December 2021, we recorded our first sales milestone of $25.0 million for the achievement of $500.0
million in worldwide annual net sales from Evrysdi.
Royalty revenue. Royalty revenue was $113.5 million for the years ended December 31, 2022, an increase of $58.9
million, or over 100%, from $54.6 million for the years ended December 31, 2021. The increase in royalty revenue was
due to higher Evrysdi sales in the year ended December 31, 2022 as compared to the year ended December 31, 2021. 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 $44.7 million for the year end December 31, 2022, an increase of $12.4
million, or 38%, from $32.3 million for the year ended December 31, 2021. Cost of product sales consist primarily of
royalty payments associated with Emflaza, Translarna and Upstaza net product sales, excluding contingent payments to
Marathon, costs associated with Emflaza, Translarna and Upstaza product sold during the period, and royalty expense
related to royalty revenues and collaboration milestone revenues. The increase in cost of product sales, excluding
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amortization of acquired intangible asset, is primarily due to the increases in net product revenue, royalty revenues, and
collaboration milestone revenue.
Amortization of acquired intangible asset. Amortization of acquired intangible asset was $116.6 million for the year
ended December 31, 2022, an increase of $61.8 million, or over 100%, from $54.8 million for the year ended December 31,
2021. These amounts are related to the Emflaza rights acquisition, as well as the Waylivra, Tegsedi, and Upstaza intangible
assets, which are all being amortized on a straight-line basis over their estimated useful lives. With the approval of Upstaza
by the European Commission in July 2022, $89.6 million was reclassified from indefinite lived intangible assets to definite
lived intangible assets, which is being amortized over its expected useful life. The amortization increase is primarily related
to the additional Marathon contingent payments, which includes a $50.0 million contingent payment made in the year
ended December 31, 2022.
Research and development expense. Research and development expense was $651.5 million for the year ended
December 31, 2022, an increase of $110.8 million, or 20%, compared to $540.7 million for the year ended December 31,
2021. The increase in research and development expenses is primarily related to increased investment in research programs
and advancement of the clinical pipeline.
Selling, general and administrative expense. Selling, general and administrative expense was $326.0 million for
the year ended December 31, 2022, an increase of $40.2 million, or 14%, from $285.8 million for the year ended
December 31, 2021. The increase reflects our 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 a gain of $25.9 million for the year ended December 31, 2022, a change of $25.4 million, or over 100%,
from a gain of $0.5 million for the year ended December 31, 2021. 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.
Intangible asset impairment. Intangible asset impairment was $33.4 million for the year ended December 31, 2022,
an increase of $33.4 million, 100%, from intangible asset impairment of $0.0 million for the year ended December 31,
2021. The increase was due to a decrease in projected cash flows for the Upstaza indefinite lived intangible asset due to
refinements in current market assumptions and the timing of patient treatments, resulting in a partial impairment.
Interest expense, net. Interest expense, net was $90.9 million for the year ended December 31, 2022, an increase of
$4.8 million, 6%, from interest expense, net of $86.0 million for the year ended December 31, 2021. The increase in
interest expense, net was primarily due to interest expense recorded from the senior secured term loan, partially offset by
lower interest expense due to the repayment of the 2022 Convertible Notes.
Other expense, net. Other expense, net was $49.2 million for the year ended December 31, 2022, a decrease of $8.7
million, 15%, from other expense, net of $57.9 million for the year ended December 31, 2021. The decrease in other
expense, net resulted primarily from an unrealized foreign exchange loss of $14.4 million and a non cash foreign currency
remeasurement loss of $16.9 million from the remeasurement of our intercompany loan for the year end December 31,
2022, as compared to an unrealized foreign exchange loss of $41.0 million from the remeasurement of our intercompany
loan for the year ended December 31, 2021. In addition, we had unrealized losses on our equity investments and
convertible debt security in ClearPoint Neuro, Inc. (formerly MRI Interventions, Inc.), or ClearPoint, of $3.5 million and
$5.8 million, respectively, for the year ended December 31, 2022, as compared to unrealized losses on our equity
investments and convertible debt security in ClearPoint of $6.1 million and $8.3 million, respectively, for the year ended
December 31, 2021.
Income tax benefit (expense). Income tax benefit was $28.5 million for the year ended December 31, 2022, a change
of $34.0 million, or over 100%, from income tax expense of $5.6 million for the year ended December 31, 2021. The
change in income tax benefit (expense) is primarily attributable to the partial amortization of an intangible which had
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previously been classified as an indefinite lived intangible, and the subsequent release of a portion of the valuation
allowance associated with this asset.
Year ended December 31, 2021 compared to year ended December 31, 2020
The following table summarizes revenues and selected expense and other income data for the years ended
December 31, 2021 and 2020:
(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 (expense) income, net
Income tax expense
Year ended
December 31,
Change
2021
428,904 $
$
55,046
54,643
32,328
54,751
540,684
285,773
(500)
—
(86,022)
(57,875)
(5,561)
2020
333,401 $
42,579 $
4,786 $
2021 vs. 2020
95,503
12,467
49,857
13,386
18,942 $
17,859
36,892 $
63,041
477,643 $
40,609
245,164 $
(23,780)
23,280 $
(10,613)
10,613 $
(56,352) $
(29,670)
85,188 $ (143,063)
29,667
(35,228) $
Net product revenue. Net product revenue was $428.9 million for the year ended December 31, 2021, an increase of
$95.5 million, or 29%, from net product revenue of $333.4 million for the year ended December 31, 2020. Translarna net
product revenues were $236.0 million for the year ended December 31, 2021, an increase of $44.1 million, or 23%,
compared to $191.9 million for the year ended December 31, 2020. These results were driven by treatment of new patients,
continued high compliance, and geographic expansion. Emflaza net product revenues were $187.3 million for the year
ended December 31, 2021, an increase of $48.3 million, or 35%, compared to $139.0 million for the year ended December
31, 2021. These results were driven by continued new prescriptions, continued high compliance, and more favorable
access. The remaining increase of $3.1 million was due to an increase in net product sales of Tegsedi and Waylivra.
Collaboration revenue. Collaboration revenue was $55.0 million for the year ended December 31, 2021, an increase
of $12.5 million, or 29%, from collaboration revenue of $42.6 million for the year ended December 31, 2020. The increase
is primarily related to three milestones that were triggered from Roche in the years ended December 31, 2021. In March
2021, the first commercial sale of Evrysdi in the EU was made. This event triggered a $20.0 million milestone payment to
us from Roche. Additionally, in June 2021, the Japanese Ministry of Health, Labor and Welfare approved Evrysdi for the
treatment of SMA in Japan. In August 2021, the first commercial sale of Evrysdi in Japan triggered a $10.0 million
milestone payment to us from Roche. In December 2021, we recorded our first sales milestone of $25.0 million for the
achievement of $500.0 million in worldwide annual net sales from Evrysdi. Comparatively, in the year ended December
31, 2020, the FDA approved Evrysdi for the treatment of SMA in adults and children two months and older in August
2020. 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.
Royalty revenue. Royalty revenue was $54.6 million for the years ended December 31, 2021, an increase of $49.9
million, or over 100%, from $4.8 million for the years ended December 31, 2020. 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.
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Cost of product sales, excluding amortization of acquired intangible asset. Cost of product sales, excluding
amortization of acquired intangible asset, was $32.3 million for the year end December 31, 2021, an increase of $13.4
million, or 71%, from $18.9 million for the year ended December 31, 2020. 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.
Amortization of acquired intangible asset. Amortization of acquired intangible asset was $54.8 million for the year
ended December 31, 2021, an increase of $17.9 million, or 48%, from $36.9 million for the year ended December 31,
2020. 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. Additionally, in
August 2021, we made a $4.0 million milestone payment to Akcea upon regulatory approval of Waylivra from ANVISA.
In accordance with the guidance for an asset acquisition, we recorded the milestone payment when it became payable to
Akcea, and it increased the cost basis for the Waylivra intangible asset. This payment is being amortized to cost of product
sales over the expected remaining useful life of the Waylivra asset on a straight line basis.
Research and development expense. Research and development expense was $540.7 million for the year ended
December 31, 2021, an increase of $63.0 million, or 13%, compared to $477.6 million for the year ended December 31,
2020. The increase in research and development expenses is primarily related to increased investment in research programs
and advancement of the clinical pipeline. This increase was partially offset by one time charges in the year ended December
31, 2020 of $53.6 million for our Censa Merger, as well as $41.4 million for our commercial manufacturing service
agreement with 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 $285.8 million for
the year ended December 31, 2021, an increase of $40.6 million, or 17%, from $245.2 million for the year ended
December 31, 2020. The increase reflects our continued investment to support our commercial activities including our
expanding commercial portfolio, including an increase in 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 a gain of $0.5 million for the year ended December 31, 2021, a change of $23.8 million, or over 100%,
from a loss of $23.3 million for the year ended December 31, 2020. 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 $0.0
million for year ended December 31, 2021, a decrease of $10.6 million, or 100%, from $10.6 million for the year ended
December 31, 2020. The settlement of deferred and contingent consideration for the year ended December 31, 2020 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
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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 $86.0 million for the year ended December 31, 2021, an increase of
$29.7 million, 53%, from interest expense, net of $56.4 million for the year ended December 31, 2020. 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, partially offset by a decrease in interest expense recorded from the 2022 and 2026
Convertible Notes as a result of the adoption of ASU 2020-06 and interest income from our investments.
Other (expense) income, net. Other expense, net was $57.9 million for the year ended December 31, 2021, a change
of $143.1 million, over 100%, from other income, net of $85.2 million for the year ended December 31, 2020. The change
in other (expense) income, net resulted primarily from an unrealized foreign exchange loss of $41.0 million from the
remeasurement of our intercompany loan, which is recorded on a non-U.S. subsidiary and denominated in U.S. dollars,
and unrealized losses on our equity investments and convertible debt security in ClearPoint Neuro, Inc. (formerly MRI
Interventions, Inc.), or ClearPoint, of $6.1 million and $8.3 million, respectively.
Income tax expense. Income tax expense was $5.6 million for the year ended December 31, 2021, a decrease of $29.7
million, or 84%, from income tax expense of $35.2 million for the year ended December 31, 2020. We recorded a state
income tax provision for the year 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.
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, our product revenue has primarily consisted of 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 authorizations in Brazil, Russia and in the EEA and secure market
access through commercial programs following the conclusion of pricing and reimbursement terms at sustainable levels
in the member states of the EEA or through EAP programs in the EEA and other territories. The marketing authorization
requires annual review and renewal by the European Commission following reassessment by the EMA of the benefit-risk
balance of the authorization and is subject to the specific obligation to 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, net proceeds
from our borrowings under the Blackstone Credit Agreement, the private placements of our preferred stock and common
stock, collaborations, bank and institutional lender debt, convertible debt financings and grants and clinical trial support
from governmental and philanthropic organizations and patient advocacy groups in the disease areas addressed by our
product 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 placement of $150.0 million in aggregate principal amount of 3.00% convertible
senior notes due 2022 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. On August 15, 2022, we repaid the outstanding
principal amount and accrued interest, totaling $152.3 million, of the 2022 Convertible Notes that was due upon maturity
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in accordance with the terms of the notes. While outstanding, the 2022 Convertible Notes bore 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.
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. 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.
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
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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) will, 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 regarding
this transaction.
In October 2022, we entered into the Blackstone Credit Agreement for fundings of up to $950.0 million consisting of
a committed loan facility of $450.0 million and further contemplating the potential for up to $500.0 million of additional
financing, to the extent that we request such additional financing and subject to the Lenders’ agreement to provide such
additional financing and to mutual agreement on terms.
The Blackstone Credit Agreement provides for a senior secured term loan facility funded on the Closing Date in the
aggregate principal amount of $300.0 million and a committed delayed draw term loan facility of up to $150.0 million to
be funded at the Company’s request within 18 months of the Closing Date subject to specified conditions. In addition, the
Blackstone Credit Agreement contemplates the potential for further financings by Blackstone, by providing for incremental
discretionary uncommitted further financings of up to $500.0 million. We will be required under conditions specified in
the Blackstone Credit Agreement to fund a reserve account up to certain amounts specified therein.
The Loans mature on the date that is seven years from the Closing Date. Borrowings under the Blackstone Credit
Agreement bear interest at a variable rate equal to, at our option, either an adjusted Term SOFR rate plus seven and a
quarter percent (7.25%) or the Base Rate plus six and a quarter percent (6.25%), subject to a floor of one percent (1%) and
two percent (2%) with respect to Term SOFR rate and Base Rate (each as defined in the Blackstone Credit Agreement),
respectively. Payment of the Loans are subject to certain premiums specified in the Blackstone Credit Agreement, in each
case, from the date the applicable Loan is funded.
All obligations under the Blackstone Credit Agreement are secured, subject to certain exceptions and specified
inclusions, by security interests in certain assets of the Loan Parties, including (1) intellectual property and other assets
related to Translarna, Emflaza, Upstaza, sepiapterin and, until certain release conditions are met, vatiquinone, in each case,
together with any other forms, formulations, or methods of delivery of any such products, and regardless of trade or brand
name, (2) future acquired intellectual property (but not internally developed intellectual property unrelated to other
intellectual property collateral) and other related assets, and (3) the equity interests held by the Loan Parties in certain of
their subsidiaries. The Blackstone Credit Agreement contains certain negative covenants with which we must remain in
compliance. The Blackstone Credit Agreement also requires that we maintain consolidated liquidity of at least $100.0
million as of the last day of each fiscal quarter, which shall be increased to $200.0 million upon our consummating
acquisitions meeting certain consolidated thresholds described therein. In addition, we will be required under conditions
specified in the Blackstone Credit Agreement to fund a reserve account up to certain amounts specified therein. The funds
in the reserve account are available to prepay the Loans at any time at our option, and are, if funded, subject to release
upon certain further conditions. Upon any such release, such funds are freely available for our use subject to the generally
applicable terms and conditions of the Blackstone Credit Agreement. The Blackstone Credit Agreement contains certain
customary representations and warranties, affirmative covenants and provisions relating to events of default. In connection
with the execution of the Blackstone Credit Agreement, we and the Purchasers also entered into the Stock Purchase
137
Agreement for the sale and issuance of 1,095,290 shares of common stock to the Purchasers at a price of $45.65 per share,
for an aggregate purchase price of approximately $50.0 million. The per share price represents the closing price of our
common stock on the Nasdaq Global Select Market on October 26, 2022.
Cash flows
As of December 31, 2022, we had cash and cash equivalents and marketable securities of $410.7 million.
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,
2021
2022
2020
$
$
$
(356,654) $
290,181 $
167,952 $
(251,332) $
219,182 $
20,877 $
(194,071)
(561,548)
668,715
Net cash used in operating activities was $356.7 million, $251.3 million, and $194.1 million for the years ended
December 31, 2022, 2021, and 2020, respectively. The cash used in operating activities primarily related to supporting
clinical development, including the manufacture of drug product, commercial activities for Emflaza, Translarna, and
Upstaza, and costs associated with the expansion of our international infrastructure for the years ended December 31,
2022, 2021, and 2020.
Net cash provided by investing activities was $290.2 million and 219.2 million for the years ended December 31,
2022 and 2021, respectively. Net cash used in investing activities was $561.5 million for the year ended December 31,
2020. The cash provided by investing activities for the years ended December 31, 2022 and December 31, 2021 were
primarily related to net sales and redemptions of marketable securities, partially offset by purchases of marketable
securities, purchases of fixed assets and the acquisition of product rights. 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.
