Ptc Therapeutics, Inc. Q3 FY2023 Earnings Call

Thank you for standing by and welcome to the PTC Therapeutics Third 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 call is being recorded. I would now turn the conference call over to your host, Jane Hanlon, Associate Director of Investor Relations. Please go ahead.

Good afternoon, and thank you for joining us today to discuss PTC Therapeutics' third 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; 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 quarterly report on 10-Q and 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, Jane. Good afternoon and thank you for joining the call. I'm pleased to share our third quarter results and outlook for the remainder of the year, including an update on our development programs. I will begin with the recent announcement of our agreement with Royalty Pharma to monetize up to $1.5 billion of the Evrysdi royalty stream. This non-dilutive financing provides PTC with capital to support planned operations and allowed us to retire the Blackstone debt obligation. In addition, the deal structure includes flexibility for accessing additional capital over the next two years. Notably, PTC maintains its right to the remaining $250 million of milestones related to Evrysdi global net sales. The royalty financing deal, along with the operating expense reductions announced in September, put PTC on very strong financial footing as we continue to focus our resources on our differentiated, high potential R&D program and robust global commercial infrastructure. Now, I'll turn to our third quarter results. We had another solid quarter with total revenue of $197 million, which keeps us on target for meeting our 2023 total revenue guidance of $940 million to $1 billion. Our DMD franchise revenue in the quarter totaled $136 million. This strong performance allows us to update our 2023 DMD revenue guidance to between $565 million and $595 million from between $545 million and $575 million. Eric and Kylie will provide additional details on our commercial performance shortly. I'd like to now provide an update on recent regulatory activities for several of our programs. Let me begin with an update on Translarna. Following the negative opinion from the CHMP on the conversion of the conditional marketing authorization to full marketing authorization and on the renewal of the conditional authorization, CHMP gave us the option to request reexamination of both opinions or only one opinion. We decided to pursue reexamination of the negative opinion on renewal of the conditional authorization only. As such, the reexamination process will focus solely on the allowance of continued conditional authorization of Translarna in Europe. We remain optimistic that we can address key concerns raised by the CHMP on the evidence of benefit in the Translarna clinical trials as well as concerns raised on the methodological robustness of the STRIDE data analysis. As previously discussed, in accordance with EMA guidelines, we expect the opinion from the reexamination procedure in late January with adoption of that opinion by the European Commission 67 days later. The U.S. Type C meeting with FDA to discuss the potential path to NDA resubmission is scheduled for this quarter. Turning to sepiapterin, we held a pre-NDA meeting in the third quarter with FDA to discuss the NDA submission. At the meeting, FDA stated that the sepiapterin clinical safety and efficacy data supported NDA submission for the treatment of pediatric and adult PKU patients. However, they requested that we complete the 26-week nonclinical mouse study to assess potential carcinogenicity risks of sepiapterin prior to submission. This nonclinical study was initially not required when sepiapterin was acquired from Censa as the NDA submission was planned under the Section 505(b)(2) pathway. With our decision to file under the 505(b)(1) pathway, the 26-week study is considered a required NDA component if needed to inform labeling. We will continue to discuss with FDA the potential to submit the mouse study results during the NDA review process. We now expect NDA submission to occur no later than the third quarter of 2024. This submission could occur in the second quarter if FDA allows submission of the nonclinical study report during the review process. For the EU, we expect to submit a marketing authorization application to EMA in the first half of 2024. The delay in NDA submission in no way mitigates the strength of the APHENITY data, given the highly meaningful clinical effects observed in the trial as well as the continued evidence of providing phenylalanine tolerance benefits to the full spectrum of PKU patients in a long-term open-label extension study. We remain incredibly enthusiastic about the potential billion-dollar-plus global commercial opportunity for sepiapterin. Moving to the PTC518 Huntington's disease program. Enrollment is ongoing in the PIVOT-HD study for both the stage 2 and early stage 2 cohorts. We expect the next data update to occur in the first half of 2024. This update will include 12-month data on the initial group of subjects on whom we reported data in June of this year. Regarding the status of the trial in the United States, we had a type A meeting with FDA to discuss the clinical safety data needed to enable resumption of enrollment of the PIVOT-HD trial at US study sites. At the meeting, FDA stated that the existing three months of safety data could support 12-week dosing at 5 milligrams and 10-milligram dose levels and had six months of clinical safety data demonstrating a similar favorable safety profile that could support 12-month dosing in the PIVOT-HD trial. This is very good news as it suggests that the safety data being generated from PIVOT-HD should be sufficient to lift the partial hold in the United States. Turning to vatiquinone, the data in the MOVE-FA study demonstrated vatiquinone treatment benefit across several disease endpoints, including favorable effects on the upright stability subscale of the mFARS assessment, which is predictive of time to loss of ambulation. We had a Type C written response-only meeting with FDA in the third quarter to determine whether the data from MOVE-FA would be sufficient to support an NDA for accelerated approval. In the written response, the FDA stated that while they see the value of upright stability as a clinically meaningful endpoint, they believe a confirmatory study would likely be needed to support NDA submission. As this was a written response only and we believe we can address the concerns raised by the FDA, we have requested a follow-up live meeting. In parallel, we are participating in a scientific advice procedure with the EMA to determine if the MOVE-FA data could support a conditional marketing authorization application in the EU. We expect to have the outcome of this procedure in the first quarter of 2024. Turning to Upstaza, we had an informal meeting with FDA in the third quarter, at which time they said that the data we have provided to support comparability between the clinical drug products and the intended commercial drug product were still not sufficient. However, in that meeting, the FDA stated that the available data from the clinical study in the United States, assessing the safety of the drug delivery cannula could be used to support a BLA for accelerated approval based on biomarker data demonstrating a treatment-related increase in de novo dopamine production. FDA suggested that we conduct a pre-BLA meeting to review the content of the planned BLA. This meeting has been scheduled for December and pending the outcome we expect to submit the BLA shortly thereafter. Let me conclude by saying I'm incredibly proud of our team's continued ability to execute on all fronts. The recent Royalty Pharma financing deal, along with our operating expense reductions, position PTC as strongly as possible for future growth as we realize the potential of our many promising programs. I will now turn the call over to Eric and Kylie to discuss our strong commercial performance in the quarter. Eric?

