Ptc Therapeutics, Inc. Q2 FY2023 Earnings Call

Good day, and thank you for standing by and welcome to the PTC Second Quarter 2023 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. Please be advised that today’s conference is being recorded. I would now like to hand the conference call over to your speaker today, Senior Director of Investor Relations, Ron Aldridge. You may begin.

Good afternoon, and thank you for joining us today to discuss PTC Therapeutics' second quarter 2023 corporate update and financial results. I'm joined today by our Chief Executive Officer, Dr. Matthew Klein; our Chief Business Officer, Eric Pauwels; our Chief Commercial Officer, Kylie O'Keefe; and our Chief Financial Officer, Pierre Gravier. Today's call will include forward-looking statements based on our current expectations. Please take a moment to review the slide posted on our Investor Relations website in conjunction with the call, which contains our forward-looking statements. Our actual results could materially differ from these forward-looking statements, as such statements are subject to risks that can materially and adversely affect our business and results of operations. For a detailed description of applicable risks and uncertainties, we encourage you to review the company's most recent annual report on Form 10-K filed with the Securities and Exchange Commission, as well as the company's other SEC filings. We will disclose certain non-GAAP information during this call. Information regarding our use of GAAP to non-GAAP financial measures and a reconciliation of GAAP to non-GAAP are available in today's earnings release. With that, let me pass the call over to our CEO, Matthew Klein. Matt?

Thank you Ron. Good afternoon and thank you for joining the call. I'm pleased to share PTC's second quarter results and our expectations for continued strong performance in 2023. First, I would like to extend a warm welcome to our new CFO, Pierre Gravier. I have had the pleasure of working with Pierre over several years and I'm confident his extensive experience in finance strategy and healthcare advisory will be incredibly helpful as we continue to build the PTC of tomorrow. Now, let me begin with our second quarter revenue. We achieved another quarter of strong revenue growth with total revenue of $214 million. This represents 29% growth over the second quarter of 2022. Our DMD franchise revenue in the quarter totaled $162 million, a 21% increase over the second quarter of 2022. This robust second quarter performance puts us in a strong position to achieve our 2023 total revenue guidance of $940 million to $1 billion which would represent 34% to 43% year-over-year growth. In addition to our team's continued strong commercial performance Evrysdi is now approved in 100 countries with more than 8500 patients treated globally. Continued growth is expected as access is achieved in countries where Evrysdi is approved. In addition based on the recent positive opinion from the CHMP, the Evrysdi EU marketing authorization will now include pre-symptomatic infants providing another important source of potential revenue growth. As we shared in May we initiated a strategic portfolio review and associated OpEx reduction. With our previously announced decision to discontinue our preclinical gene therapy programs and other prioritization decisions we now anticipate non-GAAP, R&D, and SG&A expense for the full year 2023 of between $810 million and $860 million versus our previous guidance of between $890 million and $940 million. In addition to the expected impact of our May portfolio decisions on 2023 OpEx we anticipate annualized savings of approximately $150 million in 2024. Moving to our pipeline, Q2 was very busy as we reported results from several clinical studies including strong data sets from our APHENITY and PIVOT-HD study. Let me start with our APHENITY trial of sepiapterin in PKU patients. In May we announced that we met the study primary endpoint of blood phenylalanine reduction with highly statistically significant and clinically meaningful results. Sepiapterin demonstrated substantial Phe reduction from baseline of 63% in the overall primary analysis population and 69% in the subset of classical PKU patients. In addition the vast majority of patients were able to reach target Phe levels in line with US guidelines of less than 360 micromoles per liter. With these strong data in hand, we requested a pre-NDA meeting with FDA which has been granted and is scheduled for the third quarter. Pending FDA feedback, we expect to submit an NDA in the fourth quarter of this year. Given the strength of the APHENITY data we remain incredibly enthusiastic about the potential $1 billion-plus global commercial opportunity for sepiapterin. In addition as Professor Ania Muntau emphasized in our recent PKU commercial deep dive presentation, the physician community is excited about the potential for sepiapterin to fill the persistent large unmet medical need for PKU patients worldwide. Moving to PTC518 for Huntington's disease patients, in June we reported interim 12-week data from the PIVOT-HD trial. To summarize all key objectives of this interim data analysis were met. PTC518 treatment resulted in dose-dependent lowering of blood cell Huntington protein with mean lowering of Huntington protein levels of 30% in the 10-milligram dose cohort. Treatment resulted in the targeted levels of CNS exposure with a ratio of CSF to plasma exposure of 1.5:1 at the 10-milligram dose level. This suggests that greater lowering of HTT protein possibly up to 45% could be occurring in brain cells. Importantly, PTC518 is well tolerated with no treatment-related SAEs, no reports of peripheral neuropathy and no treatment-related CSF NfL spikes, with an overall trend towards lower NfL levels in PTC518 treatment groups. With these encouraging interim data we will continue to enroll Stage 2 and early Stage 3 patients into the PIVOT-HD study. And of course we look forward to the 12-month results of the initial treated subjects at which time we can learn more about the longer-term effects of PTC518 treatment on key disease biomarkers. These HD data along with the continued global success of Evrysdi further support the power of our splicing platform. Moving to vatiquinone, we reported results from the MOVE-FA trial in pediatric and adult Friedreich ataxia patients in May. While the trial did not meet its primary endpoint the results of the MOVE-FA trial did demonstrate evidence of meaningful clinical benefit on key aspects of Friedreich ataxia, including in pediatric patients for whom there remains a large unmet medical need. In particular, the data demonstrating the vatiquinone's treatment benefit on the upright stability section of the mFARS scale support a potential long-term benefit in slowing time to loss of ambulation. Given these results, the well-established safety profile of vatiquinone in pediatric patients and the remaining unmet medical need for pediatric FA patients, we plan to share these results with the FDA to determine if there is a potential path to approval. We requested and were granted a Type C meeting with the FDA, which is scheduled for the fourth quarter of 2023. We expect a number of additional regulatory activities in the second half of 2023. Beginning with Translarna, we expect CHMP opinion for the Type 2 variation to convert the European conditional marketing authorization to standard authorization in the third quarter. In the US, we plan to submit a Type C meeting request this month to the FDA to discuss the totality of data collected to date that could support an NDA resubmission for Translarna. Upstaza as we've previously shared, we are awaiting feedback from the FDA on additional bioanalytical data we submitted can support a comparability analysis between the clinical and commercial drug product. Based on the timing of this feedback, we expect to submit the Upstaza BLA in the third quarter. Overall, I am incredibly proud of our continued successful execution across both our commercial and R&D teams. Our commercial performance in the first half of 2023 positions us well to meet our revenue guidance of $940 million to $1 billion. And the strong data sets from APHENITY and PIVOT-HD position us well for continued future growth. I will now hand the call over to Eric and Kylie to provide an update on our commercial accomplishments. Eric?