Net cash provided by financing activities was $168.0 million, $20.9 million, and $668.7 million for the years ended
December 31, 2022, 2021 and 2020, respectively. The cash provided by financing activities for the year ended
December 31, 2022 is primarily attributable to the proceeds from the issuance of the senior secured term loan under the
Blackstone Credit Agreement, the Stock Purchase Agreement, the exercise of options, and issuance of stock under our
Employee Stock Purchase Plan, or ESPP, offset by the repayment of the 2022 Convertible Notes, payments on contingent
consideration obligation, and payments on our finance lease principal. The cash provided by financing activities for
the year ended December 31, 2021 is primarily attributable to the exercise of options, and issuance of stock under our
ESPP offset by payments on our finance lease principal. Net 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 ESPP,
partially offset by repayment on our senior secured term loan, payments on deferred consideration obligation, and
payments on our finance lease principal.
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 as well as studies in our products
138
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 are also preparing a BLA for Upstaza for the treatment of AADC deficiency in the United States and
we expect to submit a BLA to the FDA in the first half of 2023. These efforts may significantly impact the timing and
extent of our commercialization expenses.
In addition, our expenses will increase if and as we:
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
seek to satisfy contractual and regulatory obligations that we assumed through our acquisitions and
collaborations;
execute our commercialization 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 Chemistry, Manufacturing and
Controls, 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, Brazil and Russia 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 manufacture program materials for certain of our gene therapy product candidates
as well as program materials for third parties;
initiate or continue the research and development of our splicing, gene therapy, Bio-e, metabolic and oncology
programs as well as studies in our products for maintaining authorizations, including Study 041, label extensions
and additional indications;
seek to discover and develop additional product candidates;
seek to expand and diversify our product pipeline through strategic transactions;
(cid:120) maintain, expand and protect our intellectual property portfolio; and
(cid:120)
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
offering of the 2026 Convertible Notes, public offerings and private placements of common stock, our “at the market
offering” of our common stock, proceeds from the Royalty Purchase Agreement, net proceeds from our borrowings under
the Blackstone Credit 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:
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(cid:120)
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;
139
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
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;
our ability to obtain marketing authorization for Upstaza for the treatment of AADC deficiency in the United
States;
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 or other
potential widespread outbreaks of contagious disease;
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
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 Translarna in other territories;
our ability to utilize the Hopewell Facility to manufacture program materials for certain of our gene therapy
product candidates and program materials for third parties;
our ability to satisfy our obligations under the Blackstone Credit Agreement;
our ability to satisfy our obligations under the indentures governing the 2026 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;
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 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 August 15, 2022, we repaid the outstanding
principal amount and accrued interest, totaling $152.3 million, of the 3.00% convertible senior notes due August 15, 2022,
or the 2022 Convertible Notes, that was due upon maturity in accordance with the terms of the 2022 Convertible Notes.
Borrowings under the Blackstone Credit Agreement bear interest at a variable rate equal to, at our option, either an
adjusted Term SOFR rate plus seven and a quarter percent (7.25%) or the Base Rate plus six and a quarter percent (6.25%),
subject to a floor of one percent (1%) and two percent (2%) with respect to Term SOFR rate and Base Rate (each as defined
in the Blackstone Credit Agreement), respectively.
140
In October 2022, we paid the former equityholders of Agilis $50.0 million in regulatory milestone payments as a
result of the European Commission’s marketing approval of Upstaza for the treatment of AADC deficiency in July 2022.
In 2022, we also paid Marathon Pharmaceuticals, LLC (now known as Complete Pharma Holdings, LLC), or Marathon, a
single $50.0 million sales-based milestone in accordance with the Emflaza Asset Purchase Agreement.
In February 2023, we completed enrollment of our Phase 3 placebo-controlled clinical trial for sepiapterin for PKU.
In connection with this event and in accordance with the Censa Merger Agreement, we are obligated to pay a $30.0 million
development milestone to the former Censa securityholders, which we have the option to pay in cash or shares of our
common stock.
We expect to make additional payments to the former Censa securityholders of $50.0 million in the aggregate upon
the achievement of certain development and regulatory milestones in 2023 relating to sepiapterin. We also expect to pay
the former equityholders of Agilis an additional $20.0 million upon the acceptance for filing by the FDA of a BLA for
Upstaza for the treatment of AADC deficiency, which we expect to occur in the first half of 2023. 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 also have certain significant contractual obligations and commercial commitments that require funding. We lease
office space for our principal office in South Plainfield, New Jersey and we occupy under leases that expire in 2024, with
two consecutive five-year renewal options to renew the leases after 2024. Additionally, we entered into a lease agreement
for approximately 103,000 square feet of laboratory and office space in Bridgewater, New Jersey. The rental term for
such facility commenced on May 1, 2020 with an initial term of seven years and two consecutive five year renewal periods
at our option. We have significant lease obligations that stem from our lease of office, manufacturing, and laboratory space
in Hopewell, 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 also lease two entire buildings comprised of approximately
360,000 square feet of shell condition, modifiable space at a facility located in Warren, New Jersey. The rental term for
such facility commenced on June 1, 2022, with an initial term of seventeen years followed by three consecutive five-year
renewal periods at our option. In addition, we lease office space, vehicles and equipment in various other locations in the
U.S. and other countries for our employees and operations. We have a total of $268.0 million in obligations that stem from
our operating leases.
We have a total of $30.0 million in obligations that stem from a commercial manufacturing services 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 Upstaza program.
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 minimum royalty
based on the euro to U.S. dollar exchange rate as of December 31, 2022 is $1.6 million, with the last minimum royalty
payment due in 2023.
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 certain 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
141
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. During the year ended
December 31, 2022, the Company incurred $2.5 million of development milestones in connection with the enrollment of
patients in the registration-directed Phase 2/3 trial of unesbulin for the treatment of LMS, which is recorded in other long-
term liabilities on the balance sheet and will be payable 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 milestone payments of up
to an aggregate of $14.5 million may become payable by the Company to Wellcome Trust 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. Since inception, the SMA Foundation has earned $28.5 million, $24.5 million which was paid and
$4.0 million which was accrued as of December 31, 2022. Our obligation to make such payments would end upon our
payment to the SMA Foundation of an aggregate of $52.5 million.
Additionally, 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. 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 have never been profitable and 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.
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, 2022. At December 31, 2022, we
held $410.7 million in cash and cash equivalents and short-term investments. After a review of our marketable investment
securities, we believe that in the event of a hypothetical ten percent increase in interest rates, the resulting decrease in fair
value of our marketable investment securities would be insignificant to the consolidated financial statements.
142
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, Swiss Franc, and Russian Ruble 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, 2022, we
recognized realized foreign currency transaction losses, net, of $19.6 million, which is recorded within other income, net
on the Statement of Operations. A hypothetical ten percent increase or decrease in the exchange rate between the U.S.
dollar and the British Pound, Euro, Brazilian Real, Swiss Franc, or Russian Ruble from the December 31, 2022 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 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 $281.7 million as of December 31, 2022.
143
Item 8. Financial Statements and Supplementary Data
Index to consolidated financial statements
Report of Independent Registered Public Accounting Firm (PCAOB ID 42)
Consolidated Balance Sheets as of December 31, 2022 and 2021
Consolidated Statements of Operations for the years ended December 31, 2022, 2021, and 2020
Consolidated Statements of Comprehensive Loss for the years ended December 31, 2022, 2021, and 2020
Consolidated Statements Stockholders’ Equity/ (Deficit) for the years ended December 31, 2022, 2021, and 2020
Consolidated Statements of Cash Flows for the years ended December 31, 2022, 2021, and 2020
Notes to Consolidated Financial Statements
145
148
149
150
151
152
154
144
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, 2022 and 2021, the related consolidated statements of operations, comprehensive loss, stockholders'
(deficit)/ equity and cash flows for each of the three years in the period ended December 31, 2022, 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, 2022 and 2021, and the
consolidated results of its operations and its cash flows for each of the three years in the period ended December 31,
2022, 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, 2022, 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 21, 2023 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.
Adoption of ASU No. 2020-06
As discussed in Note 8 to the consolidated financial statements, the Company changed its method of accounting for
convertible notes in 2021 due to the adoption of Accounting Standards Update (ASU) No. 2020-06, Debt— (Subtopic
470-20 & 815-40), and the related amendments.
145
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. 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 volume of expected claims from governmental entities, the
estimated amount of 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. 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 the significant
assumptions and data inputs utilized in the calculations.
To test the revenue adjustments related to Medicaid 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 claims and payment 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.
146
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, 2022, the Company recorded $164.0 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.
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, 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 21, 2023
147
PTC Therapeutics, Inc.
Consolidated Balance Sheets
In thousands, except shares
$
$
Assets
Current assets:
Cash and cash equivalents
Marketable securities
Trade and royalty 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’ (deficit) 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
Other current liabilities
Total current liabilities
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’ (deficit) equity:
Common stock, $0.001 par value. Authorized 250,000,000 shares; issued
and outstanding 73,104,692 shares at December 31, 2022. Authorized
250,000,000 shares; issued and outstanding 70,828,226 shares at
December 31, 2021.
Additional paid-in capital
Accumulated other comprehensive income (loss)
Accumulated deficit
Total stockholders’ (deficit) equity
Total liabilities and stockholders’ (deficit) equity
$
See accompanying consolidated notes.
148
December 31,
2022
2021
279,834 $
130,871
155,614
21,808
105,658
693,785
72,590
705,891
82,341
102,430
48,582
1,705,619 $
320,366
—
1,351
9,370
3,000
72,149
—
406,236
571,722
164,000
102,834
100,860
18,675
685,737
2,641
2,052,705
189,718
583,658
110,455
15,856
54,681
954,368
52,585
724,841
82,341
77,421
46,500
1,938,056
288,784
149,540
—
7,273
3,000
59,291
1,460
509,348
281,894
239,900
137,110
73,619
20,053
674,694
—
1,936,618
72
2,305,020
4,796
(2,656,974)
(347,086)
1,705,619 $
71
2,123,606
(24,282)
(2,097,957)
1,438
1,938,056
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:
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
Intangible asset impairment
Settlement of deferred and contingent consideration
Total operating expenses
Loss from operations
Interest expense, net
Other (expense) income, net
Loss before income tax expense
Income tax benefit (expense)
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)
Year ended December 31,
2021
2020
2022
$
535,228 $
50,052
113,521
698,801
428,904 $
55,046
54,643
538,593
333,401
42,579
4,786
380,766
44,678
116,554
651,496
325,998
(25,900)
33,384
—
1,146,210
(447,409)
(90,871)
(49,207)
(587,487)
28,470
$ (559,017) $
32,328
54,751
540,684
285,773
(500)
—
—
913,036
(374,443)
(86,022)
(57,875)
(518,340)
(5,561)
(523,901) $
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)
71,728,634
$
(7.79) $
70,466,393
66,027,908
(6.64)
(7.43) $
See accompanying consolidated notes.
149
PTC Therapeutics, Inc.
Consolidated Statements of Comprehensive Loss
In thousands
Year ended December 31,
2021
$ (559,017) $ (523,901) $ (438,160)
2020
2022
108
28,970
1,145
(51,518)
$ (529,939) $ (487,226) $ (488,533)
(2,502)
39,177
Net loss
Other comprehensive income (loss):
Unrealized gain (loss) on marketable securities, net of tax
Foreign currency translation gain (loss), net of tax
Comprehensive loss
See accompanying consolidated notes.
150
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1
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
Intangible asset impairment
Change in valuation of deferred and contingent consideration
Settlement of deferred and contingent consideration
Non-cash stock consideration, acquisition
Unrealized loss (gain) on ClearPoint Equity Investments
Unrealized loss (gain) on ClearPoint convertible debt security
Unrealized loss (gain) on marketable securities- equity investments
Disposal of asset
Deferred income taxes
Amortization of premiums on investments, net
Amortization of debt issuance costs
Share-based compensation expense
Non-cash interest expense
Unrealized foreign currency transaction losses (gains), net
Non-cash foreign currency remeasurement loss on intercompany loan
Changes in operating assets and liabilities:
Inventory, net
Prepaid expenses and other current assets
Trade and royalty receivables, net
Deposits and other assets
Accounts payable and accrued expenses
Other liabilities
Deferred revenue
Payments on contingent consideration
Net cash used in operating activities
Cash flows from investing activities
Purchases of fixed assets
Purchases of marketable securities- available for sale
Purchase of convertible debt security
Purchases of marketable securities- equity investments
Sale and redemption of marketable securities- available for sale
Sale and redemption of marketable securities- equity investments
Acquisition of product rights and licenses
Purchase of equity investment in ClearPoint
Net cash provided by (used in) investing activities
Cash flows from financing activities
Proceeds from exercise of options
Termination and exit fees related to payoff of senior secured term loan
Net proceeds from public offerings
Debt issuance costs related to senior secured term loan
Proceeds from issuance of senior secured term loan
Repayment of Convertible Notes
Payments on deferred and contingent consideration obligation
Proceeds from employee stock purchase plan
Payment of finance lease principal
Proceeds from stock purchase agreement
Cash consideration received from Royalty Purchase Agreement
Net cash provided by financing activities
Effect of exchange rate changes on cash
Net increase (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
2022
Year ended December 31,
2021
2020
$
(559,017)
$
(523,901)
$
(438,160)
128,836
9,884
—
(48,738)
72,639
33,384
(25,900)
—
—
3,560
5,740
7,992
80
(34,276)
1,713
1,901
110,333
—
13,263
16,887
(6,668)
(51,621)
(48,468)
(2,913)
27,542
(4,558)
1,351
(9,600)
(356,654)
(32,016)
(52,764)
—
(22,787)
405,234
112,958
(120,444)
—
290,181
14,632
—
—
(11,454)
300,000
(150,000)
(40,400)
6,450
(1,276)
50,000
—
167,952
(2,772)
98,707
197,218
295,925
$
64,134
7,386
—
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77,683
—
(500)
—
—
6,078
8,281
(1,673)
—
377
5,299
1,848
103,513
—
47,391
—
1,800
(15,310)
(44,991)
(232)
45,659
(6,704)
(4,010)
—
(251,332)
(28,213)
(333,148)
—
(210,018)
843,498
4,281
(57,118)
(100)
219,182
17,309
—
—
—
—
—
—
5,792
(2,224)
—
—
20,877
(7,821)
(19,094)
216,312
197,218
43,490
6,084
41,382
(2,055)
31,817
—
23,280
10,613
42,869
(14,310)
(19,252)
—
16
5,872
409
1,020
70,325
22,598
(56,980)
—
1,841
(12,621)
(10,483)
(662)
71,963
(3,930)
(8,032)
(1,165)
(194,071)
(17,843)
(1,439,665)
(10,000)
—
944,094
—
(38,134)
—
(561,548)
70,179
(597)
28,092
—
—
(28,333)
(38,100)
5,303
(17,829)
—
650,000
668,715
7,688
(79,216)
295,528
216,312
$
$
152
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 (loss) 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
Debt issuance costs related to senior secured term loan
Capital expenditures unpaid at the end of period
$
$
$
$
$
$
$
18,463
4,922
108
35,817
—
33,239
—
159
308
$
$
$
$
$
$
$
9,588
7,708
(2,502)
645
—
22,294
—
—
—
$
$
$
$
$
$
$
9,802
26,397
1,145
76,811
41,382
14,191
150,528
—
1,060
See accompanying consolidated notes.
