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Why PTC Therapeutics Is Rocketing 74% Today

By Todd Campbell – Nov 11, 2016 at 12:35PM

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A recommendation for EU renewal of the Duchenne muscular dystrophy drug Translarna is sending shares soaring.


What happened

After the company reported that it had won support from an influential committee that had been considering whether to renew conditional approval of Translarna, the company's Duchenne muscular dystrophy drug, PTC Therapeutics (PTCT 0.69%) shares are skyrocketing 74% higher at noon EST on Friday.

So what

Translarna secured conditional EU approval for use in patients diagnosed with the muscle-wasting disease in 2014. However, conditional approval must be renewed annually, and the risk of rejection has caused PTC Therapeutics shares to slide significantly from their peak in 2015.

PTCT Chart

PTCT data by YCharts.

The risk of rejection this year was (mostly) removed this morning when a key committee recommended Translarna's renewal. The committee's recommendation doesn't guarantee a renewal, but regulators typically follow the advice of committee members. An official go/no-go decision is expected in the next three months.

If approval for the drug is renewed, PTC Therapeutics will need to conduct a long-term follow-up study to confirm Translarna's efficacy. The EU committee has suggested an 18-month randomized, placebo-controlled trial, results from which would likely become available in the first quarter of 2021. 

Now what

This news is extremely important to investors because Translarna is PTC Therapeutics' only commercial-stage drug. Through the first nine months of 2016, Translarna generated net sales of $56 million, including $22 million in the third quarter, up 125% year over year.  

Management is guiding for full-year net sales between $65 million and $85 million. However, projected sales will be far shy of the company's operating expenses, as the company spent $55 million and lost $35 million in the third quarter alone. 

Overall, PTC Therapeutics' stock is intriguing, yet risky. A Translarna renewal offers much-needed clarity, and results from a cystic fibrosis trial could expand Translarna's addressable market as early as next year. However, there's no clear pathway to profit (yet), so investors should still approach this company cautiously. 

Todd Campbell has no position in any stocks mentioned. Todd owns E.B. Capital Markets, LLC. E.B. Capital's clients may have positions in the companies mentioned. Like this article? Follow him on Twitter, where he goes by the handle @ebcapitalto see more articles like this. The Motley Fool has no position in any of the stocks mentioned.

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