Thanks, Matt. We are proud of the accomplishments of our global customer-facing team, which continues to deliver revenue growth and build on our success as we focus on a strong close to the year for our commercial portfolio of products. Once again, our global DMD franchise delivered a strong quarter with continued growth from new patient starts, high compliance, low discontinuation, dose adjustments, and geographic expansion. Let me focus on our two key products in the DMD franchise. Translarna and Emflaza continue to be important growth drivers, delivering $136 million in net revenue for the third quarter, which is 4% growth compared to the third quarter of 2022. With strong year-to-date performance, we are raising our DMD revenue guidance from $545 million to $575 million to $565 million to $595 million. For Translarna, we achieved $69 million in quarterly revenue. Year-to-date sales were $281 million. The team has worked tirelessly to continue to bring this important treatment to existing as well as new patients in our markets around the world. The recently concluded World Muscle Society meeting was an opportunity to present and discuss with healthcare providers the totality of data and real-world evidence supporting the efficacy of Translarna and reemphasizing the significant life-changing impact this treatment had on young boys suffering from this devastating disease for whom Translarna is their only therapy that specifically targets nonsense mutation DMD. Our customer-facing teams have increased communications with healthcare providers in Europe, providing medical information on Translarna and its continued availability for all new and existing patients. Now turning to Emflaza. The Emflaza business continues to be solid. Quarterly net revenues were $67 million, which is a 23% growth over the prior year quarter. We have had $188 million in year-to-date sales. We continue to see strong trends in the new patient start forms and high compliance. The continued Emflaza growth is impressive and highlights the brand loyalty in the DMD community in the United States as our team is actively implementing plans to defend and protect the Emflaza brand ahead of loss of exclusivity next year. Now, I will ask Kylie to update the progress of 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 to see transformative results for the patients we have treated thus far. Our rollout across Europe is progressing well with our first patient treated in the U.K. this quarter following the positive NICE recommendation earlier in the year. Patient identification, treatment readiness, and access and reimbursement discussions continue to advance. We also continue to leverage early access programs and cross-border treatment opportunities with a patient from the Middle East also receiving treatment in France this quarter. Moving to Tegsedi and Waylivra in Latin America. We continue to grow our franchise in the region with recent MAA approvals for Tegsedi in Argentina and Waylivra in Mexico. Patient identification is robust and patients on treatment continue to grow across the region. In Brazil, we anticipate receiving new group purchase orders for both Tegsedi and Waylivra before the end of this year, which is in recognition of the increased number of patients who rely on these life-changing treatments. Lastly, as Matt mentioned, we are extremely excited about the sepiapterin opportunity. The APHENITY Phase 3 data and the long-term extension study preliminary data were presented at the recent SSIEM Congress and were very well-received by physicians and the PKU community. They are excited about the opportunity to bring a differentiated therapy to PKU patients in need. With strong differentiation from the mechanism of action and the APHENITY results, coupled with our global commercial infrastructure and proven track record in commercializing rare diseases, the team is actively working on launch activities to ensure a fast uptake upon approval. The potential market opportunity for sepiapterin is composed of a number of key PKU patient segments, all of which our APHENITY data suggest we can address. First, patients who have not been trialed on Kuvan or are considered therapy-naive. This includes many of the classical PKU patients, where we have demonstrated benefit in both the Phase 2 study and the APHENITY study. Second, patients who have not responded to Kuvan. Third, patients who have achieved some level of blood Phe reduction from Kuvan but are not well-controlled and for whom sepiapterin may deliver a better reduction in blood Phe levels. For these patients, a reduction in blood Phe to target Phe levels is clinically meaningful, potentially allowing them to substantially increase their protein intake and significantly enhance their quality of life. Many experts who have treated patients with PKU across the world have indicated that based on the data they have seen from our APHENITY study and from their understanding of the mechanistic benefits of sepiapterin, all interested patients should be trialed in sepiapterin. With an expected addressable population of approximately 15% to 30% of the overall global PKU population, this would put us above a $1 billion market opportunity. In conclusion, our third quarter builds on an excellent first half of 2023, with significant progress across all of our commercial products and across all geographies. Our customer-facing team is set to have a very strong close for the year and set ourselves up for continued success in the future by continuing to build on our commercial capabilities and to execute prelaunch strategy for our future product pipeline. Now let me turn the call over to Pierre for a financial update. Pierre?