Thanks Matt. It is exciting to see the progress of our pipeline and the future opportunities of new product launches and our customer-facing team is eager to bring these much-needed treatments to patients around the world. We are extremely proud of the accomplishments of our global customer-facing team, which has delivered another strong quarter in revenue. The team continues to accelerate the significant momentum built in the first quarter and is focused on executing on the growth strategy of our commercial portfolio of products. Our global DMD franchise continues to be robust and our strategy of geographic expansion continues to progress in Latin America, Middle East and Northern Africa and CIS regions, while we continue to build out the future foundation and growth of markets in Asia Pacific. Now, let me turn to the DMD franchise. Translarna and Emflaza continued to be an important growth driver, delivering an impressive $162 million in net revenue for the second quarter, which is up 21% compared to the second quarter of 2022. With a strong first half for our DMD franchise, we are updating our 2023 DMD franchise revenue guidance from $545 million and $565 million to $545 million to $575 million. For Translarna, we achieved $96 million in revenue this quarter, which is a remarkable 25% growth over the same quarter in 2022. Growth occurred across all major regions and we continue to see growth from new patient starts being added in new growth markets. As mentioned previously, due to the unpredictability of large government orders in some of our regional markets particularly in Latin America, Central and Eastern Europe, the Middle East and CIS regions, we expect to see ongoing lumpiness in quarterly revenue throughout the year. Now turning to Emflaza. The fundamentals of the Emflaza business continue to be solid. Quarterly net revenue was $66 million, which is 16% growth over the same quarter in 2022. We continue to see strong trends in the number of new patient start forms in the second quarter, which will provide important momentum as we progress through the year along with continued high compliance appropriate weight-based dosing and a continued focus on broad access. Now, I'll ask Kylie to update the progress on our current and future new product launches. Kylie?

Thanks, Eric. Let me begin with Upstaza, the first and only approved gene therapy infused directly into the brain. We continue our steady rollout across Europe including treating our first patient in Italy in the second quarter. We continue to see transformative results for the patients that we have treated thus far, which we shared at the recent European Pediatric Neurology Society, the EPNS Conference in Prague. New treatment centers of excellence are being opened internationally to support the treatment of patients, as we continue the European rollout. We also continue to leverage early access programs and cross-border treatment opportunities and expect to treat more patients both in Europe and other international markets throughout the second half of 2023. Moving to Tegsedi and Waylivra in Latin America. We continue to establish Tegsedi as the treatment of choice based on its strong clinical profile and improved quality of life for hereditary ATTR polyneuropathy patients. In Brazil, we completed delivery of the remainder of our second group purchase order from the Ministry of Health. We continue to see robust growth in patient identification, as well as positive patient responses on treatment across the Latin American region. Lastly, we are extremely excited about the sepiapterin opportunity as discussed recently at the PKU Deep Dive presentation. With a substantial unmet need and strong differentiation from both the mechanism of action and the APHENITY results, the customer-facing teams are looking forward to bringing this differentiated therapy to physicians and PKU patients upon approval. As we discussed at the call, we were able to leverage our strong global commercial infrastructure and we have now established our internal global launch team. This team is actively working to prioritize the global launch and key pre-launch activities, with the first step of bringing sepiapterin to the US market followed closely by Europe, Japan and other key international markets. With physician excitement as outlined by Dr. Muntau and PTC's proven track record in commercializing rare diseases, the team is poised to achieve the market opportunity of over $1 billion. In conclusion, our second quarter rounds out an excellent first half of 2023 for the commercial team. With significant progress across all our commercial products and across all geographies, we are well set to achieve our ambitious 2023 revenue guidance. Now let me turn the call over to Pierre for a financial update. Pierre?