153
PTC Therapeutics, Inc.
Notes to consolidated financial statements
December 31, 2022
(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. PTC’s ability to innovate to identify new therapies and to globally commercialize products is the
foundation that drives investment in a robust and diversified pipeline of transformative medicines. PTC’s mission is to
provide access to best-in-class treatments for patients who have little to no treatment options. PTC’s strategy is to leverage
its strong scientific and clinical expertise and global commercial infrastructure to bring therapies to patients. PTC believes
that this allows it to maximize value for all of its 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 Russia for the treatment of nmDMD in patients aged two 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. Translarna also has marketing authorization in
Brazil for the treatment of nmDMD in ambulatory patients two years and older and for continued treatment of patients that
become non-ambulatory. Emflaza is approved in the United States for the treatment of DMD in patients two years and
older.
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. The marketing authorization in the EEA was last renewed in June
2022 and is effective, unless extended, through August 5, 2023. In September 2022, the Company submitted a Type II
variation to the EMA to support conversion of the conditional marketing authorization for Translarna to a standard
marketing authorization, which included a report on the placebo-controlled trial of Study 041 and data from the open-label
extension. The Company expects an opinion from the Committee for Medicinal Products for Human Use in the first half
of 2023.
Translarna is an investigational new drug in the United States. Following the Company’s announcement of top-line
results from the placebo-controlled trial of Study 041 in June 2022, the Company submitted a meeting request to the U.S.
Food and Drug Administration (“FDA”) to gain clarity on the regulatory pathway for a potential re-submission of New
Drug Application (“NDA”) for Translarna. The FDA provided initial written feedback that Study 041 does not provide
substantial evidence of effectiveness to support NDA re-submission. The Company recently had an informal meeting with
the FDA, during which the Company discussed the potential path to an NDA re-submission for Translarna. Based on the
meeting discussion, the Company plans to request an additional Type C meeting with the FDA in the near future to review
the totality of data collected to date, including dystrophin and other mechanistic data as well as additional analyses that
could support the benefit of Translarna.
The Company has a pipeline of gene therapy product candidates for rare monogenic diseases that affect the central
nervous system (“CNS”) including Upstaza (eladocagene exuparvovec) 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. In July 2022, the European Commission approved
Upstaza for the treatment of AADC deficiency for patients 18 months and older within the EEA. In November 2022, the
Medicines and Healthcare Products Regulatory Agency approved Upstaza for the treatment of AADC deficiency for
patients 18 months and older within the United Kingdom. The Company is also preparing a biologics license application
154
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2022
(In thousands except share and per share amount)
(“BLA”) for Upstaza for the treatment of AADC deficiency in the United States and it expects to submit a BLA to the
FDA in the first half of 2023.
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 Collaboration and License
Agreement (the “Tegsedi-Waylivra Agreement”), dated August 1, 2018, by and between the Company and Akcea
Therapeutics, Inc. (“Akcea”), a subsidiary of Ionis Pharmaceuticals, Inc. 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”). The Company began to make commercial
sales of Tegsedi for the treatment of hATTR amyloidosis in Brazil in the second quarter of 2022 and it continues to make
Tegsedi available in certain other countries within Latin America and the Caribbean through early access programs (“EAP
Programs”). In August 2021, ANVISA, the Brazilian health regulatory authority, approved Waylivra as the first treatment
for familial chylomicronemia syndrome (“FCS”) in Brazil and the Company began to make commercial sales of Waylivra
in Brazil in the third quarter of 2022 while continuing to make Waylivra available in certain other countries within Latin
America and the Caribbean through EAP Programs. In December 2022, ANVISA approved Waylivra for the treatment of
familial partial lipodystrophy, or FPL. Waylivra has also received marketing authorization in the EU for the treatment of
FCS.
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 (“SMA
Foundation”). The SMA program has one approved product, Evrysdi® (risdiplam), which was approved by the FDA in
August 2020 for the treatment of SMA in adults and children two months and older and by the European Commission in
March 2021 for the treatment of 5q SMA in patients two months and older with a clinical diagnosis of SMA Type 1, Type
2 or Type 3 or with one to four SMN2 copies. Evrysdi also received marketing authorization for the treatment of SMA in
Brazil in October 2020 and Japan in June 2021. In May 2022, the FDA approved a label expansion for Evrysdi to include
infants under two months old with SMA and the Company expects the European Medicines Agency (“EMA”) to make a
regulatory decision on approval for a label expansion for Evrysdi to include infants under two months old with SMA in
2023. 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 initiated a Phase 2 study of PTC518 for the
treatment of HD in the first quarter of 2022, which consists of an initial 12-week placebo-controlled phase focused on
safety, pharmacology and pharmacodynamic effects followed by a nine-month placebo-controlled phase focused on
PTC518 biomarker effect. Enrollment in the Phase 2 study remains active and ongoing outside of the United States.
Enrollment within the United States is paused as the FDA has requested additional data to allow the Phase 2 study to
proceed; discussions are ongoing with the FDA to allow the resumption of U.S. enrollment. The Company expects data
from the initial 12-week phase of the Phase 2 study in the second quarter of 2023.
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 utreloxastat. The Company initiated a
registration-directed Phase 2/3 placebo-controlled trial of vatiquinone in children with mitochondrial disease associated
seizures in the third quarter of 2020. The Company has completed enrollment in this trial after previously experiencing
delays in enrollment due to the COVID-19 pandemic. The Company anticipates results from the Phase 2/3 trial to be
available in the second quarter of 2023. 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 results from this trial to be
available in the second quarter of 2023. In the third quarter of 2021, the Company completed a Phase 1 trial in healthy
volunteers to evaluate the safety and pharmacology of utreloxastat. Utreloxastat was found to be well-tolerated with no
155
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2022
(In thousands except share and per share amount)
reported serious adverse events while demonstrating predictable pharmacology. The Company initiated a Phase 2 trial of
utreloxastat for amyotrophic lateral sclerosis in the first quarter of 2022 and enrollment is ongoing.
The most advanced molecule in the Company’s metabolic platform is sepiapterin, a precursor to intracellular
tetrahydrobiopterin, which is a critical enzymatic cofactor involved in metabolism and synthesis of numerous metabolic
products. The Company initiated a registration-directed Phase 3 trial for sepiapterin for PKU in the third quarter of 2021
with the primary endpoint in the study of achieving statistically-significant reduction in blood Phe level. The primary
analysis population includes those patients who have a greater than 30% reduction in blood Phe levels during the Part 1
run-in phase of the trial. In January 2023, the Company announced preliminary data from the Part 1 run-in phase of this
trial, including that the mean reduction in blood Phe levels in an initial cohort of subjects during the Part 1 would be
recognized as clinically meaningful if maintained in Part 2 of the trial. The Company now expects results from Part 2 of
this trial to be available in May 2023 as the trial is overenrolled and additional time is required for the entirety of the
primary analysis population to complete the study.
Unesbulin is the Company’s most advanced oncology agent. The Company completed its Phase 1 trials evaluating
unesbulin in leiomyosarcoma (“LMS”) and diffuse intrinsic pontine glioma (“DIPG”) in the fourth quarter of 2021. The
Company initiated a registration-directed Phase 2/3 trial of unesbulin for the treatment of LMS in the first quarter of 2022
and enrollment is ongoing. The initiation of the Company’s registration-directed Phase 2/3 trial of unesbulin for DIPG was
delayed as it continued to track the progress of patients in its Phase 1 trial and analyze the corresponding data. The
Company now expects to initiate a registration-directed Phase 2/3 trial of unesbulin for the treatment of DIPG in the fourth
quarter of 2023.
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
for rare diseases.
As of 2022, the Company had an accumulated deficit of approximately $2,657.0 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 (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 dated as of July 17, 2020, by and among the Company, RPI 2019
Intermediate Finance Trust (“RPI”), and, solely for the limited purposes set forth therein, Royalty Pharma PLC (the
“Royalty Purchase Agreement”) (see Note 2), net proceeds from our borrowings under our credit agreement with
Blackstone (see Note 8), private placements of its convertible preferred stock and common stock, collaborations, bank and
institutional lender debt, other convertible debt, grant funding and clinical trial support from governmental and
philanthropic organizations and patient advocacy groups in the disease area addressed by the Company’s product
candidates. On August 15, 2022, the Company repaid the outstanding principal amount and accrued interest, totaling
$152.3 million, of the 3.00% convertible senior notes due August 15, 2022 (the “2022 Convertible Notes”) that was due
upon maturity in accordance with the terms of the notes. 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 since 2014, Emflaza for the treatment
of DMD in the United States since 2017 and Upstaza for the treatment of AADC deficiency in the EEA since May 2022.
The Company has also relied on revenue associated with milestone and royalty payments from Roche pursuant to the
License and Collaboration Agreement (the “SMA 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 its SMA program. 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.
156
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2022
(In thousands except share and per share amount)
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, indefinite lived intangible assets annual
impairment assessment, 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. Restricted cash also contains an unconditional, irrevocable and transferable letter of credit that was entered into
during June 2022 in connection with obligations for the Company’s new facility lease in Warren, New Jersey. The amount
of the letter of credit is $8.1 million and has the potential to be reduced to $4.1 million if after five years the Company is
not in default of its lease. Both amounts are classified within deposits and other assets on the consolidated balance sheet
due to the long-term nature of the letter of credit. Restricted cash also includes a bank guarantee of $0.5 million
denominated in a foreign currency.
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
$
$
157
End of
period-
December 31,
Beginning of
period-
December 31,
2021
189,718
7,500
197,218
2022
279,834 $
16,091
295,925 $
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2022
(In thousands except share and per share amount)
Consolidation
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’s marketable securities consists of both debt securities and equity investments. The Company considers
its investments in debt 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 years ended December 31, 2022 and 2021, no allowance was recorded
for credit losses.
Marketable securities that are equity investments are measured at fair value, as it is readily available, and as such are
classified as Level 1 assets. Unrealized holding gains and losses for these equity investments are components of other
(expense) income, net within the consolidated statement of operations.
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
158
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2022
(In thousands except share and per share amount)
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, 2022 December 31, 2021
1,418
$
7,721
6,717
15,856
1,078 $
14,074
6,656
21,808 $
$
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 $1.7 million
and $2.2 million for the years ended December 31, 2022 and 2021, respectively, primarily related to 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 years ended December 31, 2022 and December 31, 2021, these
amounts were immaterial.
159
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2022
(In thousands except share and per share amount)
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
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
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.
During the years ended December 31, 2022, 2021, and 2020, net product sales in the United States were $218.3
million, $187.3 million, and $139.0 million, respectively, consisting solely of sales of Emflaza, and net product sales
outside of the United States were $316.9 million, $241.6 million, and $194.4 million respectively, consisting of sales of
Translarna, Tegsedi, Waylivra, and Upstaza. Translarna net product revenues made up $288.6 million, $236.0 million, and
$191.9 million of the net product sales outside of the United States for the years ended December 31, 2022, 2021, and
2020, respectively. During the year ended December 31, 2022, two countries, the United States and Russia, accounted for
at least 10% of the Company’s net product sales, representing $218.3 million and $59.7 million of net product sales,
160
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2022
(In thousands except share and per share amount)
respectively. During the years ended December 31, 2021 and 2020, only the United States accounted for at least 10% of
the Company’s net product sales.
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. 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 Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 808
“Collaborative Arrangements” to then determine if ASC Topic 606 is applicable by considering whether the collaborator
meets the definition of a customer. If the criteria are met, the Company assesses the promises in the arrangement to identify
distinct performance obligations.
For licenses of intellectual property, the Company assesses, at contract inception, whether the intellectual property is
distinct from other performance obligations identified in the arrangement. If the licensing of intellectual property is
determined to be distinct, revenue is recognized for nonrefundable, upfront license fees when the license is transferred to
the customer and the customer can use and benefit from the license. If the licensing of intellectual property is determined
not to be distinct, then the license will be bundled with other promises in the arrangement into one distinct performance
obligation. The Company needs to determine if the bundled performance obligation is satisfied over time or at a point in
time. If the Company concludes that the nonrefundable, upfront license fees will be recognized over time, the Company
will need to assess the appropriate method of measuring proportional performance.
For milestone payments, the Company assesses, at contract inception, whether the development or sales-based
milestones are considered probable of being achieved. If it is probable that a significant revenue reversal will occur, the
Company will not record revenue until the uncertainty has been resolved. Milestone payments that are contingent upon
regulatory approval are not considered probable of being achieved until the applicable regulatory approvals or other
external conditions are obtained as such conditions are not within the Company’s control. If it is probable that a significant
revenue reversal will not occur, the Company will estimate the milestone payments using the most likely amount method.
The Company will re-assess the development and sales-based milestones each reporting period to determine the probability
of achievement. The Company recognizes 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.
161
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2022
(In thousands except share and per share amount)
For the years ended December 31, 2022, 2021, and 2020, the Company has recognized $50.1 million, $55.0 million,
and $42.6 million of collaboration revenue, respectively, related to the SMA License Agreement with Roche.
For the years ended December 31, 2022, 2021 and 2020, the Company has recognized $113.5 million, $54.6 million,
and $4.8 million of royalty revenue, respectively, related to Evrysdi.
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 which includes a review of the Company’s
receivables portfolio, which are pooled on a customer basis or country basis. In making its assessment of whether an
allowance for credit losses is required, the Company considers its historical experience with customers, current balances,
levels of delinquency, regulatory and legal environments, and other relevant current and future forecasted economic
conditions. For the years ended December 31, 2022 and 2021, no allowance was recorded for credit losses. The allowance
for doubtful accounts was $0.3 million as of December 31, 2022 and $0.1 million as of December 31, 2021. For the years
ended December 31, 2022, 2021 and 2020, 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 remaining milestone payments equal $250.0 million in the aggregate as of December 31, 2022. 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.
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 is being amortized using the effective interest method over the life of the
arrangement, in accordance with the respective guidance. The Company utilizes 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.
162
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2022
(In thousands except share and per share amount)
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
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 short term deferred research and development
advance payments were $2.4 million and $1.4 million and are classified as prepaid expenses and other current assets on
163
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2022
(In thousands except share and per share amount)
the consolidated balance sheet as of December 31, 2022 and 2021, respectively. The long term deferred research and
development advance payments were $3.9 million and $1.8 million and are classified as deposits and other assets on the
consolidated balance sheet as of December 31, 2022 and 2021, 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).
(cid:120) 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.
(cid:120) 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).
(cid:120) 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.
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
estimates the expected volatility of options utilizing the Company’s historical stock volatility. The Company estimates the
expected term of options utilizing 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 FASB Accounting Standards Update (“ASU”) 2016-9, the Company made
a policy election to continue its methodology for estimating its forfeiture rate.
164
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2022
(In thousands except share and per share amount)
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, 2022, 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 there were no deferrals of certain payroll
taxes as of December 31, 2022, which is no longer accrued in other current 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 Cuts and Jobs Act (“TCJA”), which significantly
revised 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 TCJA 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,
2022.
