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Edited Transcript of PTCT earnings conference call or presentation 5-Nov-18 9:30pm GMT

Q3 2018 PTC Therapeutics Inc Earnings Call

South Plainfield Nov 21, 2018 (Thomson StreetEvents) -- Edited Transcript of PTC Therapeutics Inc earnings conference call or presentation Monday, November 5, 2018 at 9:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Christine Utter

PTC Therapeutics, Inc. - Principal Financial Officer & Treasurer

* Emily Hill

PTC Therapeutics, Inc. - Executive Director of IR

* Marcio Souza

PTC Therapeutics, Inc. - COO

* Stuart W. Peltz

PTC Therapeutics, Inc. - Co-Founder, CEO & Executive Director

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Conference Call Participants

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* Eileen Connelly Maysek

Cantor Fitzgerald & Co., Research Division - Research Analyst

* Eric William Joseph

JP Morgan Chase & Co, Research Division - Analyst

* Gilbert Roland Kinsey

RBC Capital Markets, LLC, Research Division - Senior Associate

* Joel Lawrence Beatty

Citigroup Inc, Research Division - VP & Analyst

* Martin Douglas Auster

Crédit Suisse AG, Research Division - Research Analyst

* Raju Yashaswi Prasad

William Blair & Company L.L.C., Research Division - Senior Research Analyst

* Ritu Subhalaksmi Baral

Cowen and Company, LLC, Research Division - MD and Senior Biotechnology Analyst

* Xiaobin Gao

Barclays Bank PLC, Research Division - Research Analyst

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Presentation

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Operator [1]

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Good afternoon, ladies and gentlemen, and welcome to the PTC Therapeutics Third Quarter 2018 Earnings Conference Call. (Operator Instructions) As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Ms. Emily Hill, Head of Investor Relations. Ma'am, you may begin.

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Emily Hill, PTC Therapeutics, Inc. - Executive Director of IR [2]

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Hello. Good afternoon, and thank you for joining us to discuss our 2018 third quarter corporate updates and financial results. Joining me on today's call is our CEO, Stuart Peltz; our Chief Operating Officer, Marcio Souza, and our Principal Financial Officer, Christine Utter.

Before we start, let me remind you that today's call will include forward-looking statements based on current expectations. Please take a moment to review our slide on our simultaneous presentation, which contains our forward-looking statements. Our actual results could materially differ from these forward-looking statements as any and such risks can materially and adversely affect our business and results of operations for a detailed description of applicable risks and uncertainties, we encourage you to review the company's most recent quarterly reports on form 10-Q and annual report on form 10-K filed with the Securities and Exchange Commission as well as the company's other SEC filings, including our current report on form 8-K filed on August 24, 2018.

We will disclose certain non-GAAP information during this call. Information regarding our use of GAAP and non-GAAP financial measures and a reconciliation of GAAP to non-GAAP is available in today's earnings release.

With that, let me pass the call over to our CEO, Stuart Peltz.

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Stuart W. Peltz, PTC Therapeutics, Inc. - Co-Founder, CEO & Executive Director [3]

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Thanks for joining us this afternoon. Joining me on the call today are Marcio and Christine. Marcio will provide commercial and clinical development update. Christine will review our financials. I like to ask you to turn now to the slides we have posted on our website to highlight some accomplishments in the third quarter. Let's start on Slide 3.

I'm going to spend time on today's call talking about our path to continue to build a leading, fully-integrated biotech company that has multiple platforms. Our mission over the last 2 decades has been to be a scientifically innovative company that discovers, develops and commercializes new therapeutics for patients suffering from rare disorders with high unmet medical need. From this effort, we developed a strong DMD base business, a potential best-in-class therapy in the development for SMA, and to therapies in clinical development for patients suffering from rare cancers.