Thanks, Kylie. I want to begin by saying how thrilled I am to join the PTC team as CFO. I have known the PTC team as an advisor for several years, and it's a privilege to be working with such a patient-focused company and bring my skills to continue to build the PTC of tomorrow. It is my pleasure to provide you with the following highlights of our second quarter 2023. Please refer to the second quarter earnings press release, issued this afternoon for additional details. Beginning with top line results. Total revenue for the second quarter was $214 million. This consisted of DMD franchise revenue of $162 million and other revenue of $52 million. Starting with the DMD franchise, Translarna net product revenue in the quarter was $96 million reflecting growth of 25% over the second quarter of 2022, driven by strong performance across all geographies. Emflaza net product revenue of $66 million, representing 16% growth in the quarter compared to the second quarter of 2022. Moving to Evrysdi, second quarter global revenue of CHF 342 million, which equates to about $380 million was achieved earning royalty revenue of $37 million for PTC. As Matt mentioned, the second quarter performance puts us in a strong position to achieve 2023 total revenue guidance of $940 million to $1 billion including an expected $100 million milestone when Evrysdi surpasses $1.5 billion in annual revenue. Non-GAAP R&D expenses were $170 million for the second quarter of 2023 excluding $16 million in non-cash stock-based compensation expense compared to $143 million for the second quarter of 2022 excluding $14 million in non-cash stock-based compensation expense. The year-over-year increase in R&D expenses reflects additional investments in advancement of the clinical pipeline. Non-GAAP SG&A expenses were $75 million for the second quarter of 2023 excluding $14 million in non-cash stock-based compensation expense compared to $66 million for the second quarter of 2022 excluding $14 million in non-cash stock-based compensation expense. As Matt noted earlier, we now anticipate non-GAAP R&D and SG&A expense for the full year 2023 of between $810 million and $860 million. Cash, cash equivalents, and marketable securities totaled approximately $338 million as of June 30, 2023 compared to $411 million as of December 31, 2022. Cash increased by $52 million from the end of the first quarter mainly due to the addition of $50 million from restricted cash as a result of the positive sepiapterin data readout based on the Blackstone agreement. I will now turn the call over to the operator for Q&A. Operator?

And our first question comes from Kelly Shi from Jefferies. Your line is now open.

Thank you for taking my question and congrats on a great quarter. My first question is regarding the Translarna sales in Q1 you mentioned the sales benefited from large government order in Europe. Can you comment on how did the government order impact Q2 and how should we anticipate for the future Q3 Q4 sales? Thank you.

Kelly, thank you very much for the question. Obviously, it was another strong quarter of Translarna revenue. I'll let Eric provide some more details on the differences between Q1 and Q2.

Thanks for the question, Kelly. First of all we're really pleased with the quarter. I mean we've generated $162 million of DMD franchise. That's 21% growth year-over-year compared to last year. And I think as you've seen in the past years, we've actually invested in geographic expansion. It's been very consistent that we know that lumpiness will occur quarter-to-quarter and it's really nothing new at this point in time. But since we've expanded in many of these regions large government orders particularly in Latin America, Central and Eastern Europe in the Middle East and our CIS regions as we've seen consistently those orders and the size of the orders and the timing is relatively unpredictable. However, unlike Western Europe and the US, which tend to be more predictable from week-to-week and month-to-month I would say that the fundamentals are still the same. And we've received large orders and the timing of those orders will continue. Our base business in even those markets continue to grow. New patient starts high levels of compliance, dose adjustments and very low discontinuation rates have occurred. So the fundamentals for both the new markets as well as our mature markets are really solid and in place. We anticipate orders in the second half of the year and we've raised if you will the upper end of the guidance at this point in time to reflect that. The timing and the size of those orders will likely be more defined in the third quarter. And as we get closer and closer to the third quarter, we'll be able to if you will adjust and confidently achieve that level of guidance. So just stay tuned Kelly for an update around Q3 as we provide a little bit more color and we'll have more visibility on the timing of group purchase orders in the second half. But right now, we feel very confident and we have very good tailwinds in the DMD franchise remaining throughout the year.

Thank you very much. And I also have two quick follow-ups. First, can you guide out any trigger for PTC to start reporting Upstaza's quarterly revenue?

So Kylie, do you want to talk about?

Absolutely. Thanks, Kelly. So as we've spoken about while we did provide guidance last year I think the intent with providing that guidance was to ensure that we clearly indicated that we expected to treat patients very rapidly into the launch. We weren't expecting a delay from launch to treatment of those patients. As we've said previously it's very difficult to understand the true forecast in the first 12 months of launch. And so as we move through that period and we garner a much clearer understanding on how we're seeing patient throughput, pricing and reimbursement particularly in Europe being a country-by-country process, gaining more clarity into that and a number of registrations ex-US we'll be able to provide more granularity and more clarity. So hopefully that answers the question.

Yes. Thank you. And the one last one if I may. So regarding the Type C meeting with the FDA in ataxia filing, just curious to what kind of a strategy you can share like whether you have done some group analysis and also and a focus on like improved efficacy maybe on some genetic markers and also certain group of patients? Thank you.

Kelly, thanks for the question. Can you clarify the Type C meeting for which indications?

FA.

We have requested a Type C meeting with the FDA, which has been approved and is scheduled for the fourth quarter. Although we did not meet the primary endpoint, we gathered strong data regarding several crucial aspects of the disease, particularly the upright stability subscale. In Friedreich ataxia, a primary objective of any treatment is to delay the time it takes for patients to lose their ability to walk, which is a significant transition point in the disease. Any drug aimed at modifying the disease's progression seeks to prolong the time before loss of ambulation. The upright stability subscale of the mFARS is an essential predictor of this time period. We pre-specified this subscale as an endpoint, and since it is part of the primary endpoint, we observed a significant effect with a difference of around 1.3 points between treatment and placebo. Our analyses suggest that this could correlate to a delay in loss of ambulation of at least eight months or potentially more. We will discuss with the FDA the possibility of an accelerated approval path based on the significant evidence of delaying this critical transition point in the disease. The strong statistical significance and magnitude of effect imply that we may be able to provide long-term clinical benefits concerning delaying ambulation loss, which is the main objective of treatment for Friedreich ataxia. We look forward to this discussion. Additionally, with the approval of Skyclarys for adult patients, we have data from a study involving primarily pediatric patients that shows a strong safety profile for vatiquinone, coupled with promising data on its ability to slow ambulation loss, which is the main goal for Friedreich ataxia.