Starting in 2022, TCJA amendments to IRC Section 174 will no longer permit an immediate deduction for research
and development (R&D) expenditures in the tax year that such costs are incurred. Instead, these IRC Section 174
development costs must now be capitalized and amortized over either a five- or 15-year period, depending on the location
of the activities performed. The new amortization period begins with the midpoint of any taxable year that IRC Section
174 costs are first incurred, regardless of whether the expenditures were made prior to or after July 1 and runs until the
midpoint of year five for activities conducted in the United States or year 15 in the case of development conducted on
foreign soil. This tax law change resulted in an increased current taxable income of the Company by $450.1 million for
the year ended December 31, 2022.
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
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.
165
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2022
(In thousands except share and per share amount)
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.
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”). The Company recorded a deferred tax liability in conjunction with the Agilis Merger
of $122.0 million in 2018, 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. In July 2022, the Company received
EMEA approval for a portion of the IPR&D assets, and thus, began the amortization of the intangible.
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 was formally denominated in U.S. dollars and was remeasured into local currency using the exchange rate as of the
balance sheet date. During the year ended December 31, 2022, the loan agreement was amended to change the
denomination from U.S. dollars to local currency, and the Company recorded a non-cash realized foreign exchange loss
of $16.9 million, which is recorded within other (expense) income, net on the consolidated statement of operations. 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.
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.
166
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2022
(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 will 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.
167
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2022
(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, 2022.
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 an annual test for its indefinite-lived intangible assets as of October 1, 2022. In the fourth
quarter of 2022, the Company recorded a partial impairment on the Upstaza indefinite lived intangible asset of $33.4
million, which is recorded as intangible asset impairment in the statement of operations. The impairment was related to a
decrease in projected cash flows due to refinements in current market assumptions and the timing of patient treatments.
To calculate the impairment amount, the Company utilized a discounted cash flow model under the income method, which
primarily utilized Level 3 fair value inputs. Some of the more significant assumptions inherent in the development of the
model included the estimated annual cash flows, particularly net revenues and operations costs, the appropriate discount
rate to select in order to measure the risk inherent in the future cash flows, and the probability of success. Refer to Note
18 for further information regarding the Company’s intangible assets.
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
168
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2022
(In thousands except share and per share amount)
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, 2022, 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, 2022. The Company’s single reporting unit had a negative carrying value and thus the Company determined
there was no impairment of goodwill.
3. Acquisitions
Censa Asset Acquisition
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").
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.
The Company determined that substantially all of the fair value is concentrated in sepiapterin, formerly known as
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 sepiapterin. As sepiapterin 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 year ended December 31, 2020. Refer to Note 15 for to the terms and conditions of the Censa Merger Agreement.
4. Fair value of financial instruments and investments
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
169
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2022
(In thousands except share and per share amount)
Company’s marketable securities are classified as Level 2 as they primarily utilize broker quotes in a nonactive market to
value these securities.
The Company owns common stock in ClearPoint Neuro, Inc. (“ClearPoint”) (formerly MRI Interventions, Inc.), a
publicly traded medical device company. The ClearPoint equity investments (collectively, the “ClearPoint Equity
Investments”) represent financial instruments, and therefore, are recorded at fair value, which is readily determinable. The
ClearPoint Equity Investments are components of deposits and other assets on the consolidated balance sheet. During
the years ended December 31, 2022 and 2021, the Company recorded unrealized losses of $3.5 million and $6.1 million,
respectively, which are components of other (expense) income, net within the consolidated statement of operations. The
fair value of the equity investments was $11.0 million and $14.5 million as of December 31, 2022 and 2021, respectively.
The Company classifies its equity investments 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.
(cid:3)
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 years ended December 31, 2022 and 2021, the Company recorded unrealized losses of $5.8 million and $8.3
million, respectively. These unrealized losses are components of other (expense) income, net within the consolidated
statement of operations. The fair value of the convertible debt security was $15.2 million and $21.0 million as of December
31, 2022 and 2021, respectively. 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 Company has investments in mutual funds, including one that is denominated in a foreign currency. All of these
are equity investments and are classified as marketable securities on the Company’s consolidated balance sheets. These
equity investments are reported at fair value, as it is readily available, and as such are classified as Level 1 assets.
Unrealized holding gains and losses for these equity investments are included as components of other (expense) income,
net within the consolidated statement of operations. During the years ended December 31, 2022 and 2021, the Company
had $8.0 million unrealized losses and $1.7 million unrealized net gains, respectively, relating to the equity investments
still held at the reporting date. During the years ended December 31, 2022 and 2021, the Company had redemptions of
$113.0 million and $4.3 million, respectively. During the years ended December 31, 2022 and 2021, the Company had
$0.5 million and $0.4 million foreign currency unrealized losses, respectively, relating to these equity investments.
Fair value of marketable securities that are classified as available for sale debt securities is based upon market prices
using quoted prices in active markets for identical assets quoted on the last day of the period. In establishing the estimated
fair value of the remaining available for sale debt securities, the Company used the fair value as determined by its
investment advisors using observable inputs other than quoted prices.
170
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2022
(In thousands except share and per share amount)
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, 2022 and 2021:
December 31, 2022
Marketable securities - available for sale
Marketable securities - equity investments
ClearPoint Equity Investments
ClearPoint convertible debt security
Contingent consideration payable- development and
regulatory milestones
Contingent consideration payable- net sales
milestones and royalties
Marketable securities - available for sale
Marketable securities - equity investments
ClearPoint Equity Investments
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)
Significant
other
observable
inputs
(level 2)
Significant
unobservable
inputs
(level 3)
— $
108,261 $
10,965 $
— $
22,610 $
— $
— $
15,231 $
—
—
—
—
Total
22,610 $
108,261 $
10,965 $
15,231 $
$
$
$
$
$
82,500 $
— $
— $
82,500
$
81,500 $
— $
— $
81,500
December 31, 2021
Quoted prices
in active
markets for
identical assets
(level 1)
Total
376,685 $
206,973 $
14,525 $
20,971 $
$
$
$
$
— $
206,973 $
14,525 $
— $
Significant
other
observable
inputs
(level 2)
376,685 $
— $
— $
20,971 $
Significant
unobservable
inputs
(level 3)
—
—
—
—
$
139,300 $
— $
— $
139,300
$
100,600 $
— $
— $
100,600
No transfers of assets between Level 1 and Level 2 of the fair value measurement hierarchy occurred during the years
ended December 31, 2022 and 2021.
The following is a summary of marketable securities accounted for as available for sale debt securities at December 31,
2022 and 2021:
Commercial paper
Corporate debt securities
Total
171
Amortized
Cost
12,419 $
10,685
23,104 $
$
$
December 31, 2022
Gross Unrealized
Gains
Losses
5 $
—
5 $
— $
Fair Value
12,424
10,186
22,610
(499)
(499) $
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2022
(In thousands except share and per share amount)
Commercial paper
Corporate debt securities
Asset-backed securities
Government obligations
Total
Amortized
Cost
75,275 $
$
268,246
15,287
18,479
$ 377,287 $
December 31, 2021
Gross Unrealized
Gains
5 $
81
16
5
107 $
Losses
(1) $
Fair Value
75,279
267,683
15,298
18,425
(709) $ 376,685
(644)
(5)
(59)
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 years ended December 31, 2022 and 2021, 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 basis, 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 an event or change in
circumstances has occurred in that period that may be related to credit issues. For the years ended December 31, 2022 and
2021, no allowance was recorded for credit losses. Unrealized gains and losses are reported as a component of accumulated
other comprehensive (loss) income in stockholders’ equity.
For the year ended December 31, 2022, the Company had $4.0 million of realized losses from the sale of available
for sale debt securities. For the year ended December 31, 2021, the Company had $0.8 million of realized gains from the
sale of available for sale debt securities. Realized gains and losses 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 debt securities that have been in an unrealized loss position
for a period of less than and greater than or equal to 12 months as of December 31, 2022 are as follows:
Securities in an unrealized loss
position less than 12 months
position greater than or equal to 12 months
Total
December 31, 2022
Securities in an unrealized loss
Unrealized losses Fair Value Unrealized losses
Fair Value
10,186
10,186 $
Unrealized losses Fair Value
(499) $ 10,186
(499) $ 10,186
Corporate debt securities $
$
Total
—
— $
—
— $
(499)
(499) $
172
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2022
(In thousands except share and per share amount)
The unrealized losses and fair values of available for sale debt securities that have been in an unrealized loss position
for a period of less than and greater than or equal to 12 months as of December 31, 2021 are as follows:
Securities in an unrealized loss
position less than 12 months
position greater than or equal to 12 months
Total
December 31, 2021
Securities in an unrealized loss
Commercial paper
Corporate debt securities
Asset-backed securities
Government obligations
Total
Unrealized losses Fair Value Unrealized losses
12,992
$
217,540
10,786
15,483
(1)
(608)
(5)
(59)
—
(36)
—
—
(36) $
$
(673) $ 256,801 $
Fair Value
Unrealized losses Fair Value
(1) $ 12,992
222,525
10,786
15,483
(709) $ 261,786
(644)
(5)
(59)
—
4,985
—
—
4,985 $
Available for sale debt securities on the balance sheet at December 31, 2022 and 2021 mature as follows:
December 31, 2022
Commercial paper
Corporate debt securities
Total
Commercial paper
Corporate debt securities
Asset-backed securities
Government obligations
Total
Less Than
12 Months
More Than
12 Months
—
10,186
10,186
12,424 $
—
12,424 $
$
$
December 31, 2021
Less Than
12 Months
More Than
12 Months
—
136,077
6,574
12,423
221,611 $ 155,074
75,279 $
131,606
8,724
6,002
$
$
The Company classifies all of its marketable securities as current as they are all either available for sale debt securities
or equity investments 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”).
On August 15, 2022, the Company repaid the outstanding principal amount and accrued interest, totaling $152.3 million,
of the 2022 Convertible Notes that was due upon maturity in accordance with the terms of the notes. 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. As the 2022 Convertible Notes have been repaid, they are no longer on the balance sheet as of December 31, 2022.
The estimated fair value of the 2022 Convertible Notes at December 31, 2021 was $158.3 million. The estimated fair value
of the 2026 Convertible Notes at December 31, 2022 and December 31, 2021 was $281.7 million and $305.3 million,
respectively.
173
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2022
(In thousands except share and per share amount)
Level 3 valuation
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, 2022, the weighted average discount rate for the
development and regulatory milestones was 7.8% and the weighted average probability of success was 35%. 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, 2022, 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 50%.
The table presented below is a summary of changes in the fair value of the Company’s Level 3 valuation for the
contingent consideration payables for the years ended December 31, 2022, and 2021:
Contingent consideration payable- Contingent consideration payable-
net sales milestones and royalties
- Agilis
development and regulatory
milestones - Agilis
Beginning balance as of December 31, 2020
Additions
Change in fair value
Payments
Ending balance as of December 31, 2021
Additions
Change in fair value
Payments
Ending balance as of December 31, 2022
$
$
$
139,200 $
—
100
—
139,300 $
—
(6,800)
(50,000)
82,500 $
101,200
—
(600)
—
100,600
—
(19,100)
—
81,500
In July 2022, the European Commission approved Upstaza for the treatment of AADC deficiency for patients 18 months
and older within the EEA, which triggered a $50.0 million milestone payment to the former equityholders of Agilis in
accordance with the terms of the Agilis Merger Agreement. In accordance with ASC 230, the portion of the $50.0 million
milestone payment up to the acquisition date fair value of the contingent consideration liability is classified as a financing
outflow and the amount paid in excess of the acquisition date fair value of that liability is classified as an operating outflow
on the consolidated statements of cash flows.
174
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2022
(In thousands except share and per share amount)
The following significant unobservable inputs were used in the valuation of the contingent consideration payables for
the years ended December 31, 2022 and 2021:
December 31, 2022
Fair Value Valuation Technique
Contingent consideration
payable-
development and
regulatory milestones
Contingent considerable
payable- net sales
milestones and royalties
$82,500
Probability-adjusted
discounted cash flow
$81,500
Option-pricing model
with Monte Carlo
simulation
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
Fair Value Valuation Technique
Contingent consideration
payable-
development and regulatory
milestones
$139,300
Probability-adjusted
discounted cash flow
Contingent considerable
payable- net sales
milestones and royalties
$100,600
Option-pricing model
with Monte Carlo
simulation
December 31, 2021
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 - $331 million
25% - 92%
6.2% - 8.3%
2023 - 2029
$0 - $150 million
25% - 100%
2% - 6%
11.5%
2025 - 2041
Range
$0 - $381 million
25% - 94%
1.7% - 4.7%
2022 - 2028
$0 - $150 million
25% - 94%
2% - 6%
11.0%
2023 - 2040
The contingent consideration payables are classified Level 3 liabilities as their valuation requires substantial judgment
and estimation of factors that are not currently observable in the market. If different assumptions were used for the various
inputs to the valuation approaches, including but not limited to, assumptions involving probability adjusted sales estimates
for the gene therapy platform and estimated discount rates, the estimated fair value could be significantly higher or lower
than the fair value determined.
5. Fixed assets
Fixed assets, net were as follows at December 31, 2022 and 2021:
Leasehold improvements
Computer equipment and software
Machinery and lab equipment
Furniture and fixtures
Assets in process
Less accumulated depreciation
Total
December 31,
2022
28,969 $
15,332
47,496
3,812
14,349
109,958
(37,368)
72,590 $
2021
19,937
13,812
33,187
3,805
9,017
79,758
(27,173)
52,585
$
$
Depreciation expense was approximately $12.3 million, $9.4 million, and $6.6 million for the years ended
December 31, 2022, 2021, and 2020, respectively.
175
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2022
(In thousands except share and per share amount)
6. Leases
The Company leases office space in South Plainfield, New Jersey for its principal office under two noncancelable
operating leases through August 2024, in addition to office and laboratory space in Bridgewater, New Jersey and 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.
In May 2022, the Company entered into a Lease Agreement (the “Warren Lease”) with Warren CC Acquisitions, LLC
(the “Warren Landlord”) relating to the lease of two entire buildings comprised of approximately 360,000 square feet of
shell condition, modifiable space (the “Warren Premises”) at a facility located in Warren, New Jersey. The rental term of
the Warren Lease commenced on June 1, 2022 (the “Commencement Date”), with an initial term of seventeen years (the
“Warren Initial Term”), followed by three consecutive five-year renewal periods at the Company’s option. The aggregate
base rent for the Warren Initial Term will be approximately $163.0 million; provided, however, that if the Company is not
subject to an Event of Default (as defined in the Warren Lease), the Company will be entitled to a base rent abatement
over the first three years of the Warren Initial Term of approximately $18.6 million, reducing the Company’s total base
rent obligation to $144.4 million. The rental rate for the renewal periods will be at the Fair Market Rental Value (as defined
in the Warren Lease) and determined at the time of the exercise of the renewal. Beginning in the second lease year, the
Company is also responsible for the payment of all taxes and operating expenses for the Warren Premises. As a result, the
Company recorded an operating lease ROU asset of $28.9 million and an operating lease ROU liability of $28.9 million
as of the Commencement Date.
