What happened

After the biopharmaceutical company reported its financial results for the third quarter, shares of PTC Therapeutics (NASDAQ:PTCT), which focuses on rare diseases, are down more than 31% as of 1:55 p.m. EDT on Thursday.

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So what

The headline numbers for PTC Therapeutics' third quarter actually looked quite good. Revenue grew by 135% to $23 million, thanks almost entirely to Translarna, the company's Duchenne muscular dystrophy (DMD) drug, which is approved in Europe. That figure was comfortably ahead of the $19.7 million in sales that analysts were expecting.

The higher revenue shrank the company's net loss down to $35.2 million, or $1.03 per share, which was also better than the $1.22 that the markets were expecting.

PTC's cash balance also remains quite strong. The company ended September with $248.3 million in cash, and management expects to end 2016 with roughly $220 million on hand.

The company didn't have any new bombshells to drop on the regulatory front, either. Discussions to renew Translarna's marketing authorization in Europe remain ongoing, and a decision is expected before the end of the year. The second round of appeals related to the FDA's "refuse-to-file" letter for the drug also remains in motion, with nothing new to report.

Given all of that, it appears that the markets are thrashing the company's stock today because of its full-year guidance. Management reaffirmed that full-year sales of Translarna will land between $65 million and $85 million. However, given that year-to-date sales of Translarna have totaled $56 million, the midpoint of this guidance suggests that sales will only be $19 million in the fourth quarter. That's below the $22 million in sales that the drug recorded in the third quarter, so shares are tumbling.

Now what

While the potential for a near-term decline in Translarna's sales should be a cause for concern, the real risk that investors in this company need to watch out for is regulatory. PTC is banking on Translarna winning another round of approval in Europe, which is far from guaranteed. The company's odds of success with the FDA are increasingly looking like a long shot, given that the agency has already rejected its first appeal. It's also hard to handicap the FDA's willingness to give another DMD drug a chance, given all the scrutiny that the agency has been under since it decided to approve Sarepta Therapeutics' DMD drug a few months back.

All in all, PTC's future remains extremely murky, so I, for one, plan on keeping this stock far away from my portfolio.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.