Very helpful. Thank you.

Thank you. And one moment for our next question. And our next question comes from Sami Corwin from William and Blair. Your line is now open.

Hi, guys. Thanks for taking my question. I guess, first do you have any clarity as to why the CHMP opinion for Translarna got pushed? I thought that was originally supposed to happen in May. And is there any contingency plan there if it doesn't get approved? And then I have a follow-up question.

Hi, Sami thanks for the question. Actually the initial timing was end of H1. That timeline was put together based on how we thought the typical back and forth at 1C during the CHMP process such as a type two variation. Obviously, there is one more turn of questions back and forth and that pushed the H1 into the third quarter. So, we remain highly confident of our ability to achieve the conversion from conditional marketing authorization to standard marketing authorization knowing that really the bar here is being able to as the European statute states confirm the benefit that existed at the time of registration which of course was in 2014 based on our first placebo-controlled study 7. And now we have a data set in over 700 patients that not only confirms that benefit but actually expands it. The variability that's shown in Study 41 a statistically significant benefit on the all-comer ITT population which is the indicated population as well as showing significance on a number of different endpoints including North Star Ambulatory Assessment and timed function test. So this is really a body of data that not only confirms the evidence which is the charge, but builds on it.

Great. Thanks. And then given you have about $330 million in cash, how are you guys kind of thinking about capital deployment in terms of either focusing on your commercial franchises and products that will be going through regulatory submissions in the near term versus your earlier stage research pipeline?

Yes, I believe we are well capitalized to navigate this year and prepare for the PKU launch. We've discussed having the necessary infrastructure in place for the launch of PKU and other products. Additionally, our discovery and development capabilities are strong. All components are in place, so we are positioned and financially equipped to advance our programs and get ready for the launches we anticipate in the next one to two years.

Great. Thank you.

And thank you, and one moment for our next question. And our next question comes from Kristen Kluska from Cantor Fitzgerald. Your line is now open.

Hi, everyone. Thanks for taking my questions and welcome Pierre. First just wanted to ask what the main questions will be at the PKU pre-NDA meeting and essentially what feedback you're looking for here.

Hey. Sure Kristen. Thanks for the question. So obviously the pre-NDA meeting is often focused around the structure of the NDA. How the components are put together how we do integrated safety analyses and created efficacy analyses. And then going through the checklist of are we in line with the terms of what need from a clinical standpoint efficacy standpoint safety database non-tox package CMC package. So it's a fairly standard approach to pre-NDA meeting. Obviously, we are quite gratified to have the meeting granted. And our expectation is that we'll be able to align with the agency and move forward with the submission in the fourth quarter.

Okay. Thanks for that. And we've often talked to you about the synergies with the splicing platform, especially now that you're progressing along with Huntington's disease. But maybe just kind of wanted to ask a question from the sense of how much overlap you think there is with the neurologist community, in particular the adult community with the experience with Evrysdi given the launch has been pretty substantial here. And then, if you have any initial feedback that you've heard from some leaders in the space based off your early data?

Yes, I can provide some insights before turning it over to Kylie for additional details. SMA affects both pediatric and adult populations, but Huntington primarily involves adults, so we have been able to start our work with juveniles as well. There is widespread awareness among scientists, physicians, and patients about the effectiveness of the splicing platform. We've discussed how Evrysdi has given us a foundation for successfully discovering, optimizing, and developing an oral splicing compound for complex brain diseases like SMA and now Huntington disease. The experience with Evrysdi has paved the way for us as we plan to conduct clinical trials involving both patients and physicians, due to the recognized efficacy of our splicing platform and the potential to offer a safe and meaningful oral treatment. Kylie, would you like to add more about our collaborations with the physicians?

Yes absolutely. I think what I would add Kristen in addition to what Matt said, I think one of the things that we do as a commercial team which we take very seriously, is making sure we take learnings across all aspects of our business as well as making sure where there are overlaps between physician, specialties and physician target call points that we're sharing that amongst our different teams. So if we look at Huntington's disease specifically as Matt said obviously it's more adult. But one of the things that is consistent is the movement to sort of subspecialty within neurology has overlapped between Upstaza and other parts of our business. And so we're making sure it's not an entirely overlap but there are some components of overlap. And so in that case we're making sure that where we're having consistent touch points that we're sharing that across the different teams.

Great. Thanks again.

And thank you. And our next question comes from David Lebowitz from Citi. Your line is now open.

Thank you for taking my question. When considering the guidance for Duchenne, it suggests that at the high end, revenues could decline by 27% in the second half of the year. Should we interpret this guidance as being based on the most conservative assumptions, implying things might improve as the year progresses, or should we anticipate an actual decline in the second half?

Yes. Thank you David very much for the question. Obviously I had talked a bit about how much growth we've been able to achieve and the reasons for that growth in the Translarna franchise. I'll let Eric talk a little bit about the dynamics in the second half and how we're thinking about total year guidance.

Yes, first of all, I think we continue to see growth. So, David I think what we're trying to do is to really modulate a lot of these group purchase orders in countries where we have established ordering patterns that are relatively inconsistent. And so while we're being a bit conservative in certain areas the unpredictability of the timing and the size of the orders can certainly play. But what we've seen fundamentally in all of these markets particularly in the Latin American markets where we continue to see orders and orders from new countries as well as the Central and the Eastern European markets and Middle Eastern markets which in the last few years have started to sort of stabilize much in terms of their ordering patterns there are still some unpredictabilities. And because the number of patients that we have the large amount of patients in certain markets such as Brazil and Russia and a number of other key areas the timing, the size of these orders can have fluctuations between one quarter or the next. But the fundamentals are still very strong. And I think we're very positive given the fact that we have seen quarter-on-quarter growth. So, I think as I mentioned I think we have some very nice tailwinds. I think we're going to continue to see good growth. And we're very confident that we're going to be able to achieve the guidance that we've set out or at least that exceed it.