Thank you, Kylie. I would like to begin by discussing the financing with Royalty Pharma that we announced last week. That deal, together with the pipeline reprioritizations and OpEx reductions that we announced in May and September puts PTC in a very strong financial position. We are pleased to work again with Royalty Pharma on this win-win transaction. The non-dilutive financing provides PTC with the capital to support operations and allow for increased operational and financial flexibility by removing the Blackstone debt obligation from our balance sheet. In addition, the deal structure provides the potential for additional non-diluted capital over the next two years. To recap the details of the deal, PTC will monetize up to $1.5 billion of the Evrysdi royalty stream. Royalty Pharma acquired additional works on equity for $1 billion upfront. The agreement included options for PTC to sell up to an additional $500 million or for Royalty Pharma to acquire half of such retained royalties for up to $250 million at a later date, less royalties received by PTC. PTC maintains all economics associated with up to $250 million in the remaining commercial sales milestone associated with every global net sales. The agreement builds on the previous strategic partnership established with Royalty Pharma in 2020. The initial agreement was for the monetization of approximately 43% of the Evrysdi royalty stream. As a result of the current agreement, PTC will maintain ownership of approximately 19% of the total Evrysdi royalty stream, pending any exercise of future options by PTC or Royalty Pharma or the achievements of the cap from the 2020 royalty agreement. I'll now share the financial highlights of our third quarter 2023. Please refer to the third-quarter earnings press release issued this afternoon for additional details. Beginning with top line results, total revenue for the third quarter was $197 million. This consisted of DMD franchise revenue of $136 million and other revenue of $61 million. Starting with the DMD franchise, Translarna net product revenue in the quarter was $69 million, while Emflaza net product revenue was $67 million. Moving to Evrysdi, third-quarter global revenue of CHF 360 million, which equals to over USD 400 million was achieved by Roche, earning royalty revenue of $50 million for PTC. As Matt mentioned, the third-quarter performance puts us in a strong position to achieve our 2023 total revenue guidance of $940 million to $1 billion, including an expected $100 million milestones whenever surpasses $1.5 billion in annual net sales. Non-GAAP R&D expenses were $150 million for the third quarter of 2023, excluding $14 million in non-cash stock-based compensation expense compared to $150 million for the third quarter of 2022, excluding $15 million in non-cash stock-based compensation expense. Non-GAAP SG&A expenses were $68 million for the third quarter of 2023, excluding $13 million in non-cash stock-based comp expense compared to $67 million for the third quarter of 2022, excluding $14 million in non-cash stock-based compensation expense. Cash, cash equivalents and marketable securities totaled approximately $295 million as of September 30, 2023, compared to $411 million as of December 31, 2022. I will now turn the call over to the operator for Q&A. Operator?

Thank you. Our first question comes from Eric Joseph of J.P. Morgan. Your line is open.

Hi. Good afternoon. Thanks for taking the question. Just a couple on PKU from us. Really, just around this regulatory path here. I guess, can you just clarify when the decision was made to pursue a 505(b)(1) path for sepiapterin over a 505(b)(2) and maybe what crossed that decision? And then I guess, electing to go with the 505(b)(1), was it not clear that carcinogenicity study would be needed, would likely be a requirement? And really, ultimately, I guess, just looking forward, what should give investors confidence that assuming that the carcinogenicity study turns up nothing that the NDA submission and review cycle should otherwise be straightforward. Thank you.