At our Analyst Day earlier this year, we went into detail on our orphan oncology pipeline. Our development strategy is to generate early clinical data showing benefit to patients in these programs and then determine the best path that maximizes shareholder returns. I'm happy to report the most advanced programs, PTC 596 and PTC 299, have recently entered the clinic. These efforts have built a strong commercial and scientific infrastructure with a solid revenue base. Over the next 3 to 5 years, our strategy is to continue to build and grow our orphan disease franchise, creating significant value for all of our stakeholders.

As you can see on our pipeline chart on Slide 4, we are excited to be in such a unique position. We have a strong revenue base, strong talent, and a diverse portfolio of small molecules and gene therapy candidates. This includes therapies and development as well as products in regulatory review or have been approved. We will maintain our focus on the rare disease space, focusing on monogenetic disorders with high unmet medical need.

Next, on Slide 5, I'm pleased to report that we have already been executing on this strategy. With the acquisition of the gene therapy company, Agilis, we have added 3 gene therapy programs, including one program with robust clinical results that is expected to be submitted with regulatory authorities next year. In addition, we have in-licensed 2 products from Akcea and which we'll be commercializing in Latin America.

This is the first public call since the closing of the Agilis transaction. I couldn't be happier with the integration that puts PTC in the position to bring potential life-transforming treatments to patients using our newest innovative platform, the CNS gene therapy platform. I want to spend time reviewing this with you. Please turn to Slide 6. When we began our business development process, one of the principles was that, as an ultra-orphan rare disorders company, we needed to have gene therapy as one of our platforms to treat monogenetic disorders. We are interested in certain approaches to gene therapy. Specifically, we wanted at first to focus on utilizing gene therapy, targeting tissues with low turnover, to ensure durability of effect. We also considered that delivering gene therapy to a small, contained region of the body has the advantage of being able to use micro-doses to treat patients, allowing manufacturing of lower amounts of the viral therapy.

These considerations led us to the acquisition of Agilis, with their CNS gene therapy platform. Our 3 lead gene therapy programs in CNS are for Aromatic Amino Acid Decarboxylase Deficiency, or AADC; Friedreich Ataxia, or FAA, and Angleman Syndrome, or AS. What they all have in common, in addition to being CNS disorders of high unmet medical need, is that targeted delivery of the gene therapy can be employed.

Next, on Slide 7, the market opportunity for each of these gene therapies is exciting. Our estimate for the combined potential market of these indications is 100,000 patients, including approximately 5,000 AADC deficiency patients, 25,000 FA patients, and 70,000 patients suffering from Angleman Syndrome. We believe this is a valuable platform, and we estimate that the combined addressable global market for these programs is in excess of $5 billion.

One of the major benefits of this CNS therapy approach is the small quantity of material required. For instance, the direct injection of the AADC gene therapy into the brain utilizes a micro-dose of viral vector of only approximately 2 times 10 to the 11th viral particles. This is the total dose. It is between 1,000 to 10,000-fold smaller compared to the systemic gene therapy dosing. This reduced dose requirement allows for scalable, modular manufacturing. Because delivery in the CNS is relatively contained and only small doses are used, there's a lower risk of immunogenicity. In fact, almost no immune response has been observed in the AADC gene therapy program.

Lastly, another important point is that of the durability of the response, which is an issue in growing tissues. The CNS tissue has a lower rate of self-turnover, which is important because it allows the virus to be maintained and adds to the durability of effect of the gene therapy treatment. In sum, the low dose required for targeted gene therapy, combined with targeting slowly dividing cells, is a strong competitive advantage of this platform.

Turning to Slide 8, these gene therapy programs to treat the orphan neurological disorders fall into our area of expertise. We have over 20 years of experience discovering, developing, and commercializing therapies for rare disorders with high unmet medical need. We understand the rare disorder market and have experience with country-by-country market access and pricing, driving genotyping efforts, and patient finding. This is enabled by our global commercial and medical infrastructure and is the basis for our success and commercialize these rare disorder products.

I'd now like to talk more in-depth on the 2 most advanced programs in our gene therapy pipeline. Let's turn to AADC deficiency first, starting with Slide 9.

