PTC Therapeutics (Nasdaq: PTCT) saw its shares decline 11.7% to $9.64, after it revealed that it has entered into an asset purchase agreement with privately-held Marathon Pharmaceuticals to acquire all rights to Emflaza (deflazacort).
In February this year, Emflaza became the first treatment approved in the USA for all Duchenne muscular dystrophy (DMD) patients five years and older, regardless of their genetic mutation. Emflaza aligns with PTC’s mission to bring therapies to patients who have rare diseases with limited or no treatment options, stated the company, whose own DMD drug Translarna (ataluren) was given conditional approval in Europe in 2014, but is still awaiting clearance in the USA.
Hefty price tag previously criticized
Marathon was strongly criticized by patient advocates and lawmakers in February when it revealed it would charge US patients $89,000 a year for Emflaza, although Marathon stated that it would provide a “robust” assistance program for those who are not covered by insurance. The drug, which has been available in Europe for more than a decade, sells for $1,200 a year outside the USA.
US lawmakers argued that Marathon did not develop deflazacort. Rather Marathon acquired the rights to historical clinical trial data from the 1990s and completed some additional analyses to gain approval from the Food and Drug Administration to sell the drug in the United States. The estimated cost of Marathon’s development program for Emflaza is between $10 million $75 million – far less than that of a new drug and well short of justifying an $89,000 price. PTC has made no mention of the cost controversy or its own pricing plans.
Under the terms of the asset purchase agreement, Marathon will receive total upfront consideration of $140 million upon closing of the transaction, comprised of around $75 million in cash and about $65 million in PTC common stock, subject to a maximum 6.9 million share limit (with any shortfall to be made whole with additional cash consideration). Marathon is also entitled to receive payments from PTC based on annual net sales of Emflaza beginning in 2018, which PTC expects will range as a percentage of net sales between the low to mid-20s on a blended average basis. In addition, Marathon has the opportunity to receive a single $50 million sales-based milestone.
The transaction is expected to be accretive to both earnings and cash flow beginning in 2018. It is expected to close in the second quarter of 2017, subject to customary closing conditions, including receipt of clearance under the Hart-Scott-Rodino Act.
“Based on our long-standing experience with DMD and strong partnership with the community, we believe PTC is uniquely positioned to launch Emflaza in the US,” said Mark Rothera, PTC’s chief commercial officer, adding: “We are finalizing our commercialization plans and intend to share more information after the transaction closes.”
However, Emflaza is not the first FDA-approved drug for DMD. After many delays and calls for additional data and against advisory panel advice, in September 2016 the FDA backed marketing of Exondys 51 (eteplirsen) injection, the first drug approved to treat patients with DMD, from US RNA-based drug developer Sarepta Therapeutics (Nasdaq: SRPT). Exondys 51 is specifically indicated for patients who have a confirmed mutation of the dystrophin gene amenable to exon 51 skipping, which affects about 13% of the population with DMD. Other companies also have candidates that are not yet approved.