Got it. Thank you very much for that. And just jumping over to PKU. Given the trial the pivotal portion of the trial utilized a diet as part of the protocol. And I know the OLE that you are adding Phe into the diet. From a labeling perspective, can the OLE serve as a component to allow diet to not be a requirement for a patient, or will the labeling ultimately include on top of a diet?

That's a great question, David. We've discussed various aspects of your inquiry. It's critical to have a stable diet during the trial to avoid affecting the results. Understanding the impact of sepiapterin compared to placebo, particularly with a stable diet, is essential. However, as you mentioned, being able to relax dietary restrictions is incredibly important for PKU patients. Their diets are very restrictive, which significantly affects both the patients and their families. One of the key advantages of sepiapterin is its ability to keep phenylalanine levels under control while allowing for more dietary flexibility. The early data on Phe tolerance that we've presented indicates a positive trend, showing that patients can tolerate phenylalanine intake above recommended levels. As we continue to gather data from the open-label extension, we are seeing this trend persist as more patients participate. We look forward to sharing these findings at upcoming conferences. Regarding labeling, we cannot be certain, but it seems likely that the mention of a stable diet will remain due to the protocol. However, realistically, patients may manage their diets differently in daily life. The ability to relax dietary restrictions will have a significant impact, not so much on how the drug is prescribed, but on its perceived value. There is growing interest from both physicians and patients in having an oral therapy that not only provides effective control but also allows for dietary flexibility, which is crucial for patients.

Got it. Thank you so much for taking my questions.

And thank you. And one moment for our next question. And our next question comes from Eric Joseph from JPMorgan. Your line is now open.

Hi. Good afternoon. This is Hannah on for Eric. Thanks for taking the question. Just wondering when we might be able to see maybe a fuller update or presentation of data from the Phase III FA study. As you guys are considering and conducting additional analyses to take to the FDA just wondering if there's a plan to present these to the Street?

Thank you for the question, Hannah. We've shared the key top line data from the study, including the positive results and several secondary endpoints, as well as the two critical components of the mFARS: the bulbar subscale and the upright stability subscale. We've also conducted additional analyses to quantify the expected long-term benefits related to loss of ambulation, based on the improvements we achieved in slowing progression on the upright stability scale. We plan to continue our work in this area and look forward to sharing those analyses in the future, either through a publication or a presentation for the investor community.

Okay. And then this may be a little bit more of a niche question. So for the diet liberalization study for PKU, just wondering from your conversations with physicians and patients, is there a specific amount or just percentage of increased Phe tolerance that patients might achieve that would be considered clinically meaningful to both physicians and patients?

I believe, as we have emphasized and Professor Muntau has nicely pointed out in our detailed exploration, that a restricted Phe diet is quite burdensome for patients. Therefore, even small increases in intake would be a significant benefit and rewarding for doctors, as well as crucial for patients' quality of life. When we analyze our data, we observe that patients can exceed the recommended daily protein allowance that unaffected individuals can include in their regular diet while still maintaining control. These findings are incredibly compelling because they surpass what anyone would typically expect from a therapy. Being able to see this has been very encouraging for us, and it has generated significant excitement among patients. As Dr. Muntau herself noted, she and other physicians are very enthusiastic about the data they have encountered so far.

Okay. Great. Thanks for taking the questions.

And thank you. And one moment for our next question. And our next question comes from Jeffery Hung from Morgan Stanley.

This is Michael Riad on for Jeff Hung. Thank you for taking questions and congrats on the quarter and the progress. So if you have favorable US regulatory outcomes in all your late-stage programs presumably we'd see them launch in a close timeframe. So how is the company thinking about preparations for multiple simultaneous launches, especially in the context of the annualized $150 million in OpEx savings in 2024? And would you launch them immediately if that was an option? Thanks so much.

Yes. Michael thanks so much for the questions. We would look forward to that opportunity. We have been building for that. We're well set up for that. We're well funded for that. I'll let Kylie provide a little bit more color but let me just say the short answer is we would welcome that activity and work as quickly as possible as we always do to get these important therapies to patients. Kylie do you want to provide just a little more color around this infrastructure?

Yeah absolutely. Thanks Matt and thanks Michael for the question. As Matt said I think we'd definitely welcome that problem to have, but as we've talked a lot about we have a really strong commercial infrastructure in place globally and this includes both capabilities and capacity to focus on neurology and metabolic. And obviously the team is gearing up very quickly for a potential PKU launch. In addition to that obviously we don't start on day one of launch. The team has done a lot of work while trials are ongoing to build relationships with KOLs to build relationships with patient advocacy groups to ensure that we understand the need for the payers to ensure that we understand what's necessary to be successful at launch. And all of that takes place sometimes often up to two years prior to launch. So we're in a good position to be ready upon successful regulatory discussions and positive movement towards NDA submission. And it wouldn't require additional resources or infrastructure to be successful there. So, we have the footprint in more than 50 countries around the world and we are definitely ready to go. And I know I speak to many of the colleagues that we are excited for the opportunity to be able to bring a lot of these differentiated therapies to patients with high unmet medical need in neurology and metabolic spaces.

All right. Super. That's really helpful. And then maybe a last one more of a housekeeping question. Could you comment a little bit on the royalty rate for Evrysdi from Roche? It seems like it's been trending a little bit down in the last few quarters. Any commentary on what we should expect?

