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Why PTC Therapeutics, Inc. Gave Back As Much As 10% on Tuesday

By Sean Williams – Sep 20, 2016 at 4:06PM

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PTC Therapeutics' coattail ride may be coming to an end.

Image source: Getty Images.

What happened

Shares of PTC Therapeutics (PTCT -0.68%), a biopharmaceutical company focused on the development of small-molecule drugs that target post-transcriptional control processes, tumbled as much as 10% Tuesday after an analyst at Jefferies talked down the impact on PTC's Translarna (known scientifically as ataluren) in Europe following positive news for Sarepta Therapeutics' (SRPT -0.28%) Exondys 51 (formerly eteplirsen).

So what

PTC Therapeutics' lone approved drug is Translarna in Europe, which is designed to treat nonsense mutation Duchenne muscular dystrophy (DMD). Following Monday's Food and Drug Administration approval of exon-51 skipping drug Exondys 51 for Sarepta Therapeutics, the hope is that the FDA's tune could change to favorable for Translarna, which isn't approved in the United States.

However, Jefferies analyst Gena Wang on Tuesday noted that she sees a limited impact from Sarepta's approval on PTC Therapeutics. As Wang said, "Although PTCT's ataluren is considered safe, the FDA approval of eteplirsen is mainly based on the marginal increase of dystrophin level while PTCT does not have any dystrophin data from PH3 (phase 3)."

Jefferies maintained its "hold" rating on the company with a $7 price target, implying downside of 32% from where PTC is current trading.

Now what

As always, it's never a good idea to get too riled up, one way or another, when analyst commentary hits the newswires. But in this instance Wang makes a very valid point: PTC's data and Sarepta's data really aren't comparable. This suggests that the approval of Sarepta's Exondys 51 is almost completely unrelated to PTC's Translarna, and investors should treat Sarepta's approval as an unrelated event.

This leaves shareholders with the reality that ataluren may not be approved in the United States. PTC's lead drug was turned away in the U.S. after it failed to demonstrate the FDA's standards for efficacy in back-to-back trials. Furthermore, the FDA noted that PTC failed to provide adequate information regarding the abuse potential of ataluren.

For the time being, I would suggest investors consider the possible growth potential of Translarna in Europe, but continue to view any progression in the U.S. with a lot of skepticism.

Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

The Motley Fool has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy

Stocks Mentioned

PTC Therapeutics Stock Quote
PTC Therapeutics
$39.41 (-0.68%) $0.27
Sarepta Therapeutics Stock Quote
Sarepta Therapeutics
$119.76 (-0.28%) $0.34

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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