Is PTC Therapeutics Stock a Buy?

PTC Therapeutics (PTCT 1.11%) shares went on a roller-coaster ride after the drugmaker unveiled important data -- and so did a competitor. The company is making progress with its collaboration with Roche Holdings (RHHBY -1.70%) in spinal muscular atrophy (SMA), but efforts by Sarepta Therapeutics (SRPT 2.53%) could crimp the revenue it's bringing in from its existing Duchenne muscular dystrophy (DMD) medications. Is PTC Therapeutics stock a buy?

In this clip from Industry Focus: Healthcare, host Kristine Harjes is joined by Motley Fool contributor Todd Campbell to discuss how treatment for these rare diseases is evolving.

A full transcript follows the video.

Editor's note: PTC Therapeutics jumped from about $37 per share, not $27.

This video was recorded on June 20, 2018.

Kristine Harjes: It's been a wild week for PTC Therapeutics, ticker PTCT. Let's talk first about why the stock jumped 28% from $27 per share to $47 per share on Monday.

Todd Campbell: What a roller coaster ride for this company and its investors this week, right, Kristine?

Harjes: Absolutely. So, the Monday news, they announced that their SMA, spinal muscular atrophy, drug risdiplam had some data to be shared from a study called the FIREFISH -- I'm sure it's an acronym, although I couldn't tell you what it stands for. They released some data from 11 babies that were taking their experimental treatment, and it showed a pretty meaningful improvement on a point score that measures neuromuscular disorders, which is what SMA is. Almost all had some improvement. Even though this is a pretty early investigation into the drug, and so safety is the primary thing you're looking for, the efficacy had people pretty excited.

Campbell: Roche has been working with PTC on this drug since 2011. We're now starting to get some data that has people excited that there's potential here for these two to make the treatment of SMA one step better.

To give people a little bit of an understanding of what this disease is, it's rare, but it's life-threatening. Essentially, what ends up happening is that patients are unable to produce a particular protein called SMN -- that's easier, so we'll call it SMN. That's crucial to the survival of motor neurons. If you're not able to produce that protein, over time, those neurons that control muscles within your spinal column will die. That can cause loss of the ability to walk, failure to be able to eat, and eventually it can make it so you can't breathe.

There are essentially three types that they break it out into, depending on when you're diagnosed. This is usually diagnosed in infancy. There's type 1 SMA. That accounts for about 60% of all SMA cases. That's diagnosed within the first six months, typically. This is probably the toughest one to get a diagnosis in because about 90% of type 1 patients either die or require permanent ventilation by the time they reach age two. It's a devastating disease. Type 2 SMA is diagnosed typically between six months and 18 months of age. That accounts for about 27% of cases. Slightly better prognosis here, but still, 30% of type 2 patients succumb to their disease by the time they reach age 25. Then, there's type 3, which accounts for about 13% of cases. That has the best prognosis, but still, again, big, big impact, negative quality of life, because of the loss of mobility, the ability to walk, etc.

Previously, there really wasn't a lot of treatment options that were available to patients, until late 2016, when Spinraza won approval. We've talked on the show about that in the past, Kristine. That's a drug from Biogen and Ionis Pharmaceuticals. It's extremely high-priced. It's used to treat a small proportion of people. But it's already become a blockbuster drug.

PTC is hoping to improve upon this therapy. It's going to do that in a couple of ways, right, Kristine? It's oral dosing instead of being injected, which could be an advantage. And, if you look at the trial data that PTC released, it matches up pretty favorably to what we saw in Spinraza's trials.

Harjes: Of course, those weren't head-to-head trials, so it's not exactly fair to say, "Oh, this drug is definitely more effective." But they were measuring things on the same scale, and it does look like this drug from PTC had some strong efficacy, potentially even stronger than what we saw with Spinraza.

Going back to the dosing and the convenience factor, I'm not sure where I fall on this one. You're talking about infants, right? There's no good option. Spinraza is injected into the spine four times a year, which sounds pretty terrible. But, is that better or worse than having an infant taking a daily pill? That doesn't sound so good, either. I mean, it's a devastating disease, so having a multitude of treatments is definitively a good thing. But the convenience factor, I don't think it's a clear win for either drug.

But, what I will say is that both of these are threatened by something going on with Novartis. Novartis, earlier this year, acquired a company called AveXis for $8.7 billion. It gave it this drug called AVXS-101, which is a now late-stage gene therapy, meaning one-and-done cure, for the disease that could be available as early as next year, which is super exciting in general, although quite the threat to both of the other companies working in this space.

Campbell: It's a big-time threat. That's why, I think, if you're an investor and you're trying to digest all of the information that's come out in the last couple days in this indication, you might want to just press the pause button and not necessarily rush out and buy PTC, assuming that they're just going to be able to grab $1 billion or so in sales away from Spinraza -- assuming, obviously, that everything pans out and it wins FDA approval, right, which is far from a guarantee.

If this AVXS-101 -- which is in Phase III trials already, it's already dosed in patients, and it's being evaluated in type 1, type 2, and type 3 -- if it puts up the same kind of data that we've seen so far in previous trials, the previous studies, then I have a hard time believing that it's not going to be the standard. I mean, why wouldn't you do a one-and-done that has such a high likelihood of changing the game? To put this in perspective, they recently, I think it was in April, updated information from 15 patients. 15 out of 15 of those patients were alive and without the need for permanent ventilation at the 24-month mark. Historically, only about 8% of patients could make that claim. So, this is a potentially remarkable, revolutionary, game-changing therapy, if the Phase III trials pan out.