The Company plans on developing the Warren Premises into office and laboratory space. The Company is entitled to
an allowance of approximately $36.2 million to be provided by the Warren Landlord to be used towards such
improvements. The Landlord is providing the allowance to cover those assets that are real property improvements, such
as structural components, roofs, flooring, etc., whose useful lives are typically longer in nature. Upon the first issuance of
a temporary certificate of occupancy for the Warren Premises, the Company will receive $5.0 million from the Landlord,
which the Company has committed to fund into the construction account. The Company evaluated the leasehold
improvements under ASC 842 and determined that the Company will be the owner of the improvements, and therefore the
$36.2 million allowance and $5.0 million due from the Landlord were treated as lease incentives at the commencement of
the lease and included in the calculation of the lease ROU asset and lease ROU liability, effectively reducing both at
176
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2022
(In thousands except share and per share amount)
Commencement Date. In connection with the execution of the Warren Lease, the Company also committed to fund a
construction account with $3.6 million to go towards the Company’s improvements of the Warren Premises. Subject to
the terms of the Warren Lease, the Company has a right of first offer to purchase the Warren Premises if the Warren
Landlord receives a bona fide third party offer to purchase the Warren Premises or the Warren Landlord decides to sell the
Warren Premises.
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 Company determined that the
agreement was a finance lease, for which the Company recorded a finance lease ROU asset for $41.4 million and
corresponding finance lease liability for $41.4 million at the onset of the lease agreement. Given that the leased asset 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 full $41.4 million relating to the finance lease ROU asset was
written off and expensed to research and development during the year ended December 31, 2020. As of December 31,
2022, the balance of the finance lease liabilities-current and finance lease liabilities-non-current are $3.0 million and $18.7
million, respectively, and are directly related to the Company’s MassBio agreement. As of December 31, 2021, the balance
of the finance lease liabilities-current and finance lease liabilities non-current were $3.0 million and $20.1 million,
respectively. Additionally, during the years ended December 31, 2022 and December 31, 2021, the Company recorded
finance lease costs of $1.6 million and $1.7 million, respectively, 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 1.2 years to 16.4 years and certain leases include
renewal options to extend the lease for up to 15 years. Rent expense was approximately $25.2 million, $21.4 million, and
$15.3 million for the years ended December 31, 2022, 2021 and 2020.
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,
2022
Year Ended
December 31,
2021
Year Ended
December 31,
2020
$
$
19,804 $
4,557
808
25,169 $
16,411
4,361
656
21,428
$
$
12,368
2,448
450
15,266
Total operating lease cost is a component of operating expenses on the consolidated statements of operations.
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
December 31, 2022 December 31, 2021
10.87
11.61
8.61 %
10.01
7.80 %
8.91 %
11.00
7.80 %
177
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2022
(In thousands except share and per share amount)
Supplemental cash flow information related to leases was as follows:
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases
Financing cash flows from finance lease
Operating cash flows from finance leases
Year Ended December 31,
2021
2022
2020
$ 14,736 $ 13,683 $ 8,462
17,829
171
1,276
1,724
2,224
776
Right-of-use assets obtained in exchange for lease obligations:
Operating leases
Finance lease
$ 35,817 $
—
645 $ 76,811
41,382
—
Future minimum lease payments under non-cancelable leases as of December 31, 2022 were as follows:
2023
2024
2025
2026
2027 and thereafter
Total lease payments
Less: Imputed Interest expense
Total
7. Accounts payable and accrued expenses
Operating Leases Finance Lease
3,000
$
3,000
3,000
3,000
18,000
30,000
8,325
21,675
15,373 $
18,456
20,431
19,985
193,792
268,037
157,807
110,230 $
$
Accounts payable and accrued expenses at December 31, 2022 and 2021 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,
2022
62,669 $
4,712
38,882
3,093
63,787
67,355
40,546
27,268
12,054
320,366 $
2021
55,733
1,287
26,434
3,547
61,662
68,770
35,679
23,033
12,639
288,784
$
$
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”
178
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2022
(In thousands except share and per share amount)
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 utilizes the prospective
method to account for subsequent changes in the estimated future payments to be made to RPI and updates 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, 2022:
(cid:3)
Liability for sale of future royalties- (current and noncurrent)
Beginning balance as of December 31, 2021
Less: Non-cash royalty revenue payable to RPI
Plus: Non-cash interest expense recognized
Ending balance
Effective interest rate as of December 31, 2022
Year Ended December 31,
2022
733,985
(48,738)
72,639
757,886
8.7 %
$
$
Non-cash interest expense is recorded in the statement of operations within “Interest expense, net”.
Senior Secured Term Loan
On October 27, 2022 (the “Closing Date”), the Company entered into a credit agreement (the “Blackstone Credit
Agreement”) for fundings of up to $950.0 million consisting of a committed loan facility of $450.0 million and further
contemplating the potential for up to $500.0 million of additional financing, to the extent that the Company requests such
additional financing and subject to the Lenders’ agreement to provide such additional financing and to mutual agreement
on terms, among the Company, certain subsidiaries of the Company (together with the Company, the “Loan Parties”) and
funds and other affiliated entities advised or managed by Blackstone Life Sciences and Blackstone Credit (collectively,
“Blackstone”, and such lenders, together with their permitted assignees, the “Lenders” and each a “Lender”) and
Wilmington Trust, National Association, as the administrative agent for the Lenders.
The Blackstone Credit Agreement provides for a senior secured term loan facility funded on the Closing Date in the
aggregate principal amount of $300.0 million (the “Initial Loans”) and a committed delayed draw term loan facility of up
to $150.0 million (the “Delayed Draw Loans” and, together with the Initial Loans, the “Loans”) to be funded at the
Company’s request within 18 months of the Closing Date subject to specified conditions. In addition, the Blackstone Credit
Agreement contemplates the potential for further financings by Blackstone, by providing for incremental discretionary
uncommitted further financings of up to $500.0 million. The Company capitalized approximately $11.6 million of debt
issuance costs which are presented on the balance sheet as a direct deduction from the debt liability and are being amortized
over the term of the senior secured term loan facility using the effective interest rate method.
The Loans mature on the date that is seven years from the Closing Date. Borrowings under the Blackstone Credit
Agreement bear interest at a variable rate equal to, at the Company’s option, either an adjusted Term SOFR rate plus seven
and a quarter percent (7.25%) or the Base Rate plus six and a quarter percent (6.25%), subject to a floor of one percent
179
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2022
(In thousands except share and per share amount)
(1%) and two percent (2%) with respect to Term SOFR rate and Base Rate (each as defined in the Blackstone Credit
Agreement), respectively. Payment of the Loans are subject to certain premiums specified in the Blackstone Credit
Agreement, in each case, from the date of the applicable Loan funded.
All obligations under the Blackstone Credit Agreement are secured, subject to certain exceptions and specified inclusions,
by security interests in certain assets of the Loan Parties, including (1) intellectual property and other assets related to
Translarna, Emflaza, Upstaza, sepiapterin and, until certain release conditions are met, vatiquinone, in each case, together
with any other forms, formulations, or methods of delivery of any such products, and regardless of trade or brand name,
(2) future acquired intellectual property (but not internally developed intellectual property unrelated to other intellectual
property collateral) and other related assets, and (3) the equity interests held by the Loan Parties in certain of their
subsidiaries. The Blackstone Credit Agreement contains certain negative covenants with which the Company must remain
in compliance. The Blackstone Credit Agreement also requires that the Company maintains consolidated liquidity of at
least $100.0 million as of the last day of each fiscal quarter, which shall be increased to $200.0 million upon the Company
consummating acquisitions meeting certain consolidated thresholds described therein. In addition, the Company will be
required under conditions specified in the Blackstone Credit Agreement to fund a reserve account up to certain amounts
specified therein. The funds in the reserve account are available to prepay the Loans at any time at the Company’s option,
and are, if funded, subject to release upon certain further conditions. Upon any such release, such funds are freely available
for use by the Company subject to the generally applicable terms and conditions of the Blackstone Credit Agreement. The
Blackstone Credit Agreement contains certain customary representations and warranties, affirmative covenants and
provisions relating to events of default.
The following table sets forth total interest expense recognized related to the senior secured term loan:
Contractual interest expense
Amortization of debt issuance costs
Total
Effective interest rate
2026 Convertible Notes
Year ended
December 31,
2022
6,069
290
6,359
12.2 %
$
$
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”).
180
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2022
(In thousands except share and per share amount)
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:
(cid:120)
(cid:120)
during any calendar quarter commencing on or after December 31, 2019 (and only during such calendar quarter),
if the last reported sale price of the Company’s common stock for at least 20 trading days (whether or not
consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately
preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading
day;
during the five business day period after any five consecutive trading day period (the “measurement period”) in
which the trading price (as defined in the 2026 Convertible 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;
(cid:120)
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
(cid:120)
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
181
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2022
(In thousands except share and per share amount)
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
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) will,
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.
Prior to the adoption of ASU 2020-06, the Company accounted for the 2026 Convertible Notes as a liability and equity
component where the carrying value of the liability component was 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 did 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, was amortized to interest expense over the seven-year term of the 2026 Convertible Notes.
The equity component was not re-measured as long as it continued 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 were amortized to interest expense over the seven-year term of
the 2026 Convertible Notes, and transaction costs attributable to the equity component were 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.
Effective January 1, 2021 the Company adopted ASU 2020-06. After adoption, the Company now accounts for the
2026 Convertible Notes as a single liability measured at amortized cost. As the equity component is no longer required to
be split into a separate component, the Company recorded an adjustment for the initial $123.0 million that was allocated
to additional paid in capital and $16.1 million of life to date interest expense recorded as amortization of debt discount.
Additionally, the net deferred tax liability recorded for the 2026 Convertible Notes was reversed. The principal amount
of the liability over its carrying amount is amortized to interest expense over the seven-year term of the 2026 Convertible
Notes. Since the 2026 Convertible Notes are classified as a single liability, there is no debt discount required to be
amortized.
182
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2022
(In thousands except share and per share amount)
The 2026 Convertible Notes consist of the following:
Liability component
Principal
Less: Debt issuance costs
Net carrying amount
Year ended
December 31,
2022
$ 287,500 $
(4,456)
$ 283,044 $
2021
287,500
(5,606)
281,894
As of December 31, 2022, the remaining contractual life of the 2026 Convertible Notes is approximately 3.7 years.
The following table sets forth total interest expense recognized related to the 2026 Convertible Notes:
Contractual interest expense
Amortization of debt issuance costs
Total
Effective interest rate
Year ended
December 31,
$
(cid:3) $
2022
4,313 $
1,150
5,463 $
1.9 %
2021
4,313
1,128
5,441
1.9 %
In April 2022, under the terms of the 2026 Convertible Notes Indenture, the Company paid additional interest on the 2026
Convertible Notes at a rate equal to 0.5% per annum, for a total interest payment of approximately $2.1 million, for the
period beginning September 25, 2020 and ending March 14, 2022. In September 2022, under the terms of the 2026
Convertible Notes Indenture, the Company paid additional interest on the 2026 Convertible Notes at a rate equal to 0.5%
per annum, for a total interest payment of approximately $0.1 million, for the period beginning March 15, 2022 and ending
April 8, 2022. These amounts are not included in the table above, but were recorded as interest expense, net within the
statement of operations for the year ended December 31, 2022.
2022 Convertible Notes
In August 2015, the Company issued, at par value, $150.0 million aggregate principal amount of 3.00% convertible
senior notes due 2022. On August 15, 2022, the Company repaid the outstanding principal amount and accrued interest,
totaling $152.3 million, of the 2022 Convertible Notes that was due upon maturity in accordance with the terms of the
notes.
The 2022 Convertible Notes consisted of the following:
Year ended
December 31,
Liability component
Principal
Less: Debt issuance costs
Repayment of Convertible Notes
Net carrying amount
$
2021
2022
150,000 $ 150,000
(460)
—
— $ 149,540
—
(150,000)
$
183
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2022
(In thousands except share and per share amount)
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
Total
Effective interest rate
9. Capital structure
Common stock
$
$
$
2022
2,800
460
3,260
$
3.5 %
2021
4,500
720
5,220
3.5 %
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 year ended 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. During the year
ended December 31, 2020, the Company received net proceeds of $28.1 million after deducting agent discounts and
commissions and other offering expenses payable by the Company. No shares were sold during the years ended December
31, 2021 and 2022. 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, 2022.
On April 29, 2020, the Company, certain of the former equity holders of Agilis (“the Participating Rightholders”),
and, for the limited purposes set forth in the agreement, Shareholder Representative Services LLC, entered into a Rights
Exchange Agreement (the “Rights Exchange Agreement”). As a result of the Rights Exchange Agreement, during the
year 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 year 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.
In June 2021, the Company filed a Certificate of Amendment to its Restated Certificate of Incorporation, which
increased the number of authorized shares of the Company’s common stock from 125,000,000 to 250,000,000 shares.
In connection with the execution of the Blackstone Credit Agreement, the Company and certain entities affiliated with
the Lenders (the “Purchasers”) also entered into a stock purchase agreement (the “Stock Purchase Agreement”) on the
Closing Date for the sale and issuance of 1,095,290 shares of common stock (the “Shares”) to the Purchasers at a price of
$45.65 per share, for an aggregate purchase price of approximately $50.0 million. The per share price represents the closing
price of the Company’s common stock on the Nasdaq Global Select Market on October 26, 2022.
184
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2022
(In thousands except share and per share amount)
Under the Stock Purchase Agreement, the Company agreed to register the resale of the Shares on a registration
statement to be filed with the Securities and Exchange Commission within 60 days of the Closing Date. The Company has
agreed to keep such registration statement effective for a period of six months following the Closing Date. In addition,
subject to certain conditions, the Purchasers will be entitled to participate in registered underwritten public offerings by
the Company during such period.
Pursuant to the terms of the Stock Purchase Agreement, the Purchasers and certain of their controlled affiliates have
agreed not to, without the prior written approval of the Company and subject to specified conditions, directly or indirectly
acquire shares of the Company’s outstanding common stock in excess of specified thresholds, seek or propose any
acquisition of all or substantially all of the assets of the Company, seek or propose a merger or other business combination
involving the Company, solicit proxies or consents with respect to any securities of the Company, seek to influence the
management, board of directors or policies of the Company, or undertake other specified actions related to the potential
acquisition of additional equity interests in the Company, or to encourage others to do any of the above (the “Standstill
Restrictions”). The Standstill Restrictions terminate on the earliest of (i) the commencement of a tender offer or exchange
offer by a third party unaffiliated with the Purchasers for more than 50% of the Company’s outstanding common stock,
(ii) the public announcement by the Company of a written agreement to consummate a change of control of the Company,
(iii) the public announcement of the Company’s voluntary or involuntary bankruptcy and (iv) the termination of the
Blackstone Credit Agreement.
The Purchasers have also agreed not to sell or transfer the Shares without the prior written approval of the Company
for a period of 90 days following the Closing Date, subject to certain exceptions.
As of December 31, 2022, the Company’s number of authorized shares of common stock was 250,000,000.
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.
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
2022
Year ended December 31,
2021
2020
$
(559,017) $
(523,901) $
(438,160)
71,728,634
70,466,393 66,027,908
$
(7.79)* $
(7.43) * $
(6.64)*
* For the years ended December 31, 2022, 2021, and 2020, the Company experienced a net loss and therefore did not
report any dilutive share impact.