Thank you for your questions, Eric. First, I want to explain the difference between the 505(b)(1) and 505(b)(2) pathways. The 505(b)(2) pathway is generally used for Me-too compounds that already have an approved active ingredient. In contrast, the 505(b)(1) pathway is designed for innovative therapies, which is more suitable for sepiapterin. Although its active ingredient is BH4, similar to Kuvan, sepiapterin has unique factors that contribute to its enhanced efficacy, making it a promising therapy. Initially, we considered the 505(b)(2) pathway, but after our analysis, we determined that the 505(b)(1) pathway was more appropriate. The 505(b)(2) pathway allows for referencing existing studies, including nonclinical ones, while the 505(b)(1) pathway does not permit that. Our decision to switch was influenced by sepiapterin’s distinct efficacy profile compared to Kuvan and the potential delays of up to 30 months that could arise with the 505(b)(2) pathway. This compound is novel and fits better under the 505(b)(1) pathway. We have engaged with the regulatory agency to clarify the requirements for the 505(b)(1) pathway, which include necessary studies like juvenile toxicity and REPROTOX. When it comes to carcinogenicity, we plan to submit a weight of evidence request for a waiver, for which we are confident due to the lack of genotoxicity in sepiapterin. Our non-clinical studies showed no signs of carcinogenicity or related lesions. While we are not directly referencing the Kuvan NDA, its long clinical history shows no carcinogenic risks associated with BH4. We provided this information to the agency, which indicated that while they accept that a two-year rat study can be conducted post-approval, they require a 26-week mouse study to inform the label under the 505(b)(1) pathway. If we were under the 505(b)(2) pathway, we could have referenced the Kuvan label, which mentioned a risk of adrenal tumors that has not been observed clinically. As they need data to support the label, this study becomes necessary and is standard for the 505(b)(1) pathway submission. Regarding your other question, the agency acknowledged that the safety and efficacy data for sepiapterin can support a broad patient label, which is what we aim for. We expect that after receiving the results from the mouse study, if needed for our submission, the process will be smooth. The robust efficacy and safety data we possess, along with the time we will save, will only enhance our overall submission package.

Our next question comes from the line of Kristen Kluska of Cantor Fitzgerald. Kristen Kluska, your line is open.

Hi, everyone. First, just wanted to congratulate you on the Royalty Pharma deal. And I had a question about Translarna. Can you talk about why you're only pursuing reexamination of the conditional authorization? I guess, what advantages do you see going this way versus both? And assuming that you do get the green light, how are things going to be moving forward? Will it be similar to what we've seen over the last eight years when they've given you the green light, or will you need to conduct any type of work in the background? Thank you.

Thank you for your question, Kristen. As I mentioned earlier, there were two opinions during the previous procedure. Essentially, it involved converting the conditional marketing authorization to full marketing authorization and continuing the conditional authorization. They combined these into two opinions. When they decided against the conversion to full authorization, they also opted against renewing the conditional authorization. We were then given the choice to pursue one or both. Our main focus is to ensure that this drug remains available for patients in Europe, where there are no other targeted therapies for nonsense mutations. We believe the best approach right now is to concentrate on maintaining the conditional authorization. We also think that not pursuing full approval may lessen some issues related to the negative primary analysis in Study 041. Instead, we can emphasize the strong data from Study 041, including the intention-to-treat population, where we clearly demonstrate benefits across various endpoints, in addition to the long-term STRIDE data. By focusing solely on renewing the conditional authorization, we believe we can provide the necessary evidence to shift the opinion from negative to positive. As for your question about what happens next, if we secure a conditional marketing authorization in Europe, we will need to gather additional evidence to continue demonstrating its benefits. We see various potential sources for this, including ongoing data collection from STRIDE. Our recent analysis has shown a significant benefit in delaying ambulation loss by 3.5 years and meaningful delays in pulmonary function loss. As we continue to gather data, we anticipate more patients contributing to the analysis of ambulation loss and pulmonary function, with hopes of eventually including cardiac function and mortality data. There is still a wealth of valuable data that can support the long-term benefits of Translarna from STRIDE. We might consider enhancing STRIDE with additional analyses or a second registry, but based on feedback from scientific experts during the advisory phase, this may not be likely. The experts indicated that generating meaningful data for genetic-directed therapies in DMD is challenging, and longer-term data collection mechanisms could be most beneficial for understanding true benefits. In short, we need to collect additional data, and we are prepared and willing to do so. Our priority is to keep this therapy on the market in Europe. We believe focusing on the renewal of the conditional authorization positions us best to achieve that.

And just the second part of that, I would imagine since you had the announcement that the community was probably pretty upset, especially the ones that have been on the therapy long-term. So wondering if there's anything you can collect from them, anecdotes, stories, et cetera, and if they can be of any help ahead of this upcoming meeting and decision.

Yeah, Kristen, good question. I think needless to say, the physician and the patient community was surprised, disappointed, and quite honestly scared for the patients. Obviously, this is the only therapy they have that is directed for nonsense mutation patients. Many of them have been on the therapy for years and observed the benefits that we've been reporting. For physicians, they understand the context of the disease. They understand the strength of the data that we produce, and they’ve commented that they can't imagine having to take patients off a drug that’s safe and effective. The patients themselves may have the ability to reach out and let their voices be heard. I'm sure in many parts of Europe that will happen given the fear and concern they have. Similarly, the physician community will want to speak on that. Our sense is that most people, as we were, never thought this date would arrive or this would be a reality. I think this is a call for them to speak up and let their voices be heard. Importantly, as you say, sharing their story and experience, particularly the physicians who are experts and can articulate the benefits they have observed and the importance of this therapy for patients with nonsense mutation DMD.

Thank you. One moment please. Our next question comes from the line of Sami Corwin of William Blair.

