Image source: PTC Therapeutics.

What happened

Following news that co-developer Roche Holdings (RHHBY -1.15%) has begun enrolling patients in a phase 2 study of the spinal muscular atrophy (SMA) therapy RG7919, shares in PTC Therapeutics (PTCT -1.52%) spiked 21% today.

So what? 

Roche Holdings licensed rights to PTC Therapeutics' research into therapies for SMA in 2011, but the development program hit a roadblock last year when enrollment in a phase 2 study of RG7800 was stopped because of safety concerns.

SMA is caused by a deficiency of the survival of motor neuron, or SMN, which is caused by a genetic mutation. It's a rare condition occurring in just one in 10,000 children, yet sadly, it's the most common genetic cause of death in children.

The advancement of RG7916, which works differently than RG7800 to restore SMA production, suggests that PTC Therapeutics could benefit from future milestone payments from Roche Holdings. Under the two companies' 2011 agreement, Roche Holdings agreed to pay up to $460 million in milestones, plus royalties on any eventual net sales of PTC Therapeutics' discovered drugs.

Now what?

The two-part study kicks off in October, but it will be a while before we know if RG7916 is effective. According to Clinicaltrials.gov, the 186-person study's primary completion date is April 2019.

Nevertheless, news that SMA development is continuing for this indication is positive since it could eventually help diversify PTC Therapeutics' revenue beyond Duchenne muscular dystrophy, or DMD. Currently, the company's only approved drug is DMD therapy Translarna, which is available in Europe. The company estimates Translarna's full-year sales will eclipse $65 million this year.

PTC Therapeutics' shares have been volatile recently because the EU has yet to announce an annual extension of Translarna's conditional approval, and a pathway to market in the U.S. is uncertain. The recent approval of a competing DMD drug made by Sarepta Therapeutics has renewed hope that a EU decision will be forthcoming -- and that the FDA may be open to evaluating Translarna.

Overall, PTC Therapeutics is an intriguing company with some big question marks that need answering. If Translarna nets an official OK, or the FDA provides the company's management with clarity, it may be worth considering this company's stock in risk-tolerant portfolios.