AADC deficiency is a devastating disorder which halts infant neurological and motor development. And similar to spinal muscular atrophy, the children are never able to achieve motor milestones, such as holding their head up, sitting, or standing. In its most severe form, this disorder results in childhood mortality between 4 and 8 years of age. Following a single direct CNS gene therapy treatment, these patients have shown improvements in functional developmental milestones, including having the ability to hold a head position, to sit, to stand, and even to walk.

The results in clinical trials have shown increases in motor functions that were durable in the 5-year clinical trial follow-up. Now, let's turn to Slide 10.

The AADC treatment is delivered via a single dose through direct delivery into the putamen using an established surgical technique. The AADC gene therapy program has substantial long-term evidence of durable clinical benefit. The first patient was treated 8 years ago. Our regulatory package relies on data from 26 patients treated over the past 8 years. The data for this regulatory package has the longest-term follow-up demonstrating durability of effect in the gene therapy space. The improvements in these patients have been measured using multiple motor scales.

Here on Slide 11, you can see this. Observed clinical improvements are seen here in 2 clinical trials. The Peabody Development Motor Scale demonstrates clinical improvement in treated patients at the 1 and 5-year follow-up. As you can see, every patient experienced rapid and durable improvement in both fine and gross motor skill regardless of their age when the treatment was initiated. This is compelling when set in context of the natural history where none of these motor milestones are achieved. Patients in these studies demonstrated remarkable improvement after gene therapy treatment, including head control, sitting, and standing.

What's really remarkable about this gene therapy are the transformative changes that were observed in the treated AADC patients. I would like to share a video demonstrating robust improvement in motor development and cognitive ability in an AADC gene therapy-treated patient. On Slide 12, I'd like to share one of the many videos we have of such a patient. What you will see here is a child suffering from AADC deficiency at 2 years old before initial treatment. You can see the child has limited motor function and is unable to lift his head or sit. At 2 years of age, he received a single treatment. As you can see, after 1 year of follow-up, there's substantial change. You can see the child sitting upright independently and grasping a mirror.

After an additional year of follow-up, at 4 years of age, we see continued growth in fine motor function and cognitive improvement. The child is now standing and interacting with a caregiver. We believe these results are impressive, and you can see why we're excited to bring this therapy to patients as rapidly as possible. We are working on the BLA now and expect to submit in 2019.

Now turning to Slide 13, let me transition to Friedreich ataxia gene therapy program. This is the most advanced program in development for the underlying cause of FA. FA is a triplet-repeat disease causing the loss of frataxin protein. Again, the gene therapy will be directly targeting the appropriate region in the brain that is involved in ataxia and will be utilizing micro-dosing.

As you can see on Slide 14, we're very encouraged by the preclinical data showing that, in 2 large species, protein levels above the normal have been achieved. The robust animal data allows us to find an appropriate dose range to be used in patients.

Let's move to Slide 15. We plan to file an IND for the FA gene therapy program in 2019 and start dosing patients. We believe this program will benefit from high patient efficacy group engagement. We already have a good relationship with FARA, the leading FA patient advocacy group.

Let's move to Slide 16. We are very excited about the path forward for these programs, including the early-stage program in Angleman Syndrome. We're very proud of our gene therapy pipeline, which we believe will drive both near- and long-term value creation for patients and shareholders.

I'll now pass the call to Marcio to review our growing DMD franchise and the product for which we in-license in Latin America commercial rights. This important new collaboration with Akcea leverages our strong commercial infrastructure and brings us 2 new substantial commercial opportunities. I will also ask Marcio to update you on the advances that we've made in our niche oncology programs.

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Marcio Souza, PTC Therapeutics, Inc. - COO [4]

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Thanks, Stu. As part of these strategies Stu just outlined, we also looked for in-license opportunities that would leverage our strong existing commercial infrastructure. In the third quarter, we're pleased to announce an important agreement with Akcea which allowed us to commercialize 2 rare disease drugs in Latin America, Tegsedi and Waylivra. Tegsedi has been approved for the treatment of patients with hATTR with polyneuropathy in the U.S., Europe, and Canada. The polyneuropathic form of hATTR occurs more frequently in individuals of Portuguese ancestry.

