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Why PTC Therapeutics Inc. Shares Nearly Doubled

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of PTC Therapeutics (NASDAQ: PTCT  ) , a biopharmaceutical company focused on developing small-molecule drugs to treat genetic mutations, vaulted higher by as much as 88% after receiving a positive opinion from the Committee for Medicinal Products for Human Use (CHMP) in Europe for translarna, which is the branded name given to ataluren, the company's lead investigational compound.

So what: According to PTC Therapeutics' press release, following its request for a reexamination of translarna as a treatment for nonsense mutation Duchenne muscular dystrophy (nmDMD), the CHMP (essentially the equivalent of the FDA panel in the U.S.) recommended the conditional marketing authorization of the compound. This positive CHMP decision will be taken into consideration by the European Medicines Agency on whether to grant EU market approval over the coming months. Usually this is about a three-month process, although similar to how investigational drugs are reviewed in the U.S., the EMA is not obligated to follow the advice of the CHMP. If approved, translarna would mark the first FDA-approved therapy specifically for nmDMD. Following this decision Credit Suisse boosted its price target on PTC to $40 from $35, while rival Prosensa (NASDAQ: RNA  ) rocketed higher by as much as 35% in anticipation that its DMD-based exon-skipping therapy will be viewed favorably in the EU as well.

Now what: The results from PTC's phase 2b trial were remarkably solid, with a 31.3 meter benefit noted in the six-minute-walk-distance (6MWD) relative to the placebo after 48 weeks. Further, in a pre-specified group of patients unable to walk 350 meters, the 40 mg dose of translarna improved their 6MWD by 68 meters relative to the placebo. Based on today's opinion and these results I'm certainly leaning toward the therapy being approved throughout Europe, although investors should keep in mind that the company is also running a broader phase 3 trial at the moment, and we have seen DMD drugs succeed in phase 2 studies only to fall flat on their face in phase 3. While this is an exciting day for nmDMD sufferers overseas who could soon be looking at better quality of life, investors would probably be wise to wait for a pullback before even considering buying into PTC.

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  • Report this Comment On May 28, 2014, at 11:53 AM, noataluren wrote:

    As a former PTC employee, this recommendation for conditional approval is a joke. None of the data are strong. The improvement for the 40 mg/kg/day dose over placebo was significant (after eliminating 2 patients whose baseline data was faulty) in the DMD trial, however the results from the higher 80 mg/kg/day dose almost perfectly matched the placebo. Moreover, the CF Phase 3 trial was not only negative on the primary endpoint, but also on pretty much all the secondaries. Most importantly, the endpoint that was the primary in the Phase 2 studies in CF, used to show proof of concept, was highly nonsignificant in the Phase 3 study. Don't be surprised to see this one land flat on its face.

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Sean Williams

A Fool since 2010, and a graduate from UC San Diego with a B.A. in Economics, Sean specializes in the healthcare sector and in investment planning topics. You'll usually find him writing about Obamacare, marijuana, developing drugs, diagnostics, and medical devices, Social Security, taxes, or any number of other macroeconomic issues.

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