Sure. Kylie do you want to fill that in?

Absolutely. Yes. So the royalty rates from Roche for every year are tiered between 8% to 16%. So that is on an annualized basis. So every year they start at the beginning with the 8% and they're tiered up to 16%. So from that perspective throughout the year they progress through the different tiers. We're up towards as we've seen with CHF 701 million of sales in the first half of the year we're tiering up towards the second and almost near the third tier of royalty rates. So I wouldn't say that they're going down. If anything they go up. But that's, on an annualized basis.

Thank you. And for our next question we have Brian Abrahams from RBC Capital Markets. Your line is now open.

Hi. This is Joe on for Brian. Thank you for taking our question. Just going back to Translarna, can you talk about some of the potential outcomes of the CHMP opinion? Is there a possibility that Translarna can remain on the market with conditional authorization with the annual renewal? And I have a follow-up.

Thank you for the question, Joe. We are submitting type two variations to upgrade the conditional authorization to a standard one. We are confident in our ability to achieve this based on the strength of our data and our capability to meet the confirming requirements, leveraging data that was available at registration. If the CHMP decides that we need to collect more data, it could be through the longer-term open-label segment of 741, which was part of the 72-week placebo-controlled study. The analysis we presented, which supports our conversion request, is based on that placebo-controlled portion. It's possible that the CHMP may acknowledge STRIDE for providing direct measurements of long-term therapy benefits for DMD and capturing our impact on significant disease transition points like loss of ambulation and pulmonary function. They could request additional real-world data for the conversion, which could lead to them suggesting that we maintain the conditional authorization for now. This would mean business as usual for Translarna.

Got it. Thank you. That was very helpful. And also to touch on the US pathway, I guess if I'm not mistaken, Type C meeting has been requested this month. Is there a typical response time from the FDA to get back to you once the meeting has been requested? And also how much additional back and forth can you expect to have before the meeting is scheduled? Thank you.

Yeah. Thanks Joe. And we had said, so that meeting request came based on a recent discussion with the division. Within our division where we talked about the potential pathways to an NDA resubmission in the US, particularly now given the volume of data we have not only from the three placebo-controlled studies, Study 7, Study 20 and Study 41. But importantly those STRIDE data that I recently mentioned, which provide very strong evidence of the benefits that we've been recording over the course of the time of the clinical trials are translating to long-term meaningful benefit, in the most significant way possible that's long time to loss of ambulation and loss of pulmonary function. The agency said, well, why don't, we get all of our data together, including some of the mechanistic data that we generated over the years any analysis we want. Request the Type C meeting and we'll have a discussion about how we can put together an NDA package that would be suitable for resubmission. As mentioned, we have not yet submitted request. We will be submitting that request in August. They typically respond within a couple of weeks to let us know if the meeting is granted or not. And typically the timeline for a Type C meeting following meeting request to meeting date is roughly 75 days.

Got it. Thanks for the clarity.

Thank you. And one moment for our next question. And our next question comes from Colin Bristow from UBS. Your line is now open.

Hi. This is Yihan on for Colin. Congrats on the quarter, and thanks for taking our question. So I guess our question is on the PTC518 HD program. So in terms of the US partial clinical hold, just wondering if you have already submitted the Part A data as well as the additional safety data to FDA yet and if there's any feedback for the requirements from the FDA to potentially lift the hold? And also the second part on the same program, so for the dose escalation. So based on our data it seems like the 10-milligram will be very likely to reach your targeted HTT reduction goal of like 30% to 50% brain. And you previously noted you need some more data at low doses to further determine for the dosing escalation. So just wondering, could you please let us know what kind of data set you might need to see to make this decision? And will this potential dosing escalation be included in your conversation with the FDA for the clinical holding team? And when will we expect to see the data, the next update? Thank you so much.

Thank you for your questions, Yihan. I'll begin with your first question about the FDA and the partial clinical hold in the US. We were pleased to present data in June from the first cohort of patients in the initial part of PIVOT-HD, which showed that the drug was safe and well tolerated, with no serious adverse events or signs of peripheral neuropathy, and no NfL spikes seen in other therapies. Overall, the safety record is as strong as we hoped. We are actively monitoring safety and have an independent DSMB that meets regularly and supports the continuation of the study as it is. They also indicated that based on the data from the 5-milligram and 10-milligram doses, they would be supportive if we decide to escalate to the 20-milligram dose. We have submitted our safety data and rationale to the agency to support reopening the study in the US. This process is ongoing, and we will provide an update when appropriate. Regarding your second question about dosing, you're correct. As we shared, we believe the 10-milligram dose leads to about a 30% reduction in huntingtin protein in the blood, and we observed higher CNS exposure with a CSF to plasma ratio of 1.5:1. This gives us confidence that we are within the targeted range of a 30% to 50% reduction in brain cells. We plan to keep collecting data on the 5-milligram and 10-milligram cohorts. Some biomarker data from the second part of PIVOT-HD will be presented with the 12-month data cut once it's available. This will help confirm if we are at the desired dose level, and we will likely use this time point to inform decisions about moving to the higher 20-milligram dose. It’s worth noting that we are in a favorable position with an oral molecule that can be titrated. Peripheral biomarkers like blood huntingtin protein provide important insights into target engagement and pharmacodynamic effects, which are crucial for guiding this clinical development program and determining a dose level that is not only safe but could potentially benefit patients. For now, we’ll continue with the 5 and 10 milligram doses. We expect to have the next biomarker update around nine months after we have the three-month data update. The decision will be based on the data we observe, and the DSMB has already given us their approval to escalate to the higher dose if we deem it necessary.