Because Latin America, and in particular Brazil, contains a large portion of such patients, the region is of strategic importance for Tegsedi. Based on much research data we conducted, we have learned that Tegsedi is highly regarded by physicians in Latin America for its clinical profile. In fact, the predicted allocation of market share by the physicians shows a predominant use of Tegsedi over competitive products. We believe an additional contributing factor for this competitive advantage is that the subcutaneous delivery method is preferred in Brazil, which, as a country, lacks sufficient infrastructure for infusion center across its extensive geography. We estimated about 6,000 eligible patients in Latin America for Tegsedi. Genetic confirmation of hATTR diagnosed and general patient mapping are key next steps to enable successful launch, and we're well underway with such activities. On the regulatory front, we intend to file a marketing authorization with (inaudible) in the first half of next year.

Our strong existing business infrastructure positions us as a partner of choice for Akcea. This infrastructure is based off the success of our growing DMD business with both Translarna outside of the U.S. and Emflaza in the U.S. Our DMD franchise was strengthened in the first half of this year on several fronts. The [EMA] approved a label expansion for Translarna in nonsense mutation DMD for patients age 2 to 5. Because DMD is a degenerative disease, treating patients early allows for better preservation of muscle function. Importantly, this label expansion allows patients in countries that recognize the EMA approval to gain access to therapy at a younger age.

We have recently submitted for a label expansion for non-ambulatory patients. The EMA has validated our application, and we are working now going through the regulatory process. While most clinical programs focus on ambulatory patients, there is an equal (inaudible) unmet needs to treat non-ambulatory patients with DMD.

Our DMD franchise also includes Emflaza for all U.S. DMD patients over age 5. We are working hard to establish Emflaza as the standard of care in the United States. As we stated last quarter, there are a number of levers to pull to effectively establish Emflaza as the standard of care. One such factor we discussed was the bridging program to allow for access to therapy before reimbursement. This was an important tool in our early commercialization efforts to bring patients on board. For a subset of patients, however, the Bridge Program is low reimbursement timelines. In September, this program was discontinued, and patients from Bridge are now being transitioned to commercial products. We are seeing the early impact of this change since the end of the third quarter.

In addition to the termination of the Bridge Program, the recent publications regarding Emflaza's effects support our efforts to establish it as standard of care. We remain focused on maximizing the value of Emflaza, and part of the equation is to have the right structure in place. Based on our experience over the first year, we've been able to adjust and redeploy our field force. We have recently decided to expand the field team, both on the medical and commercial side of the business, to increase our coverage to the accounts, especially the ones outside of the main centers.

In the third quarter, our revenues for the DMD franchise totaled approximately $53 million. This includes $22.6 million for Emflaza and $30.4 million for Translarna. Since the close of the third quarter, we have received a sizable order of Translarna from Latin America, which is in the process of being finalized. Based on this [visibility], we are maintaining our 2018 Translarna guidance of $170 million to $185 million for the full year. For Emflaza, based on our visibility of individual patient use and order-dispensing dynamics, we are narrowing the range of our guidance to $90 million to $95 million, and therefore we are adjusting our DMD franchise guidance for the full year 2018 to $260 million to $280 million. We're also reiterating our guidance of 15% composite growth for Translarna through 2022.

I want to express my enthusiasm for our gene therapy platforms. We have started pre-commercial efforts ahead of our BLA filing for AADC next year. These efforts include patient identification mainly in cerebral palsy and epilepsy centers where AADC patients are often misdiagnosed. We have preliminarily identified a large group of patients with cerebral palsy with normal MRIs. At this stage, we believe there are in between 100,000 to 150,000 patients from these centers with normal MRI who should be screened for AADC. We are in the late stage of establishing partnerships to sponsor the use of a sensitive and low-cost blood test which can be used to screen those patients for AADC deficiency.