On the topic of Translarna, I guess since the negative opinion, have you seen any change in how physicians are writing scripts or if patients are accumulating medication ahead of the potential that the opinion does not reverse? And then can you speak a little bit if you've increased your sales efforts in non-EU areas since the negative opinion as well?

Yeah, Sami, thank you for the question. Again, in the physicians we've spoken with, the first response was clarifying and confirming that in no way does anything change. Patients can stay on the drug, they can write new prescriptions, and obviously, everyone's going to do everything they can to ensure patients stay on therapies. But let me take it over to Eric for further details on prescriptions.

First of all, we haven't actually seen an impact since the CHMP issued their opinion. In fact, we’ve seen physicians who have been very supportive. Our customer-facing team has stepped up their interactions with healthcare providers, advocacy groups, and others to emphasize that the drug is actually available. This is one of the most important things. We've made specific calls to every prescribing physician and worked with them because we've had relationships now for many years with these physicians. They know about the treatment, they've been treating patients for many years, and we've reaffirmed that Translarna is not only available for existing patients, but we're seeing new prescriptions as well. The fundamentals that we see, Sami, is that there have been limited to no discontinuations due to the CHMP information. New patients continue to receive prescriptions. Compliance remains very high, and we've been able to maintain dose adjustments. We’ve even had patients go from ambulatory to non-ambulatory and have been maintained as well. To your question about geographic expansion outside, while some information has gone out to other countries, we’ve still been able to work with healthcare providers in other parts of the world and continue to generate and see growth from Translarna in the quarter. The simple answer is that we have not seen any discontinuations, and the fundamentals remain strong. We’re confident in what we did this quarter, and we’re very confident in how we’ll finish 2023, and we’ve actually raised our guidance for DMD to $565 million to $595 million, which includes Translarna growth in the fourth quarter. Combined, that would equal about 11% to 17% year-over-year growth for the DMD franchise compared to last year.

Thank you. One moment please. Our next question comes from the line of David Lebowitz of Citi.

Thank you for taking my question. When looking at the Translarna European sales, could you please, or overseas sales, can you please give us a breakdown of what those sales are in Europe versus the rest of the world? Also, could you give us insight as to what other geographies might have their opinion affected by the EU opinion?

David, thank you for the question. Let me start with your second part first. As we've talked about in the past, many of our largest markets outside of Europe have independent regulatory agencies that do their independent assessments and will continue to make their independent regulatory decisions independent of the CHMP and European authorization. In terms of revenue, we have mentioned that while many years ago, Europe would have been the primary source of our Translarna revenue, we’ve done a lot of work over the past years to diversify our business. Kylie, do you want to go into a bit more detail about the breakdown of revenue?

Absolutely. As Matt was just saying, we've spent substantial effort and time over the last couple of years to geographically diversify the business. This strategy aims to ensure that we have contributions from multiple regions to total Translarna revenue. Currently, we have a number of growth markets that have continued to grow over the last couple of quarters. This has allowed us to have less than half of the EU revenue contribution to total revenue, with the remainder being from outside the US.

Sure, I mean, is there any way you can provide us with a specific number in the range, just in case things don't work out in Europe? We're trying to understand what the implications might be going forward with respect to our projections.

So David, I think from that perspective, it's roughly around 45% to 48%. But one thing to note is those European markets are some of our more mature markets. So over time, you would expect that the contribution to total revenue from more mature markets doesn't have the same growth trajectory as newer and growth markets. Therefore, while it currently sits around 45% to 48%, we wouldn't expect that number to remain flat over the coming years.

Got it. And with respect to expenses going forward, is there any way you can give us some level of bandwidth on what to expect for 2024 and beyond when the restructuring is fully in place?

Yeah. David, we announced the revised our OpEx guidance previously to $810 million to $860 million. And also, we then announced the subsequent cuts and how that would have an impact of an additional approximately 20% in January 2024. Obviously, we'll give the updated OpEx guidance at JP Morgan in January.

Thank you. One moment please. Our next question comes from the line of Kelly Shi of Jefferies. Your line is open.

Hi. This is Yun for Kelly. Thank you very much for taking the question. So the first question on Translarna, assume that you're able to get the negative opinion reversed. Is there a deadline for you to eventually have to convert that conditional approval to full approval? And then on the pre-BLA meeting for AADC deficiency, on comparability in terms of manufacturing, are there any specific assays that you have to develop before the meeting?