That's very helpful. I just need one quick clarification. Will you provide additional trial data from Stage two or early Stage three patients, or will the next update only include the nine months of data? Thank you.

Yes. So, good question. So we have a few more data updates to go, right? So obviously, those first patients that we presented the Part A data or that first three-month data on in June, we will expect in approximately nine months from then to have the 12-month data, right? And then obviously, we'll be able to provide the 3-month data update on the additional Stage two and the early Stage three patients when those available. We haven't given that time yet and we will provide the timing for that, once we have more clarity on the precise date.

Very helpful. Thank you so much.

Thank you. And one moment for our next question. And our next question comes from Joseph Thome from TD Cowen. Your line is now open.

Hi, there. good afternoon. Thank you for taking my questions. Maybe one on Upstaza. It seems like companies are having various ability to treat patients after the approval of a gene therapy in the US, and varying success here. So I guess, is there anything you can do during the hopeful update review process to kind of prime payers to be ready to reimburse Upstaza upon potential US approval, which I expect will come sometime in the back half of next year? And then maybe second. We are going to know what the pipeline looks like by the end of this year based on the regulatory feedback you get in the next couple of months. I believe in your previous deal, with Blackstone there was like $500 million earmarked for BD. I guess are you ever contemplating using that at all depending on, what comes up over the next few months? Thank you.

Thank you very much for the question. The first question on Upstaza, I'll let Kylie give some detail on how we're studying the US market in terms of payers. But I will add that we're obviously, incredibly gratified with this as we continue treatment in Europe as well as the treatments that we did as part of the Canada study that included sites in the US. We're continuing to see very strong data again substantiating the fact that this is a transformative therapy. It's one of those therapies where we get it and we see the effects that we're hopeful, with a gene therapy. Taking kids who have virtually no dopamine production, no motor function and then providing an ability to make dopamine and seeing them be able to sit crawl and walk is incredibly gratifying. And of course that in and itself does so much to preset the market. It increased both patient and physician desire to get that therapy. So Kylie, do you want to talk a little bit about preparation for the U.S.?

Yes. Absolutely Joe. We are engaging with U.S. payers and we do this well ahead of launch to understand what are the types of queries that they have and what are some of the roadblocks that might be put in front of us. And we obviously especially with AADC need to do education around what is the disease the high morbidity and mortality rates the lack of standard of care or any disease-modifying therapies out there available and obviously budget impact. And all of that work happens ahead of approval and the U.S. team has been actively engaged in that process to date. As Matt said, with a strong data package and transformative data not just in the short-term, but also in durability, which is one of the questions that a lot of payers have put in front of other companies with gene therapies. How well does your treatment perform not only in the short-term, but also in the long-term? We feel very, very confident around the data package that we have for Upstaza. And the value proposition in totality has been very well received by U.S. payers and there has been a high willingness to pay.

And Joe on your second question regarding we'll learn a lot more about the portfolio in the coming months. We've done significant work in our strategic prioritization. The decision to discontinue the preclinical gene therapy programs aligns more with our strategy and focus, and business development can play an important role in that. Pierre, would you like to provide more insight on funding and business development opportunities?

Absolutely. So as Matt said the team and the company is well aligned about our capital and our strategy to leverage our expertise and being opportunistic on BD. As it comes to Blackstone, we're very proud to have partnered with such a strong group with life science expertise and we will always evaluate our funding options as it comes to be there on our capital structure.

Great. Thank you very much.

Thank you. And one moment for our next question. And for our next question we have Gena Wang from Barclays. Your line is now open.

Hi. It's Tony on for Gena. Going back to the Huntington's program, could you just add some more color potentially on what kind of threshold you might be looking for in terms of CSF protein? I know you talked about 30% to 50% range, but is there kind of a specific cutoff you would be specifically looking for?

Yes. Tony, thank you very much for the question. Obviously, there's been a lot of discussion about CSF Huntington protein, what it means and how do we measure it and many things like that. Look we're in a position where there's many important biomarkers of disease that we're measuring in the study. We're measuring CSF protein. We're also measuring NfL, which obviously has been shown in neurodegenerative disease to be a very important marker obviously of safety in terms of potential nerve injury, which I mentioned we've not see any sign of thus far in the PIVOT-HD trial. But also efficacy. We can look to first an accelerated approval as an indicator that there's broad interest including from regulatory authorities to look at NfL as an important marker of efficacy in neurodegenerative disorders that are characterized by neuronal injury and neuronal loss. CSF huntingtin protein has been a bit less well characterized. What we do know is that in early stages of Huntington's disease there's no detectable mutant huntingtin protein in the CSF. It's at levels that are so low that it's not detected by the assay. However, over the course of time as neurodegeneration progresses, there's a gradual increase in the level of mutant huntingtin protein in the CSF. So that tells us that it is in a way a marker of neurodegeneration. So if that is true and we believe it is and if that CFS protein is likely coming from killing from nerve cells when they become injured and die during the course of the process the ability to lower CSF huntingtin protein is an important marker that we are having a favorable effect on the brain cells such that they're less injured, they are spilling less huntingtin protein into the CSF. So all that is to say that's what we understand about it. Quantifying what change is meaningful is a bit challenging. I don't think anyone has an exact number other than to say obviously, if you have a marker of disease that is increasing over time as the disease worsens, if you could stabilize and ultimately lower that market that's obviously very good. But I think the way we think about it is not in terms of any specific threshold but being able to look at our effects on the trajectory of CSF protein with a goal in mind. And we did share on the 12-week call that we are observing lowering in the dose cohorts at very early points in time before we know that we're reaching steady state in terms of what we'll ultimately be able to achieve in CSF protein lowering. But we're also going to look at that alongside other important markets such as NfL as well as the volumetric MRI and that together those will paint an important picture of the benefit that PTC518 will be able to provide for Huntington's disease patients.