Because patient finding and identification have such a strategic value and impact for all current and future indications we are working on, we have decided to create dedicated units within Medical Affairs to globally coordinate such efforts. We are happy with the progress we've seen so far in patient identification, and we plan to share more details early next year. Our research supports the prevalence previously reported, and we estimate 5,000 patients worldwide with about 1,200 patients in the United States living with AADC deficiency.

Let me now transition to another important milestone achieved this quarter in our oncology portfolio. At Analyst Day, we shared our goal to file an IND for PTC 299 in AML and have it cleared with the FDA before the end of the year. I am pleased to report that we not only achieved this, but we also have the site open and have the first patients screened in this trial. We expect to continue to advance 299 in the AML indication during 2019.

Our second oncology candidate, PTC 596, has progressed as well, and the DIPG trial is open for enrollments. And we expect the second trial in sarcomas to be open before the end of the year. We look forward to sharing more of these programs as they progress.

I'll now turn the call back to Stuart. Stu?

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Stuart W. Peltz, PTC Therapeutics, Inc. - Co-Founder, CEO & Executive Director [5]

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Thanks, Marcio. Most of you are familiar with our spinal muscular atrophy program, which is in pivotal studies. The SMA program reflects the scientific innovation of which PTC is founded. The idea of a small molecule selectively alter and splicing was foreign only a few years ago. This technology has now been used to discover potential new therapies for SMA, a rare genetic neuromuscular disorder that generally manifests early in life, and it's a leading genetic cause of death in infants and toddlers.

We have a robust program in collaboration with Roche and the SMA Foundation around oral SMN2 splicing modifiers. We believe that an oral systemic therapy provides a competitive advantage because of its broad tissue distribution, systemic SMN protein increases, and ease of administration. Earlier clinical data has shown that Risdiplam drives SMN2 splicing towards a complete restoration of [full] length SMN2 messenger RNA.

This program is currently in pivotal stages with 2 registrational studies, FIREFISH for type 1 infants and SUNFISH for type 2 and 3 patients. Data from the dose-finding arms of FIREFISH and SUNFISH were recently presented in the World Muscle Society Congress.

An important aspect of the World Muscle Society Congress presentation was the first clinical data presented from the type 2 and 3 patients. The SUNFISH study reported a median 3-point improvement in motor function measurement at 12 months of treatment. The pivotal portion of SUNFISH is fully enrolled and powered to detect a 3-point difference in motor function measurement at 12 months. There is a potential to file an NDA for this program as early as next year.

The SMA program is not only progressing towards an oral and systemic treatment for SMA patients. It also validates that our splicing platform technology can identify selective compounds that modulate pre-mRNA splicing. We are now applying our expertise to other challenging diseases with high unmet medical need and have internal preclinical programs. These include programs in Huntington's disease and familial dysautonomia.

I'd now like to turn the call over to Christine Utter, our Principal Financial Officer. Christine?

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Christine Utter, PTC Therapeutics, Inc. - Principal Financial Officer & Treasurer [6]

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Thanks, Stu. Earlier today, we issued a press release summarizing the details of our financial results for the third quarter of 2018, and I refer you to that release for full details. I'll start with a few comments on our financial performance and our guidance for 2018.

Starting with our top line results, we reported $53 million in combined revenue across our DMD franchise for the third quarter of 2018 compared to $41.8 million in the third quarter of 2017. Translarna net product revenues were $30.4 million for the third quarter of 2018. This compares to $32 million in the same period last year. As Marcio mentioned, we recently received a large order from Latin America. This visibility allows us to reiterate our full-year Translarna guidance. Our Translarna guidance of $170 million to $185 million contemplates uneven ordering patterns and reflects the total patient demand for the year. And we are happy to reiterate our 15% CAGR for Translarna through 2022.

For Emflaza, we reported net product revenues of $22.6 million in the third quarter of 2018, an increase from $9.8 million reported in the third quarter of 2017. We adjusted the range on our Emflaza guidance for 2018 to $90 million to $95 million from the prior guidance of $90 million to $110 million. As a result, we are adjusting our 2018 DMD franchise revenue guidance to $260 million to $280 million from $260 million to $295 million.