185
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2022
(In thousands except share and per share amount)
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,
2022
11,502,417
2,516,336
14,018,753
2021
10,772,582
1,519,831
2020
9,663,677
982,058
12,292,413 10,645,735
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. On June
8, 2022 (the “Restatement Effective Date”), the Company’s stockholders approved the Amended and Restated 2013 Long-
Term Incentive Plan (the “Amended 2013 LTIP”). The Amended 2013 LTIP provides for the grant of incentive stock
options, nonstatutory stock options, restricted stock units and other stock-based awards. The number of shares of common
stock reserved for issuance under the Amended 2013 LTIP is the sum of (A) the number of shares of the Company’s
common stock (up to 16,724,212 shares) that is equal to the sum of (1) the number of shares issued under the 2013 Long-
Term Incentive Plan prior to the Restatement Effective Date, (2) the number of shares that remain available for issuance
under the 2013 Long-Term Incentive Plan immediately prior to the Restatement Effective Date and (3) the number of
shares subject to awards granted under the 2013 Long-Term Incentive Plan prior to the Restatement Effective Date that
are outstanding as of the Restatement Effective Date, plus (B) from and after the Restatement Effective Date, an additional
8,475,000 shares of Common Stock. As of December 31, 2022, awards for 9,126,463 shares of common stock were
available for issuance under the Amended 2013 LTIP.
There are no additional shares of common stock available for issuance under the Company’s 1998 Employee, Director
and Consultant Stock Option Plan, 2009 Equity and Long Term Incentive Plan or 2013 Stock 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. In April 2022, the Company’s Board of Directors approved a
reduction in the total number of shares of common stock that may be issued under the 2020 Inducement Stock Incentive
Plan to 1,300,000 shares. In December 2022, the Company’s Board of Directors approved an additional 1,700,000 shares
of common stock that may be issued under the 2020 Inducement Stock Inventive Plan. As of December 31, 2022, awards
for 1,820,565 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.
186
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2022
(In thousands except share and per share amount)
Inducement stock option awards
Pursuant to the Nasdaq inducement grant exception, during the year ended December 31, 2022, the Company issued
options to purchase an aggregate of 104,385 shares of common stock to certain new hire employees at a weighted-average
exercise price of $42.02 per share under the 2020 Inducement Stock Incentive Plan. Additionally, during the year ended
December 31, 2022, the Company issued 43,800 restricted stock units under the 2020 Inducement Stock Incentive Plan.
An aggregate of 237,700 of options and 26,336 of restricted stock units previously granted as inducement awards were
forfeited during the year ended December 31, 2022 in connection with employee separations from the Company.
Stock option activity—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, 2019
Granted
Exercised
Forfeited
Outstanding at December 31, 2020
Granted
Exercised
Forfeited
Outstanding at December 31, 2021
Granted
Exercised
Forfeited/Cancelled
Outstanding at December 31, 2022
Vested or Expected to vest at December 31, 2022
Exercisable at December 31, 2022
11,043,939 $
2,777,975 $
(3,268,452) $
(889,785) $
9,663,677 $
2,487,234 $
(635,871) $
(742,458) $
10,772,582 $
1,685,435 $
(496,863) $
(458,737) $
11,502,417 $
3,432,725 $
7,774,274 $
31.67
51.06
24.25
42.14
38.72
61.36
28.01
52.04
43.66
38.55
29.45
48.75
43.33
47.74
41.23
6.38 years $
8.20 years $
5.49 years $
38,330
1,694
36,523
The fair values of grants made in the years ended December 31, 2022, 2021 and 2020 were contemporaneously
estimated on the date of grant using the following assumptions:
Risk-free interest rate
Expected volatility
Expected term
2022
1.55% - 4.57%
54% - 74%
5.5 years
2021
0.51% - 1.24%
74% - 89%
5.5 years
2020
0.34% - 1.45%
87% - 89%
5.75 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, 2022, 2021 and 2020 was $23.54, $43.05, and $36.94 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
187
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2022
(In thousands except share and per share amount)
restricted stock awards, which has been determined based upon the market value of the Company’s shares on the grant
date, is expensed over the vesting period.
The following table summarizes information on the Company’s restricted stock awards and units:
Unvested at December 31, 2021
Granted
Vested
Forfeited
Unvested at December 31, 2022
Restricted Stock Awards and Units
Weighted
Average
Grant
Date
Fair Value
55.43
38.37
50.15
46.67
45.67
Number of
Shares
1,519,831 $
1,686,467
(504,851)
(185,111)
2,516,336 $
Employee Stock Purchase Plan—In June 2016, the Company established an Employee Stock Purchase Plan (as
amended, “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. In June 2021, the Plan was amended to increase the total number of
shares available for purchase under the Plan from one million shares to two 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, 2022, the Company recorded $2.4 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
2022
55,869 $
54,464
Year ended December 31,
2021
53,632 $
49,881
$
$
110,333 $
103,513 $
2020
38,716
31,609
70,325
As of December 31, 2022, there was approximately $176.1 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 2.19 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.
188
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2022
(In thousands except share and per share amount)
The following table summarizes other comprehensive income (loss) and the changes in accumulated other
comprehensive items, by component, for the years ended December 31, 2022, 2021, and 2020, respectively.
Unrealized
Gains (Losses)
On
Marketable
Securities, net of tax
Total
Accumulated
Other
Comprehensive
Foreign
Currency
Translation
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
Other comprehensive (loss) income before reclassifications
Amounts reclassified from other comprehensive items
Other comprehensive (loss) income
Balance at December 31, 2021
Other comprehensive income before reclassifications
Amounts reclassified from other comprehensive items
Other comprehensive income
Balance at December 31, 2022
$
$
$
$
755 $
479
666
1,145
1,900 $
(3,279)
777
(2,502)
(602) $
4,072
(3,964)
108
(494) $
(11,339) $
(51,518)
—
(51,518)
(62,857) $
39,177
—
39,177
(23,680) $
28,970
—
28,970
5,290 $
Items
(10,584)
(51,039)
666
(50,373)
(60,957)
35,898
777
36,675
(24,282)
33,042
(3,964)
29,078
4,796
Reclassified amounts from other comprehensive items were determined using the actual realized gains and losses from
the sales of marketable securities.
13. Revenue recognition
Net product sales
During the years ended December 31, 2022, 2021, and 2020, net product sales in the United States were $218.3
million, $187.3 million, and $139.0 million, respectively, consisting solely of sales of Emflaza, and net product sales
outside of the United States were $316.9 million, $241.6 million, and $194.4 million respectively, consisting of sales of
Translarna, Tegsedi, Waylivra, and Upstaza. Translarna net product revenues made up $288.6 million, $236.0 million, and
$191.9 million of the net product sales outside the United States for the years ended December 31, 2022, 2021, and 2020,
respectively. During the year ended December 31, 2022, two countries, the United States and Russia, accounted for at least
10% of the Company’s net product sales, representing $218.3 million and $59.7 million of the net product sales,
respectively. During the years ended December 31, 2021 and 2020, only the United States accounted for at least 10% of
the Company’s net product sales. For the years ended December 31, 2022, 2021, and 2020, two of the Company’s
distributors each accounted for over 10% of the Company’s net product sales.
As of December 31, 2022, the Company has a contract liabilities balance of $1.4 million relating to the production of
plasmid DNA and AAV vectors for gene therapy applications for external customers. As of December 31, 2021, the
Company did not have a contract liabilities balance. The Company did not have any contract assets for the years ended
December 31, 2022 and 2021. For the year ended December 31, 2022, the Company did not recognize any revenue related
to the amounts included in the contract liability balance at the beginning of the period. For the year ended December 31,
2021, the Company recognized revenues of $4.0 million related to amounts included in contract liability balance at the
189
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2022
(In thousands except share and per share amount)
beginning of the period, which related to Translarna net product revenue. The Company has not made significant changes
to the judgments made in applying ASC Topic 606 for the years ended December 31, 2022 and 2021.
Remaining performance obligations
Remaining performance obligations represent the transaction price for goods the Company has yet to provide. As of
December 31, 2022, the aggregate amount of transaction price allocated to remaining performance obligations related to
plasmid DNA and AAV vector production for external customers is $1.4 million. The Company expects to recognize
revenue over 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. As of December 31, 2021, the Company did not have any
remaining performance obligations.
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”). Under the terms of the SMA License Agreement, Roche acquired an exclusive worldwide license to the
Company’s SMA program.
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.
For the years ended December 31, 2022, 2021, and 2020, the Company recognized revenue related to the licensing
and collaboration agreement with Roche of $50.1 million, $55.0 million, and $42.6 million, respectively. The below
summarizes the milestone achievements associated with the Company’s SMA program during the years ended December
31, 2022, 2021, and 2020.
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 these three milestone payments as collaboration revenue for the year
ended December 31, 2020.
The first commercial sale of Evrysdi in the EU was made in March 2021. This event triggered a $20.0 million
milestone payment to the Company from Roche. The first commercial sale in Japan was made in August 2021, which was
the final research and development milestone received by the Company. This event triggered a $10.0 million payment to
the Company from Roche. In December 2021, the Company recorded its first sales milestone of $25.0 million for the
achievement of $500.0 million in worldwide annual net sales from Evrysdi. The Company recorded these three milestone
payments as collaboration revenue for the year ended December 31, 2021.
190
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2022
(In thousands except share and per share amount)
In September 2022, the Company recognized a sales milestone of $50.0 million for the achievement of $750.0 million
in worldwide annual net sales from Evrysdi, which is recorded on the balance sheet within prepaid expenses and other
current assets as of December 31, 2022. The remaining potential sales milestones as of December 31, 2022 is $250.0
million upon achievement of certain sales events. As of December 31, 2022, the Company does not have any remaining
research and development milestones that can be received.
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 years ended
December 31, 2022, 2021, and 2020 the Company has recognized $113.5 million, $54.6 million, and $4.8 million of
royalty revenue related to Evrysdi, respectively.
14. Income taxes
The loss from operations before tax benefit (expense) consisted of the following for the years ended December 31,
2022, 2021, and 2020:
Domestic
Foreign
Total
2022
2021
2020
$ (591,126) $ (487,726) $ (452,475)
49,543
$ (587,487) $ (518,340) $ (402,932)
(30,614)
3,639
The Income Tax Provision consisted of the following for the years ended December 31, 2022, 2021 and 2020:
Current:
U.S. Federal
U.S. State and Local
Foreign
Deferred:
U.S. Federal
U.S. State and Local
Foreign
Total tax benefit (expense)
2022
2021
2020
$
— $
— $
(4,224)
(1,582)
(3,844)
(1,340)
—
(24,984)
(4,372)
23,689
10,587
—
28,470 $
—
(377)
—
—
(5,872)
—
(5,561) $ (35,228)
$
191
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2022
(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
2022
21.00 %
3.07
(1.83)
5.89
(23.36)
(0.10)
(0.17)
0.34
—
—
4.84 %
December 31,
2021
21.00 %
(0.74)
(4.06)
4.50
(29.03)
12.05
0.01
0.01
(4.78)
(0.03)
(1.07)%
2020
21.00 %
(3.31)
(6.66)
4.93
(26.40)
2.93
0.72
(1.46)
(0.61)
0.12
(8.74)%
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
December 31,
2022
2021
$
— $
—
(102,834)
(137,110)
$ (102,834) $ (137,110)
192
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2022
(In thousands except share and per share amount)
The significant components of the Company’s deferred tax assets and liabilities at December 31, 2022 and 2021 are
as follows:
2022
2021
Deferred tax assets:
Accrued expense
Amortization
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
Noncash interest expense
Other comprehensive loss
Total gross deferred tax assets
Less valuation allowance
Total deferred tax assets, net of valuation allowance
Deferred tax liabilities:
Depreciation
Indefinite lived intangible
Total gross deferred tax liabilities
Net deferred tax assets (liabilities)
$
2,124 $
52,532
174,802
9,787
69,957
10,316
4,837
110,219
27,054
185,589
30,160
(719)
676,658
(672,172)
8,208
87,998
142,595
8,054
76,589
9,159
3,316
241
15,273
148,503
26,040
143
526,119
(525,570)
549
4,486 $
$
$
(4,486) $
(549)
(137,110)
(137,659)
$ (102,834) $ (137,110)
(102,834)
(107,320)
For the year ended December 31, 2022, the Company generated taxable income in the U.S. of $61.6 million. The
Company has not recorded any federal income tax provision after considering the federal NOL, section 250 deduction,
available general business credits, and foreign tax credits. The Company recorded a state income tax provision of $4.2
million which is primarily attributable to state income taxes paid in the current year.
At December 31, 2022 and 2021, the Company recorded a valuation allowance against its net deferred tax assets of
$672.2 million and $525.6 million, respectively. The change in the valuation allowance during the years ended December
31, 2022 and 2021 was $146.6 million and $146.0 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, 2022, the Company had $333.1 million and
$164.9 million of federal and state net operating loss carryforwards, respectively.
The Company recorded a deferred tax liability in conjunction with the Agilis Merger of $122.0 million in 2018, related
to the tax basis difference in the IPRD 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.
In July 2022, the Company received EMEA approval for a portion of the IPR&D assets, and thus, began the amortization
of the intangible.
193
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2022
(In thousands except share and per share amount)
As of December 31, 2022, research and development credit carryforward for federal purposes is $29.0 million. In
addition, the Orphan Drug Credit Carryover available as of December 31, 2022 is $145.8 million. The Company’s federal
credit carryforwards could begin to expire in 2023 if not otherwise utilized as projected.
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 10 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 of NOLs of which $97.7
million was the section 382 NOL. The Company did not utilize any NOLs in the year ended December 31, 2021. At
December 31, 2022, the Company utilized $49.3 million of NOLs of which $11.4 million is section 382 NOL. At December
31, 2022, there is $333.1 million available for immediate use and an additional $5.7 million will free up in 2023.
The income tax benefit (expense) for the years ended December 31, 2022 and 2021 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 the IPR&D assets
becoming partially amortizable in 2022, foreign taxes, the impact of temporary difference, including the updated section
174, 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.
Under the 2017 Tax Cuts and Jobs Act, the ability to currently deduct qualifying research and experimental costs
under section 174, as well as software development costs, are eliminated for tax years beginning after December 31, 2021.
Under the new rule, these costs must be capitalized and amortized over a five-year or fifteen-year period, depending on
whether the research is conducted in the U.S. or abroad, respectively. The rule became effective for the Company during
the year, and resulted in an increased current taxable income of the Company by $450.1 million for the tax year ended
December 31, 2022.
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, 2022, the Company recorded unrecognized tax benefits in the amount of $27.2 million
including interest and penalties through 2022. 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 is currently under a wage tax audit in Germany for tax
years 2018 through 2021. Although the outcome of tax audits is always uncertain, the company does not expect any
adjustment to result for these years as of December 31, 2022.
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
194
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2022
(In thousands except share and per share amount)
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, 2022, for purposes of ASC 740-10-25-3, the
Company had $65.1 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.
Unrecognized Tax Benefits
A reconciliation of the gross amount of unrecognized tax benefits, excluding accrued interest and penalties, is as
follows:
Balance at December 31, 2021
Additions based on tax positions related to the current year
Balance at December 31, 2022
Unrecognized Tax Benefits
27,217
—
27,217
$
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, 2022, the Company did not record any unrecognized tax benefits. 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 not recorded any
interest and penalties related to uncertain tax positions for the year ended December 31, 2022, 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
195
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2022
(In thousands except share and per share amount)
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 certain program intellectual property on a for-profit basis itself or in collaboration with a
partner (provided the Company retains overall control of worldwide commercialization), the Company may become
obligated to pay to Wellcome Trust development and regulatory milestone payments and single-digit royalties on sales of
any research program product. The Company’s obligation to pay such royalties would continue on a country-by-country
basis until the longer of the expiration of the last patent in the program intellectual property in such country covering the
research program product and the expiration of market exclusivity of such product in such country. The Company made
the first development milestone payment of $0.8 million to Wellcome Trust under the oncology platform funding
agreement during the second quarter of 2016. During the year ended December 31, 2022, the Company incurred $2.5
million of development milestones in connection with the enrollment of patients in the registration-directed Phase 2/3 trial
of unesbulin for the treatment of LMS, which is recorded in other long-term liabilities on the balance sheet and will be
payable 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 milestone payments of up to an aggregate of $14.5 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. Since inception, the SMA Foundation has earned $28.5 million, $24.5 million which was paid and
$4.0 million which was accrued as of December 31, 2022. 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 received a $50.0 million sales-based milestone during
the year ended December 31, 2022.