Got it. Very helpful. Thank you.

Thank you. And one moment for our next question. And our next question comes from Tazeen Ahmad from Bank of America. Your line is now open.

Hi. What would shift to a standard approval from the benefits you're at now for EU practically change in terms of either commercial opportunity, reimbursement, or does that kind of not really matter in the grand scheme of things? And then as far as the cost savings that you mentioned about an annualized number of about $150 million or so to clarify upon what you might have said before, could there be room for additional cost savings beyond what you just described as we get closer to 2024 and you take a closer look at your portfolio? Thanks.

Great. Thank you very much for the question, Tazeen. On the first question regarding the conversion from a regulatory standpoint I think the impact is perhaps you don't have to go through a process every year of getting the renewal. But more importantly and to the point of your question, the commercial type I'll let Kylie talk more about that.

Yes. So Tazeen in answer to your question around the benefit, I think what the team has done is a remarkable job of securing very favorable pricing and market access with conditional approval. And not only being able to secure it but maintain a really favorable pricing corridor over the years of maturation of the product, which is not easy to do. I think from a benefit perspective we don't see a huge upside when it comes to the countries that we're already launched in with pricing and market access. There are some smaller countries that would open the door to a discussion post conversion. But I think where the true upside is the countries that we don't have registration in yet.

Great. And then Tazeen regarding your second question in terms of potential further cost savings. Look as we talked about at the time of the CEO transition one of the things that we really wanted to focus on particularly as we were leading our studies and with the positive PKU data that we ultimately had we were in a position to start really focusing down and looking at opportunities to reduce our OpEx and reducing our cost. So, the team spent a lot of time in the spring looking into this. We obviously shared the reductions that we planned associated with the discontinuation of the preclinical gene therapy programs. Obviously that involved reduction in headcount and we made these decisions in late May which obviously gave a bit of a limited time in 2023 to realize an impact on cost savings which is why we've shared that we expect those changes in 2023 to have a greater impact than the impact of approximately $150 million in cost savings in 2024. Of course we also are going to be in a position where we're going to continue looking at the portfolio. Looking at opportunities to ensure that we're advancing programs that have a reasonable return on investment as well as seeking opportunities to say when that's not the case let's look at cost savings. We're looking at $940 million to $1 billion of revenue this year. We're incredibly excited about that. We expect as we move our other programs forward and looking forward to the potential launch of the PKU program which we believe can be an over $1 billion market opportunity we're really in position where we should be thinking about moving towards a breakeven point and ultimately one day in the future being profitable. And to do that we have to continue to be very thoughtful and strategic about our utilization of capital and how we think about OpEx when we think about program spend. So, you're correct. This is going to be something that we continue to do over time as we build the company forward.

Thank you.

And thank you. And our next question comes from Paul Choi from Goldman Sachs. Your line is now open.

Thank you. Good afternoon and congratulations on the quarter. My first question is on the commercial side with regard to Evrysdi. Your partner Roche reported the first sequential decline basically since the early days of the launch. I'm just wondering if you could maybe comment on market trends there given that your guidance embeds a milestone for 2023. My second question is also on Huntington's. Just with regard to enrollment progress pending the discussion with the FDA and just how you're factoring in the pace of enrollment contingent upon clarifying the clinical hold there? Thank you.

Thank you for your questions, Paul. I will start with your second question. We have consistently stated that we are capable of enrolling this study outside the United States, which is an advantage of having a global development organization that can initiate and conduct trials in various countries worldwide. We are currently conducting a study in several countries across Europe and Australia, and as you noted, in Canada as well. There is significant enthusiasm among physicians and patient groups in these countries to participate in this trial. The interim data showing that the drug has been safe, well-tolerated, and is producing the desired pharmacodynamic effect has further increased interest. We are aware of the eagerness of both patients and physicians in the U.S. to join the study, but we will continue to enroll participants without slowing down. If we are able to reopen the sites in the U.S., there will be opportunities for those patients to participate. As for your question about Evrysdi, Kylie, would you like to address that?

Yes, certainly. I believe that one of the key aspects we're observing with Evrysdi is the ongoing increase in the total number of patients being treated. This growth is fueled by several factors across the board, including consistent switches from both Zolgensma and Spinraza, as well as the treatment of new therapy-naive patients. In the US, Roche has mentioned that infants are becoming a growing segment of patients treated with Evrysdi. With the recent CHMP opinion, we also anticipate this trend to persist outside the U.S. They have mentioned that they lead the market in most major global markets and expect to be a global market leader by the end of 2023. With Evrysdi, similar to what we have seen with Translarna and as Eric has highlighted throughout this call, there is some variability in the business. This is directly related to the international segment, where they experience significant government-based purchase orders that can vary between quarters, leading to expected quarterly fluctuations. We have observed growth from 2022 into Q1 of 2023, with some variability in Q2, but we expect growth to continue for the remainder of the year. We are optimistic about reaching the $100 million milestone you mentioned, as sales in the first half of the year indicate we are already beyond halfway. This is an encouraging sign, which is why we maintain confidence in our full revenue guidance for 2023, including the $100 million milestone. We're experiencing similar fluctuations in our Translarna business as well.

Okay. Great. Thank you for the color.

Thank you. I am showing no further questions. I would now like to turn the call back over to Dr. Matthew Klein for closing remarks.

Thank you again for joining us on the call today. I'm extremely proud of our many achievements in the second quarter and we look forward to a busy and productive second half of 2023. So thank you all again for joining the call and have a good evening.

This concludes today's conference call. Thank you for participating. You may now disconnect.