Thank you very much for the question. So on your first question regarding the positive opinion, if we're able to convert that to a positive opinion, the continued conditional marketing authorization in Europe. There's typically not a fixed timeline to that. Typically, what goes along with the conditional marketing authorization in Europe is something called a specific obligation. This obligation typically requires gathering additional data to support the benefit and risk profile of the therapy. So there's no fixed timeline per se. However, there would be a specific obligation that would require us to collect data. Part of the conditional marketing authorization requires an annual renewal, which we've done for the past several years, relying on the continued evidence of safety seen in STRIDE and the benefits we observe. There are therapies that have had conditional marketing authorization status for decades, so this wouldn't be the first time therapy continued in a conditional frame for a bit longer time. On your second question regarding the pre-BLA meeting and comparability. The analyses are done to show that the material used in clinical studies is as similar as possible to the material intended for commercial use. This typically includes a number of different analytical assays. One of the challenges we had is that the clinical trial material we used in which we established comparability with the commercial process is over a decade old. Those clinical studies started in the early 2010s, and there simply is not enough of that residual clinical supply available to provide additional replicates and data that the agency wanted us to have to finalize the comparability analysis. However, we were able to discuss with them the potential to leverage the accelerated approval pathway using our ongoing study in the U.S., which is using material made with the commercial process. This is the commercial-like material for which there was no comparability assay. What we’ve been able to show in AADC, which is a genetic disease of dopamine deficiency, is that when we give the drug, we can measure increases in dopamine. Obviously, that's a reliable, quantifiable biomarker indicative of the disease pathology, which precedes the subsequent development of dopamine-related motor function, aligning exactly with our clinical study observations. So this fits neatly within the framework for accelerated approval.

Thank you. One moment please. Our next question comes from the line of Brian Abrahams of RBC Capital Markets. Brian Abrahams, your line is open.

Hey, good afternoon. Thanks for taking my questions. As you prepare for the MAA filing for sepiapterin next year, what are your expectations for what the CARC study requirements will be for Europe approval? And then secondarily, I guess, on Translarna in the U.S., where do you stand in terms of key discussion items and potential areas of focus that you're expecting for the Type C meeting? And when might we see an update from that? Will we see it shortly after the meeting or should we expect a bit of a time gap to allow for the minutes to be collected? Thanks.

Thanks for the question, Brian. On the question regarding the MAA in Europe, this is another example of how regulatory authorities tend to look at things differently. The feedback we received from Europe regarding carcinogenicity is that they understand very well that the active metabolite for sepiapterin is BH4. They understand that BH4 and sepiapterin are both naturally occurring cofactors. They also understand the data we've collected regarding carcinogenicity risk. They've stated that they would like us to not only have our own data but that we can rely on the data and experience from Kuvan’s long-term use, which shows no carcinogenicity risk with BH4 used clinically. Hence, we don't believe the issue we have at FDA will arise in Europe for that reason. In response to your question about the Type C meeting for Translarna, this meeting focuses on the evidence we have showing clear benefits in studies such as Study 041, which can be confirmed in several ways, including meta-analysis, and the long-term real-world STRIDE registry. We want to work constructively with the division to determine what components we need and how to formulate them to support the submission. Once we have clarity on the outcome of the meeting, we will certainly share it. We know many people are quite interested in the outcome, particularly the patients in the U.S. and the numerous boys who’ve been on Translarna for several years, who are eagerly awaiting therapy.

Thank you. One moment please. Our next question comes from the line of Colin Bristow of UBS. Your line is open.

Good afternoon. Thanks for taking the questions. On the sepiapterin NDA filing timeline, I am just curious, what is the latter end of your guidance for 3Q 2024? I am curious if you can confirm whether the study has started. It seems like, if this study is all that's needed, an extreme upper bound on this timeline. And then on AADC, could you just provide a little more detail on why the FDA thinks the comparability data is still not sufficient? What are you hoping to discuss at the pre-BLA meeting in December? Thank you.

Thanks for your questions, Colin. With the necessity of doing a study, it takes time to organize the study, order the animals, confirm the doses, finalize the protocols, get approval, and then start the study. We expect to initiate dosing in the study this December. That's a six-month study. So by the time we get those animals dosed this December, the in-life portion should conclude in June. After that, we would need to sacrifice the animals, proceed through the histological studies, and analyze the data. Therefore, we needed to provide an accurate depiction of what could be the latest possible time for that submission. While we have discussed the potential to submit the mouse study data during the NDA review, we aim to provide everything as quickly as possible. As for comparability, this is simply a matter of a limited supply of clinical material. There were only a certain number of assay runs we could perform to provide data to compare with the commercial material. The agency wanted additional data points, which we couldn't provide due to limited supply. Regarding the pre-BLA meeting, the suggestion was made to ensure we are aligned on the content of the package, how we will present the integrated safety summary from all studies, all efficacy data, and include other components as needed. It's prudent to have this meeting to ensure the file leads to meet formats and specifications, which we want to avoid during filings. We think it makes sense to have that pre-BLA meeting and then submit quickly thereafter.

Thank you. One moment please. Our next question comes from the line of Jeff Hung of Morgan Stanley.

A question, in your discussions with the EMA on vatiquinone, what gives you confidence that it makes that move up date for conditional marketing authorization? Is there anything you can update in terms of analysis or presentation that would increase your confidence for a positive outcome on the conditional marketing authorization given the feedback you've received from the FDA? Thanks.