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
196
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2022
(In thousands except share and per share amount)
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
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.
In July 2022, the European Commission approved Upstaza for the treatment of AADC deficiency for patients 18
months and older within the EEA. As a result of such approval, the Company paid the former equityholders of Agilis $50.0
million in accordance with the terms of the Agilis Merger Agreement in the year ended December 31, 2022.
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, 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.
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, former 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 sepiapterin’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 sepiapterin, (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 sepiapterin, on a country-by-country basis, which contingent payment will 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
sepiapterin for PKU, if achieved, in cash or shares of the Company’s common stock.
197
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2022
(In thousands except share and per share amount)
The Company also has the Tegsedi-Waylivra Agreement for the commercialization of Tegsedi and Waylivra, and
products containing those compounds in countries in Latin America and the Caribbean. Akcea is entitled to receive royalty
payments subject to certain terms set forth in the Tegsedi-Waylivra 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, Emflaza, and Upstaza net product revenue, payable quarterly or annually
in accordance with the terms of the related agreements.
From time to time in the ordinary course of its business, the Company is subject to claims, legal proceedings and
disputes. The Company is not currently aware of any material legal proceedings against it.
16. Geographic information
The Company views its operations and manages its business in one operating segment. The following table presents
financial information based on the geographic location of the facilities of the Company as of and for the years ended:
Total assets
Fixed assets, net
Revenue
(cid:3)
Total assets
Fixed assets, net
Revenue
17. 401(k) plan
United States
Year Ended December 31, 2022
Non-US
$
$
$
(cid:3)
(cid:3)
(cid:3)
1,473,770
71,754
498,567
(cid:3)
$
$
$
(cid:3)
231,849
836
200,234
(cid:3)
$
$
$
(cid:3)
(cid:3)
(cid:3)
Year Ended December 31, 2021
Non-US
United States
Total
1,705,619
72,590
698,801
Total
$
$
$
1,744,225
51,626
297,005
$
$
$
193,831
959
241,588
$
$
$
1,938,056
52,585
538,593
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% matching contribution for up to the first 6% of each contributing employee’s base salary contributions for the years
ended December 31, 2022, 2021 and 2020, respectively. The Company made matching contributions to the 401(k) plan
and recorded expense of approximately $8.4 million, $6.6 million, and $5.3 million for the years ended December 31,
2022, 2021 and 2020, respectively.
198
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2022
(In thousands except share and per share amount)
18. Intangible assets and goodwill
Definite-lived intangibles
Definite lived intangible assets consisted of the following at December 31, 2022 and 2021:
Definite lived
intangibles assets, gross
Emflaza
Waylivra
Tegsedi
Upstaza
Total definite lived
intangibles, gross
Ending Balance at
December 31,
Reclass from
Indefinite Lived to
Foreign
currency
(cid:3)(cid:3)(cid:3)(cid:3)
$
2021 (cid:3)(cid:3)(cid:3)(cid:3) Additions (cid:3)(cid:3)(cid:3)(cid:3)
Definite Lived (cid:3)(cid:3)(cid:3)(cid:3) Impairment (cid:3)(cid:3)(cid:3)(cid:3) translation (cid:3)(cid:3)(cid:3)(cid:3)
291,875 $ 128,378 $
9,904
4,060
—
—
3,240
—
— $
—
—
89,550
— $
—
—
—
— $
(588)
(191)
—
Ending Balance at
December 31,
2022
420,253
9,316
7,109
89,550
$
305,839 $ 131,618 $
89,550 $
— $
(779) $
526,228
Definite lived
intangibles assets, accumulated amortization
Emflaza
Waylivra
Tegsedi
Upstaza
Total definite lived intangibles, accumulated amortization
Ending Balance at
December 31,
(cid:3)(cid:3)(cid:3)(cid:3)
$
2021 (cid:3)(cid:3)(cid:3)(cid:3) Amortization (cid:3)(cid:3)(cid:3)(cid:3)
(154,594) $ (111,429) $
(1,821)
(1,083)
—
(1,020)
(685)
(3,420)
$
(157,498) $ (116,554) $
Foreign
currency
translation (cid:3)(cid:3)(cid:3)(cid:3)
Ending Balance at
December 31,
2022
(266,023)
(2,751)
(1,709)
(3,420)
(273,903)
— $
90
59
—
149 $
Total definite lived intangibles, net
$
252,325
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 records the milestone payment when it becomes
payable to Marathon and increase the cost basis for the Emflaza rights intangible asset. For the year ended December 31,
2022, milestone payments of $128.4 million were recorded, which included a $50.0 million sales-based milestone. These
payments are being amortized over the remaining useful life of the Emflaza rights asset on a straight line basis. As of
December 31, 2022, a milestone payable to Marathon of $32.8 million was recorded on the balance sheet within accounts
payable and accrued expenses.
Akcea is also entitled to receive royalty payments subject to certain terms set forth in the Tegsedi-Waylivra Agreement
related to sales of Waylivra and Tegsedi. In accordance with the guidance for an asset acquisition, the Company records
royalty payments when they become payable to Akcea and increase the cost basis for the Waylivra and Tegsedi intangible
assets, respectively. For the year ended December 31, 2022, royalty payments of $3.2 million were recorded for Tegsedi.
As of December 31, 2022, a royalty payable of $0.5 million for Tegsedi was recorded on the balance sheet within accounts
payable and accrued expenses.
199
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2022
(In thousands except share and per share amount)
For the years ended December 31, 2022, 2021, and 2020, the Company recognized amortization expense of $116.6
million, $54.8 million, and $36.9 million respectively, related to the Emflaza rights, Waylivra, Tegsedi, and Upstaza
intangible assets.
The estimated future amortization of the Emflaza rights, Waylivra, Tegsedi, and Upstaza intangible assets is expected
to be as follows:
2023
2024
2025
2026
2027 and thereafter
Total
$
$
As of December 31, 2022
142,324
30,609
9,352
9,352
60,688
252,325
The weighted average remaining amortization period of the definite-lived intangibles as of December 31, 2022 is
4.9 years.
Indefinite-lived intangibles
Indefinite lived intangible assets consisted of the following at December 31, 2022 and 2021:
Indefinite lived
intangibles assets
Upstaza
PTC-FA
PTC-AS
Total indefinite lived
intangibles
Total intangible
assets, net
(cid:3)(cid:3)(cid:3)(cid:3)
$
Ending Balance at
December 31,
Reclass from
Indefinite Lived to
2021 (cid:3)(cid:3)(cid:3)(cid:3) Additions (cid:3)(cid:3)(cid:3)(cid:3)
Definite Lived (cid:3)(cid:3)(cid:3)(cid:3) Impairment (cid:3)(cid:3)(cid:3)(cid:3)
Foreign
currency
translation (cid:3)(cid:3)(cid:3)(cid:3)
358,700 $
112,500
105,300
— $
—
—
(89,550) $ (33,384) $
—
—
—
—
— $
—
—
Ending Balance at
December 31,
2022
235,766
112,500
105,300
$
576,500 $
— $
(89,550) $ (33,384) $
— $
453,566
$
705,891
In connection with the acquisition of the Company’s gene therapy platform from Agilis, the Company acquired rights
to Upstaza, 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 PTC-
FA, 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 PTC-AS for 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
200
PTC Therapeutics, Inc.
Notes to consolidated financial statements (Continued)
December 31, 2022
(In thousands except share and per share amount)
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. With the approval of Upstaza by the European
Commission in July 2022, $89.6 million was reclassified from indefinite lived intangible assets to definite lived intangible
assets.
The Company performed an annual test for its indefinite-lived intangible assets as of October 1, 2022. In the fourth
quarter of 2022, the Company recorded a partial impairment on the Upstaza indefinite lived intangible asset of $33.4
million, which is recorded as intangible asset impairment in the statement of operations. The impairment was related to a
decrease in projected cash flows due to refinements in current market assumptions and the timing of patient treatments.
To calculate the impairment amount, the Company utilized a discounted cash flow model under the income method, which
primarily utilized Level 3 fair value inputs. The discount rate utilized in the discounted cash flow model was 15%, and the
weighted average probability of success was 88%. As of December 31, 2022, the remaining balance of the Upstaza
indefinite lived intangible asset is $235.8 million. No impairments were identified for the Company’s additional gene
therapy portfolio pertaining to PTC-FA and PTC-AS.
Goodwill
As a result of the Agilis Merger on August 23, 2018, the Company recorded $82.3 million of goodwill. 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, 2022 and 2021 was $82.3 million. The Company performed an annual impairment test for goodwill as of
October 1, 2022. The Company’s single reporting unit had a negative carrying value and thus the Company determined
there was no impairment of goodwill.
19. Subsequent events
In February 2023, the Company completed enrollment of its Phase 3 placebo-controlled clinical trial for sepiapterin
for PKU. In connection with this event and in accordance with the Censa Merger Agreement, the Company is obligated
to pay a $30.0 million development milestone to the former Censa securityholders, which the Company has the option to
pay in cash or shares of its common stock.
201
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, 2022. 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, 2022, 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, 2022. 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, 2022 based on those criteria.
202
The effectiveness of our internal control over financial reporting as of December 31, 2022, 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, 2022 that has
materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
203
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, 2022, 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, 2022, 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, 2022 and 2021, the
related consolidated statements of operations, comprehensive loss, stockholders' (deficit)/ equity and cash flows for each
of the three years in the period ended December 31, 2022, and the related notes and our report dated February 21, 2023
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.
204
/s/ Ernst & Young LLP
Iselin, New Jersey
February 21, 2023
Item 9B. Other Information.
None.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
None.
205
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 2023 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 (other than the information required by Item 402(v) of Regulation S-K) as set forth
in under the captions “Executive Compensation”, “2022 Director Compensation”, “Corporate Governance—Risk
Oversight” and “Corporate Governance—Compensation Committee Interlocks and Insider Participation” in our Proxy
Statement for the 2023 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 2023 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 2023 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 2023 Annual Meeting of Shareholders is incorporated
in this Annual Report on Form 10-K by reference.
206
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.
(cid:120) Reports of independent registered public accounting firm
(cid:120) Consolidated Balance Sheets as of December 31, 2022 and 2021
(cid:120) Consolidated Statements of Operations for the years ended December 31, 2022, 2021 and 2020
(cid:120) Consolidated Statements of Comprehensive Loss for the years ended December 31, 2022, 2021 and 2020
(cid:120) Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2022, 2021 and 2020
(cid:120) Consolidated Statements of Cash Flows for the years ended December 31, 2022, 2021 and 2020
(cid:120) 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)
207
Exhibit
Number
Description of Exhibit
3.1 Restated Certificate of Incorporation of the Registrant, as amended (incorporated by reference to Exhibit
3.1 to the Quarterly Report on Form 10-Q filed by the Registrant on July 29, 2021)
3.2 Amended and Restated Bylaws of the Registrant, effective December 5, 2022 (incorporated by reference to
Exhibit 3.1 to the Current Report on Form 8-K filed by the Registrant on December 6, 2022)
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 February 22, 2022)
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
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+ PTC Therapeutics, Inc. Amended and Restated 2013 Long-Term Incentive Plan (incorporated by reference
to Exhibit 10.1 to the Current Report on Form 8-K filed by the Registrant on June 9, 2022)
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)
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)
208
Exhibit
Number
Description of Exhibit
10.11+ Form of Nonqualified Stock Option Agreement Inducement Grant Agreement—2014-2022 (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—2014-2022
(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—2014-2022
(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 —2016-2022
(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 —2017-2022 (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+ Form of Incentive Stock Option Agreement under Amended and Restated 2013 Long Term Incentive Plan**
10.19+ Form of Nonstatutory Stock Option Agreement under Amended and Restated 2013 Long Term Incentive
Plan**
10.20+ Form of Nonstatutory Stock Option Agreement under Amended and Restated 2013 Long Term Incentive
Plan—Non-employee Director**
10.21+ Form of Restricted Stock Unit Agreement under Amended and Restated 2013 Long Term Incentive Plan**
10.22† Funding Agreement, dated as of May 26, 2010, by and between the Registrant and The Wellcome Trust
Limited (incorporated by reference to Exhibit 10.16 to the Registration Statement on Form S-1, as amended
(File No. 333-188657), of the Registrant)
10.23* Amendments to the Funding Agreement, dated as of May 26, 2010, by and between the Registrant and The
Wellcome Trust Limited**
10.24+ 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)
10.25+ 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)
209
Exhibit
Number
Description of Exhibit
10.26+ 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)
10.27† 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)
10.28† 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 May 3, 2022)
10.29+ 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)
10.30† 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)
10.31* 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. (incorporated
by reference to Exhibit 10.42 on Form 10-K filed by Registrant on March 2, 2020)
10.32† 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)
10.33 Amended and Restated 2016 Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.1 to
the Current Report on Form 8-K filed by the Registrant on June 9, 2021)
10.34+ 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)
10.35* 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)
10.36
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)
10.37+ 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)
10.38+ 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)
210
Exhibit
Number
Description of Exhibit
10.39+ 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)
10.40+ 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)
10.41+ Amendment No. 2 to 2020 Inducement Stock Incentive Plan (incorporated by reference to Exhibit 99.1 to
Post-Effective Amendment No. 1 to the Registration Statement on Form S-8 (File No. 333-251878) of the
Registrant)
10.42+ Amendment No. 3 to 2020 Inducement Stock Incentive Plan (incorporated by reference to Exhibit 99.4 to
the Registration Statement on Form S-8 (File No. 333-268851), of the Registrant)
10.43* 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)
10.44* 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)
10.45* 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)
10.46* 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)
10.47+ Employment Agreement, as amended, between the Registrant and Matthew Klein (incorporated by
reference to Exhibit 10.44 to the Annual Report on Form 10-K filed by the Registrant on February 22, 2022)
10.48+ 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)
10.49* 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)
10.50 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)
10.51* Lease Agreement dated May 24, 2022, between Warren CC Acquisitions, LLC and PTC Therapeutics, Inc.
(incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q filed by Registrant on
August 4, 2022)
211
Exhibit
Number
10.52
Description of Exhibit
Irrevocable Transferable Standby Letter of Credit, dated June 22, 2022, issued by HSBC Bank USA, N.A.
in favor of Warren CC Acquisitions LLC c/o Vision Real Estate Partners for the Account of PTC
Therapeutics, Inc. (incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q filed by
Registrant on August 4, 2022)
10.53* Letter Agreement re: Collaboration and License Agreement, dated July 25, 2022, by and between Akcea
Therapeutics, Inc. and PTC Therapeutics International Limited (incorporated by reference to Exhibit 10.1
to the Quarterly Report on Form 10-Q filed by Registrant on October 27, 2022)
10.54* Letter Agreement re: Collaboration and License Agreement, dated September 14, 2022, by and between
Akcea Therapeutics, Inc. and PTC Therapeutics International Limited (incorporated by reference to Exhibit
10.1 to the Quarterly Report on Form 10-Q filed by Registrant on October 27, 2022)
10.55* Credit Agreement dated as of October 27, 2022, among PTC Therapeutics, Inc., as the Borrower, each
subsidiary of the Borrower from time to time party thereto, as Guarantors, the Lenders from time to time
party thereto and Wilmington Trust, National Association, as Administrative Agent**
10.56 Stock Purchase Agreement, dated as of October 27, 2022 by and among the investors listed therein and PTC
Therapeutics, Inc.**
21.1 Subsidiaries of the Registrant**
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)
212
†† 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.
** Submitted electronically herewith.
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.
213
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 21, 2023
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 21, 2023
Dated: February 21, 2023
Dated: February 21, 2023
Dated: February 21, 2023
Dated: February 21, 2023
Dated: February 21, 2023
/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:
214
Dated: February 21, 2023
Dated: February 21, 2023
Dated: February 21, 2023
Dated: February 21, 2023
Dated: February 21, 2023
Dated: February 21, 2023
/s/ EMMA REEVE
Emma Reeve
Director
/s/ MARY SMITH
Mary Smith
Director
/s/ DAVID P. SOUTHWELL
David P. Southwell
Director
/s/ GLENN D. STEELE
Glenn D. Steele
Director
/s/ ALETHIA YOUNG
Alethia Young
Director
/s/ JEROME B. ZELDIS
Jerome B. Zeldis
Director
By:
By:
By:
By:
By:
By:
215
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, as amended,
(12) Registration Statement (Form S-8 No. 333-262018) pertaining to the 2013 Long Term Incentive Plan and
the Amended and Restated 2016 Employee Stock Purchase Plan,
(13) Registration Statement (Form S-8 No. 333-265803) pertaining to the Amended and Restated 2013 Long
Term Incentive Plan,
(14) Registration Statement (Form S-3 No. 333-268849) of PTC Therapeutics Inc. and
(15) Registration Statement (Form S-8 No. 333-268851) pertaining to the 2020 Inducement Stock Incentive Plan.
of our reports dated February 21, 2023, 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, 2022.
/s/ Ernst & Young LLP
Iselin, New Jersey
February 21, 2023
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 21, 2023
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 21, 2023
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, 2022 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 21, 2023
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, 2022 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 21, 2023
By:
/s/ EMILY HILL
Emily Hill
Chief Financial Officer
(Principal Financial Officer)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(Amendment No. 1)
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: December 31, 2022
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number: 001-35969
PTC THERAPEUTICS, INC.
(Exact name of registrant as specified in its charter)
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 No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant
to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to
submit such files). Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or
an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth
company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Non-accelerated filer
Accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with
any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant 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.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in
the filing reflect the correction of an error to previously issued financial statements.
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant’s executive officers during the relevant recovery period pursuant to § 240.10D-1(b).
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, 2022, the last business day of the registrant’s most recently completed second fiscal quarter, was
$2,129,532,394. 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 16, 2023, the registrant had 73,815,144 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 2023 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, 2022.
EXPLANATORY NOTE
This Amendment No. 1 on Form 10-K/A (“Amendment No. 1”) to the Annual Report on Form 10-K of PTC Therapeutics, Inc. (the “Company”) for the
year ended December 31, 2022, originally filed with the Securities and Exchange Commission (the “SEC”) on February 21, 2023 (the “Original Filing”), is
being filed solely for the purpose of amending Item 15, Exhibits and Financial Statement Schedules, of Part IV, to add reference to new Exhibits 10.57, 10.58
and 10.59. References in the exhibit index to these exhibits, which are incorporated by reference to prior filings by the Company with the SEC, were
inadvertently omitted from the Original Filing due to an administrative error.
In addition, as required by Rule 12b-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), new certifications by our
principal executive officer and principal financial officer pursuant to Rules 13a-14(a) and 15d-14(a) of the Exchange Act are filed as exhibits to this
Amendment No. 1.
This Amendment No. 1 does not update or amend the Company’s financial statements or any other items in the Original Filing in any way other than as
described in the preceding paragraphs, and the Original Filing, as amended by this Amendment No. 1, continues to speak as of the date of the Original Filing.
Accordingly, this Amendment No. 1 should be read in conjunction with the Original Filing and the Company’s other filings with the SEC.
PART IV
Item 15. Exhibits and Financial Statement Schedules
Financial Statements
The response to this portion of Item 15 is incorporated by reference from the Original Filing into this Amendment.
Exhibits
Those exhibits required to be filed with the Annual Report on Form 10-K by Item 601 of Regulation S-K are listed in the exhibit index below.
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)
3.1 Restated Certificate of Incorporation of the Registrant, as amended (incorporated by reference to Exhibit 3.1 to the Quarterly Report on
Form 10-Q filed by the Registrant on July 29, 2021)
3.2 Amended and Restated Bylaws of the Registrant, effective December 5, 2022 (incorporated by reference to Exhibit 3.1 to the Current
Report on Form 8-K filed by the Registrant on December 6, 2022)
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
February 22, 2022)
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)
Exhibit
Number
4.3 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)
Description of Exhibit
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+ PTC Therapeutics, Inc. Amended and Restated 2013 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.1 to the Current
Report on Form 8-K filed by the Registrant on June 9, 2022)
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)
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—2014-2022 (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—2014-2022 (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—2014-2022 (incorporated by reference to
Exhibit 10.16 to the Annual Report on Form 10-K filed by the Registrant on March 2, 2015)
Exhibit
Number
Description of Exhibit
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 —2016-2022 (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 —2017-2022 (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+ Form of Incentive Stock Option Agreement under Amended and Restated 2013 Long Term Incentive Plan (incorporated by reference to
Exhibit 10.18 to the Annual Report on Form 10-K filed by the Registrant on February 21, 2023)
10.19+ Form of Nonstatutory Stock Option Agreement under Amended and Restated 2013 Long Term Incentive Plan (incorporated by reference to
Exhibit 10.19 to the Annual Report on Form 10-K filed by the Registrant on February 21, 2023)
10.20+ Form of Nonstatutory Stock Option Agreement under Amended and Restated 2013 Long Term Incentive Plan—Non-employee Director
(incorporated by reference to Exhibit 10.20 to the Annual Report on Form 10-K filed by the Registrant on February 21, 2023)
10.21+ Form of Restricted Stock Unit Agreement under Amended and Restated 2013 Long Term Incentive Plan (incorporated by reference to
Exhibit 10.21 to the Annual Report on Form 10-K filed by the Registrant on February 21, 2023)
10.22† Funding Agreement, dated as of May 26, 2010, by and between the Registrant and The Wellcome Trust Limited (incorporated by reference
to Exhibit 10.16 to the Registration Statement on Form S-1, as amended (File No. 333-188657), of the Registrant)
10.23* Amendments to the Funding Agreement, dated as of May 26, 2010, by and between the Registrant and The Wellcome Trust Limited
(incorporated by reference to Exhibit 10.23 to the Annual Report on Form 10-K filed by the Registrant on February 21, 2023)
10.24+ 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)
10.25+ 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)
10.26+ 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)
Exhibit
Number
Description of Exhibit
10.27† 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)
10.28† 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 May 3, 2022)
10.29+ 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)
10.30† 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)
10.31* 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. (incorporated by reference to Exhibit 10.42 on Form 10-K filed by
Registrant on March 2, 2020)
10.32† 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)
10.33 Amended and Restated 2016 Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K
filed by the Registrant on June 9, 2021)
10.34+ 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)
10.35* 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)
10.36 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)
10.37+ 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)
10.38+ 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)
10.39+ 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)
Exhibit
Number
Description of Exhibit
10.40+ 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)
10.41+ Amendment No. 2 to 2020 Inducement Stock Incentive Plan (incorporated by reference to Exhibit 99.1 to Post-Effective Amendment No. 1
to the Registration Statement on Form S-8 (File No. 333-251878) of the Registrant)
10.42+ Amendment No. 3 to 2020 Inducement Stock Incentive Plan (incorporated by reference to Exhibit 99.4 to the Registration Statement on
Form S-8 (File No. 333-268851), of the Registrant)
10.43* 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)
10.44* 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)
10.45* 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)
10.46* 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)
10.47+ Employment Agreement, as amended, between the Registrant and Matthew Klein (incorporated by reference to Exhibit 10.44 to the Annual
Report on Form 10-K filed by the Registrant on February 22, 2022)
10.48+ 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)
10.49* 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)
10.50 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)
10.51* Lease Agreement dated May 24, 2022, between Warren CC Acquisitions, LLC and PTC Therapeutics, Inc. (incorporated by reference to
Exhibit 10.1 to the Quarterly Report on Form 10-Q filed by Registrant on August 4, 2022)
10.52 Irrevocable Transferable Standby Letter of Credit, dated June 22, 2022, issued by HSBC Bank USA, N.A. in favor of Warren CC
Acquisitions LLC c/o Vision Real Estate Partners for the Account of PTC Therapeutics, Inc. (incorporated by reference to Exhibit 10.2 to
the Quarterly Report on Form 10-Q filed by Registrant on August 4, 2022)
Exhibit
Number
Description of Exhibit
10.53* Letter Agreement re: Collaboration and License Agreement, dated July 25, 2022, by and between Akcea Therapeutics, Inc. and PTC
Therapeutics International Limited (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q filed by Registrant on
October 27, 2022)
10.54* Letter Agreement re: Collaboration and License Agreement, dated September 14, 2022, by and between Akcea Therapeutics, Inc. and PTC
Therapeutics International Limited (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q filed by Registrant on
October 27, 2022)
10.55* Credit Agreement dated as of October 27, 2022, among PTC Therapeutics, Inc., as the Borrower, each subsidiary of the Borrower from
time to time party thereto, as Guarantors, the Lenders from time to time party thereto and Wilmington Trust, National Association, as
Administrative Agent (incorporated by reference to Exhibit 10.55 to the Annual Report on Form 10-K filed by the Registrant on
February 21, 2023)
10.56 Stock Purchase Agreement, dated as of October 27, 2022 by and among the investors listed therein and PTC Therapeutics, Inc.
(incorporated by reference to Exhibit 10.56 to the Annual Report on Form 10-K filed by the Registrant on February 21, 2023)
10.57 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)
10.58† 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)
10.59† 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)
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
February 21, 2023)
23.1 Consent of Independent Registered Public Accounting Firm (incorporated by reference to Exhibit 23.1 to the Annual Report on Form 10-K
filed by the Registrant on February 21, 2023)
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 (incorporated by reference to Exhibit 31.1 to the Annual Report on
Form 10-K filed by the Registrant on February 21, 2023)
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 (incorporated by reference to Exhibit 31.2 to the Annual Report on
Form 10-K filed by the Registrant on February 21, 2023)
31.3 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**
Exhibit
Number
Description of Exhibit
31.4 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 (incorporated by reference to Exhibit 32.1 to the Annual Report on Form 10-K filed by the Registrant on February 21, 2023)
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 (incorporate by reference to Exhibit 32.2 to the Annual Report on Form 10-K filed by the Registrant on February 21, 2023)
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.
** Submitted electronically herewith.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
Date: March 8, 2023
PTC Therapeutics, Inc.
By: /s/ STUART W. PELTZ
Stuart W. Peltz, Ph.D.
Chief Executive Officer
(Principal Executive Officer)
Exhibit 31.3
I, Stuart W. Peltz, certify that:
CERTIFICATIONS
1.
2.
I have reviewed this Annual Report on Form 10-K of PTC Therapeutics, Inc.; and
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.
Date: March 8, 2023
By: /s/ STUART W. PELTZ
Stuart W. Peltz
Chief Executive Officer
(Principal Executive Officer)
Exhibit 31.4
I, Emily Hill, certify that:
CERTIFICATIONS
1.
2.
I have reviewed this Annual Report on Form 10-K of PTC Therapeutics, Inc.; and
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.
Date: March 8, 2023
By: /s/ EMILY HILL
Emily Hill
Chief Financial Officer
(Principal Financial Officer)
Board of Directors
Michael Schmertzler
Chairman of the Board
PTC Therapeutics, Inc.
Allan Jacobson, Ph.D.
Gerald L. and Zelda S.
Haidak Distinguished
Professor of Cell Biology
University of
Massachusetts
Medical School
Stephanie Okey
Former Senior
Vice President,
Head of North America,
Rare Diseases &
U.S. General Manager,
Rare Disease Business Unit
Genzyme
Matthew Klein, M.D.,
M.S., FACS
Chief Executive Officer
PTC Therapeutics, Inc.
Emma Reeve
Former Chief Financial Officer
Constellation
Pharmaceuticals, Inc.
Mary L. Smith
Vice Chairman
The VENG Group
David P. Southwell
Former Chief Executive Officer
TScan Therapeutics, Inc.
Glenn D. Steele, Jr.,
M.D., Ph.D.
Chairman
GSteele Health Solutions
Alethia Young
Chief Financial Officer
Graphite Bio
Jerome B. Zeldis,
M.D., Ph.D.
Executive Vice President
and Head of R&D
NexImmune, Inc.
Stock Performance Graph*
The following graph illustrates a comparison of the total cumulative stockholder return on
the Common Stock of PTC Therapeutics’ Stock from investing on January 1, 2017 through
December 31, 2022 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.
$600
$500
$400
$300
$200
$100
0
Dec-16
Dec-17
Dec-18
Dec-19
Dec-20
Dec-21
Dec-22
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
incorporated 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
$100 Investment
in Stock or Index
in Stock or Index
Dec 31,
Dec 31,
2016
2016
Dec 31,
Dec 31,
2017
2017
Dec 31,
Dec 31,
2018
2018
Dec 31,
Dec 31,
2019
2019
Dec 31,
Dec 31,
2020
2020
Dec 31,
Dec 31,
2021
2021
Dec 31,
Dec 31,
2022
2022
PTC Therapeutics, Inc.
(PTCT)
NASDAQ Composite
(IXIC)
NASDAQ Biotechnology
Index (NBI)
$100
$153
$315
$440
$559
$365
$350
$100
$128
$123
$167
$239
$291
$194
$100
$121
$110
$137
$172
$171
$151
Executive Committee
Matthew Klein, M.D., M.S., F.A.C.S.
Chief Executive Officer
Neil Almstead, Ph.D.
Chief Technical Operations Officer
Mark E. Boulding
Executive Vice President
and Chief Legal Officer
John Baird, Ph.D.
Chief of Staff to the CEO
Mary Frances Harmon
Senior Vice President
Corporate and Patient Relations
Emily Hill
Chief Financial Officer
Kylie O’Keefe
Chief Commercial Officer
Eric Pauwels
Chief Business Officer
Lee Golden, M.D.
Chief Medical Officer
Hege Sollie-Zetlmayer
Senior Vice President, Human Resources
Christine Utter
Senior Vice President, Chief Accounting
Officer and Head of People Services
Ellen Welch, Ph.D.
Chief Scientific Officer
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
International Headquarters
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 6, 2023 at
9 a.m. ET. The meeting will be held in a
virtual format via live webcast. There will
not be a physical meeting location and
Stockholders will not be able to attend
the Annual Meeting in person.
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