What happened

Shares of PTC Therapeutics, Inc. (NASDAQ:PTCT), a biotech focused on RNA-based therapies, surged 45.2% higher in June, according to data from S&P Global Market Intelligence. Investors took the Food and Drug Administration's (FDA) decision to grant the company's muscular dystrophy candidate Translarna an independent advisory-committee review as a good sign.

So what 

Normally, an advisory-committee meeting is bad news because it means the FDA wants second opinions before issuing a decision about whether or not to approve a new drug candidate. However, this isn't Translarna's first rodeo.

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In February 2016, the FDA told PTC Therapeutics that its new drug application for Translarna was not sufficiently complete to permit a review. The experimental therapy is supposed to reduce the effect of nonsense mutations that lead to a lack of functional dystrophin, a crucial muscle-membrane protein, which, in turn, causes irreversible muscle damage. The FDA cited a lack of evidence proving Translarna works because PTC Therapeutics failed to prove a statistically significant benefit during clinical trials supporting the application.

In theory, Translarna's nonsense-mutation-alleviating mechanism could play a role in other genetic diseases. Unfortunately, a failure to provide a significant benefit over a placebo among cystic fibrosis patients earlier this year cast an even darker cloud over the drug's future. Few would be surprised if the FDA had simply refused to approve the resubmitted application for treatment of muscular dystrophy, so calling together a panel of independent advisors was enough to fuel hope of an eventual approval.

Now what

Translarna is available for the treatment of muscular dystrophy in the EU, although its continued sale is contingent upon proving efficacy in clinical trials by the end of the third quarter of 2021. First quarter Translarna sales rose 40% over the previous year, to $26.4 million, but the company still lost $29.1 million during the period. 

Management expects full-year Translarna sales to reach between $115 million and $130 million this year. The recent acquisition of Emflaza, a steroid used to reduce inflammation for muscular dystrophy patients, should also help reduce the company's cash-burn rate. A cash balance of about $202.5 million at the end of March gives the company some breathing room, and the FDA's controversial approval of Sarepta's muscular dystrophy drug suggests it's too early to throw in the towel on this biotech stock.

If the FDA refuses to approve Translarna's application the second time around, investors in PTC Therapeutics would experience an exercise in anxiety management. With a handful of much better biotech stocks to buy, investors would do well to avoid this one until it can prove its lead drug actually works.

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.