Non-GAAP R&D expenses were $49.9 million for the third quarter of 2018, excluding $4.4 million in noncash stock-based compensation expense compared to $26.4 million for the same period in 2017, excluding $3.6 million in noncash stock-based compensation expense. This increase in R&D expense reflects increased investment in our research programs and the advancement of our clinical pipeline as well as the Akcea upfront licensing fee of $12 million paid during the third quarter. Non-GAAP SG&A expenses were $33.9 million for the third quarter of 2018, excluding $4.5 million in noncash stock-based compensation expense compared to $27.9 million for the same period in 2017, excluding $3.5 million in noncash stock-based compensation expense, reflecting continued investment in commercial activities to support our DMD franchise.

Net loss for the third quarter of 2018 was $51 million compared to a net loss of $33.7 million for the same period in 2017. Cash, cash equivalents and marketable securities totaled approximately $249 million at September 30, 2018 compared to approximately $191 million at December 31, 2017. We are proud of these transactions we announced in the last few months. As a result of these transactions, I'd like to update our non-GAAP R&D and SG&A expense guidance for the full year 2018 to $280 million to $290 million from the previous guidance of $250 million to $260 million. This increase reflects our investment in the gene therapy programs and also includes the upfront licensing fee to Akcea paid in the third quarter. This non-GAAP guidance excludes estimated noncash stock-based compensation expense of approximately $35 million.

I will now hand the call over to the operator to start our question-and-answer session. Operator?

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from the line of Ritu Baral with Cowen.

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Ritu Subhalaksmi Baral, Cowen and Company, LLC, Research Division - MD and Senior Biotechnology Analyst [2]

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Could you walk us through a little more about the dynamics that you're seeing with Emflaza that's leading you to sort of tighten the range? Forgive me if I missed it, but is it connected to the discontinuation of the Bridge Program in some capacity? Can you talk about what you're seeing? And I've got one follow-up.

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Marcio Souza, PTC Therapeutics, Inc. - COO [3]

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So it is and it isn't, right? So it is in a sense that that was one of the drivers I discussed last quarter in terms of accelerating the conversion that we were looking to this at the beginning of the year. As I mentioned before, we normally expect the conversion between prescription to dispense around 3 to 6 months, or trailing more toward the upper end of this guidance.

Part of this was a large number of patients that we had on this program, this Bridge Program, where we saw some apathy on the patient and on the physician side to give us information to continue to move forward. So one of the decisions we made was to terminate this program, so the sense of [urgency] would be [instilled] on them to move things forward then. And this is having an impact, and it is moving.

So with that we are being able to model and to look into individual patients. Now, the dynamics of the market in general, when you look into individual patient conversion, the number of prescriptions we have right now, ordering patterns for the [special] pharmacy is what is letting us, or getting us to narrow the range since we are relatively close to the end of the year. So that's the main reason why, considering the base of patients we have and the number of scripts we are seeing per day.

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Ritu Subhalaksmi Baral, Cowen and Company, LLC, Research Division - MD and Senior Biotechnology Analyst [4]

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So is it fair to say your time to fill is continuing to improve and that your insurance discussions and coverage is not getting worse?

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Marcio Souza, PTC Therapeutics, Inc. - COO [5]

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Oh, no, it's definitely fair to say it's not getting worse. And if anything, our team is out there really trying to remove some of the barriers. I mentioned this before, as in previous call, the most common step edit we have is around 6 months on prednisone previous to start Emflaza. What we are seeing is a number of plans, and it's still a small number, but we see this improving, moving forward, removing that altogether or reducing to, like, a number of weeks on reducing to one or 2 months. So we're seeing an improvement on the general condition, and now it's really getting this paperwork through, getting these patients that we have in-house. It's still on the order of hundreds that we have in-house, like, move to commercial while we build the new prescription.