Yeah, thanks, Jeff, for the question. The framework in FDA may differ, and the discussions are about accelerated approval based on upright stability as an intermediate clinical endpoint. Obviously, upright stability, as we've mentioned, is critical in pediatric and adult patients, particularly ambulatory patients, as it provides the ability to delay the loss of ambulation and loss of angulation. We look forward to continuing discussions with the EMA. In terms of the MOVE-FA study, we can provide supportive analyses, including the six-month open-label extension study during which all subjects are blinded, so we can monitor changes in trajectory, particularly for placebo patients upon switching. Regarding conditional marketing authorization, there are several criteria established that need to be met, such as showing an initial favorable benefit-risk profile and addressing unmet medical needs. Vatiquinone and the MOVE-FA study data clearly meet these criteria, helped by the established safety profile in pediatric patients. The possibility of demonstrating beneficial effects through ongoing patient data also supports confirming favorable risk profiles. Hence, we believe we meet all necessary criteria to receive conditional marketing authorization and look forward to discussions with the EMA.

Thank you. One moment please. Our next question comes from the line of Alexander Xenakis of Truist Securities. Your line is open.

Hi. Thank you for taking my questions. Congratulations on securing the royalty financing deal. I have two questions. First, regarding sepiapterin, when can we expect to see another update on the Phe tolerance data? Second, about Translarna, if you manage to overturn the ongoing conditional marketing authorizations and continue with the study but do not have the full marketing authorization, have you conducted any market research to assess how that might impact referencing countries globally and whether they would need to pause sales? Thank you.

Thanks for the questions, Alex. First on the Phe tolerance data, we provided an update at the sepiapterin IEM meeting in Israel last month. We’ve shared really great data showing over 40 patients enrolled in the Phe tolerance protocol achieving levels of tolerance beyond the recommended daily allowance. This data is critical, although the Phe tolerance component isn't the only thing we show in terms of efficacy; we have robust evidence supporting it and showing durability. Regarding Translarna, keeping the conditional authorization is pivotal for us. We anticipate continued emphasis will remain consistent with our existing relationships, where we maintain a favorable pricing corridor and reimbursement while collecting additional data. Thus, we don't foresee negative impacts on global payers regarding the ongoing conditional authorization.

Thank you. One moment please. Our next question comes from the line of Joseph Schwartz of Leerink Partners. Your line is open.

Hey, thanks very much. I was wondering if you could talk about your publication plans for the APHENITY sepiapterin data. Will we see that published in a peer-review journal any time soon? And then I believe you have the option to go up to a 20-milligram dose of PTC518 in PIVOT-HD patients outside the US. So where do you stand on implementing that decision?

Yeah. Absolutely. I'll take the second question first, then. On 518, as we talked about we shared the results from the 5- and 10-milligram dose groups, the first cohort of 32 in June. Those data from our standpoint were as good as they can be. We achieved every objective in that 12-week portion study for that first cohort of patients, demonstrating a dose-dependent lowering of Huntington protein in the blood and seeing the differential exposure of PTC518 in CSF relative to plasma. The 10-milligram dosing showed that this ratio is 1.5:1, suggesting greater brain exposure and lower levels of Huntington proteins. Of course, the key point here is that we’re managing this process safely and effectively. The safety profile of the drug was strong in those first 12 weeks. We had no terminated serious adverse events or notable spikes in NFL levels, which is particularly important, given concerns raised over other HTT-lowering therapies. Based on those data, we believe we may have the dose levels we need right now to get to our goal in the program, which is to lower brain cell Huntington protein levels 30% to 50%. We've the Data Safety Monitoring Board (DSMB) support us starting a 20-milligram cohort. The regulatory authorities and local ethics communities have approved us going into 20 mg. But we still want to understand the biomarker effects with the current levels before increasing the dose. I’m not sure whether we will need to, and we want to analyze the longer-term biomarker effects of the current doses before revisiting that decision. Now, regarding publication strategy for the APHENITY study, we are actively working on that. The team is looking to target a high-impact peer-reviewed journal for publication, and we expect that to happen in 2024 pending the journal selection.

Thank you. One moment please. Our next question comes from the line of Gena Wang of Barclays. Your line is open.

Hi. Thank you for taking my questions. So I do have, I think, three quick questions. The first one is regarding the PKU program. Since originally you were thinking about 505(b)(2), is that because of the lack of confidence in their IP position that this drug will be very different from Kuvan? That's the first question. And relatedly, how confident are you on the IP regarding this is a new composition of matter? And then for the PIVOT-HD, I don't know if I missed it, but exactly what kind of data would you need in order to remove the FDA clinical hold? When I look at the press release, the six-month clinical safety data indicate a favorable safety profile that could support 12-month dosing. What additional data will be required to dose more than 12 months? What dosages do you plan to use beyond 10 milligrams? So that's the second question. And lastly, regarding Upstaza in AADC, if you're using current US data for accelerated approval, what additional study will you need to do to obtain full approval in the future?

Thank you very much for the questions, Gena. The first question on PKU — look, that was more reflective of the thinking around a small virtual company looking for what they’d presume would be the fastest, least expensive development path forward. It's not uncommon for a smaller company to think about development pathways that way. From our standpoint, it is very clear that this is highly differentiated therapy that is much better suited to the 505(b)(1) pathway. We have the necessary resources to carry out the required studies without relying on another NDA, thus avoiding the risk of delays. We are very confident in how differentiated sepiapterin is and its ability to meet a persistent and significant unmet medical need for PKU patients. As for the intellectual property position, we have orphan designation and some potential patent extensions that we believe will extend the orphan exclusivity further. Your second question on the PIVOT-HD: As we’ve discussed, our interactions with the agency indicated that they want evidence supporting safety in the dose levels intended in PIVOT-HD. These additional data could come from non-clinical studies or from clinical data we've structured in order to collect already in our study outside the US. Therefore, we’d collect the clinical data in the study and submit these to the FDA to meet the demonstrated need for PTC518’s safety. As for dosing beyond 10 milligrams, our latest discussions indicated that we need additional clinical safety data to support the longer duration of dosing we proposed in our PIVOT-HD study. This means we might need to prove additional clinical parameters as a safety measure. Regarding Upstaza, we are using the existing clinical study in the U.S. using a recognized biomarker for accelerated approval. When it comes to full approval, we will have a long-term study that will look at the clinical evidence needed over a defined period to gather broader data on long-term safety and efficacy after accelerated approval for the therapy.

Thank you. One moment please. Our next question comes from the line of Paul Choi of Goldman Sachs. Your line is open.

Good afternoon and thank you for taking our questions. Two questions for me. First, on the commercial side, with the approval of Vamorolone today, can you comment on how you’re thinking about the impact on Emflaza, and would you consider pulling back on Salesforce resources for that product starting next year ahead of your expected loss of exclusivity? And then on the pipeline side, can you comment on what you would intend to present in terms of your PIVOT-HD update next year? Should investors continue to expect plasma Huntington updates and neurofilament changes, or will you present additional details on other endpoints, including clinical endpoints? Thank you very much.

Thanks, Paul, for the questions. Let me address the second one first, and then I'll turn the other question over to Eric and Kylie. So for the 518 data, the 12-month data that we will share in the first half of 2024 will involve biomarker-based data focused on pharmacodynamics, pharmacokinetics, and safety. This data will provide further insight into the neurofilament levels and treatment benefits in patients on targeted dose regimen over a long time. While the 12-month data may not be entirely interpretable, we'll also be presenting some clinical endpoints data, which we are carefully monitoring. As for your question on Vamorolone and Emflaza, Eric, do you want to take that?

Yes, on Emflaza, we know that Emflaza has been on the market for over six years. It is currently the standard-of-care. We’ve established it as the standard due to numerous publications supporting its benefits in preserving motor function versus prednisone. We recognize the community desires options, but right now we’re focused on not only growing the brand this year but also have strategies in place to protect the brand following the loss of exclusivity. We don’t see this simply as a drop because of a generic or competitor. We have numerous strategies, including patient support programs, partnering with specialty pharmacies, payers, and major manufacturers to continue ensuring optimal patient experiences to protect the business.

Thank you. One moment please. Our next question comes from the line of Tazeen Ahmad of Bank of America.

Okay. Thanks so much for taking my questions. A few quick ones from me, if I may. So to keep with the topic of the approval for Catalyst Pharma, how, if in any way, does that change your strategy for how you might want to look beyond the loss of exclusivity for Emflaza next year and beyond? And then the second question relates to the sepiapterin milestone agreements with Censa. I believe you have already paid them $30 million for completing Phase 3 enrollment. I guess what other milestones should we anticipate either this year or next? And then lastly, to clarify on the conditional approval for Translarna, and I'm sorry if it was answered earlier, is there a set amount of time for which a conditional approval would need to be renewed on a go-forward basis? Thanks.

Thanks for the questions, Tazeen. Let me address the third one and the team can respond to the other two. So the conditional authorization inherently includes specific obligations to gather additional evidence. These come with specific obligations to collect data without a fixed deadline. While historically we have seen therapies maintain conditional approvals for many years, we are committed to ensuring we meet the requirements through product renewal when necessary while sharing the data that supports our product's safety and efficacy. For the questions on milestones for Censa, the team can provide that information.

Absolutely. You are correct. We paid $30 million in equity in 2023. We don't expect any additional milestones for Censa in 2023, but we’ve shared previously, $65 million worth of regulatory success-based milestones for Censa in 2024 over the next 12 months, which we haven't broken out into specifics yet.

I'm showing no further questions at this time. Let's turn the call back over to Dr. Matthew Klein, Chief Executive Officer, for any closing remarks.

Great. Thank you. Thank you all for joining the call today. We look forward to a strong closeout in 2023 as we get ready for what's clearly also going to be a busy 2024. We'll look forward to sharing updates with you as they become available. Thank you all again and have a good evening.

Thank you. Ladies and gentlemen, this does conclude today's conference. Thank you all for participating. You may now disconnect. Have a great day.