So in a sense, the entire team focus is twofold, right? So one for this year, and to get to the numbers that was just discussed, is continue to execute on the conversion, but keeping an eye on building the number of prescriptions for next year, as well. And we have a lot of focus and, like, great daily calls with different accounts and moving. I'm pretty confident, as we move forward, to have a good end of the year.

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Stuart W. Peltz, PTC Therapeutics, Inc. - Co-Founder, CEO & Executive Director [6]

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And I think it's also we're trying to remove the impediments, as Marcio said. And we're helping them by the number of publications that continue to come out demonstrating that Emflaza has superiority over prednisone. And not only the synergies [datas] that came out, that publication, the paper on the [EK] DMD trial and those others that are coming out, as well. So I think that's helping, as well.

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Marcio Souza, PTC Therapeutics, Inc. - COO [7]

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That's definitely helping, yes.

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Stuart W. Peltz, PTC Therapeutics, Inc. - Co-Founder, CEO & Executive Director [8]

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I was able to follow that. And then, can you characterize persistence on treatment and how that figures into everything?

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Marcio Souza, PTC Therapeutics, Inc. - COO [9]

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So persistence like in the U.S. is one of the advantage that we can track and we do track patients, like every order, and we are seeing a very good persistence on treatment. One of the things that we didn't quite tackle this year to the extent that we would like to is adjustment of dose to -- a dose that is more -- in our view, more associated with better (inaudible) index on these patients. So that's something, moving forward, we're going to put a little bit more focus on. Since we discussed this before, but maybe it was not clear, some of these patients are on, like, half of the therapeutic dose, for example, and we're discussing actively with the prescribers if this is a leftover from the previous regimen or if it's really something they want to focus. So persistence been really good. What we ideally want is persistence at the best dose for that given patient, and we are moving towards that, as well.

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Operator [10]

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(Operator Instructions) Our next question is from the line of Martin Auster with Credit Suisse.

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Martin Douglas Auster, Crédit Suisse AG, Research Division - Research Analyst [11]

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I had a question, was wondering if you could give us an update on when you expect to be -- enrollment in FIREFISH to complete. And then, also just with the SUNFISH phase, pivotal part of that trial completed. Is there anything you can tell us about the baseline characteristics around the age of the patients or the [FMN 32] status, or things like that?

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Stuart W. Peltz, PTC Therapeutics, Inc. - Co-Founder, CEO & Executive Director [12]

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Thanks for that question, Martin. So 2 things, one is, as we all know, that the SUNFISH trial has completed enrollment, and probably at the appropriate meeting we'll be describing what the baseline characteristics are like. So we'll do that at a meeting, most likely. And then, in terms of FIREFISH, yes, things, as we said, that we anticipate that it would be completed by the end of this year, and then we fully expect that to be the case so that it would be completed. Enrollment would be completed by the end of this year, and the trial would be finished next year. So we fully expect that to occur. So we believe that we're well on track to finish enrolling that trial.

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Martin Douglas Auster, Crédit Suisse AG, Research Division - Research Analyst [13]

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And if I could maybe ask a follow-up, I had a question about the AADC gene therapy program. Thanks for giving us a little bit sort of deeper look in your gene therapy programs overall. Just curious, what can you tell us about the differences of your approach versus other clinical stage AADC approaches that are directed at Parkinson's? And then, is there a long-term opportunity for this product to potentially be developed for that market, as well?

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Stuart W. Peltz, PTC Therapeutics, Inc. - Co-Founder, CEO & Executive Director [14]

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Sure. Maybe I'll start, and then -- so yes. So our view of the AADC in terms of -- it's obviously, in this case, a deficiency of the decarboxylase gene, where we think by injecting into the putamen gives the results that you see here that we showed within the video. And there's many videos that do that. So we think that's clearly [versus Parkinson's] or something. Now switch is probably this is more for the direct effect of the disease, not for the symptoms of it. So it's a difference in that perspective.

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Marcio Souza, PTC Therapeutics, Inc. - COO [15]

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Yes, so too, on the biology itself, right, the cells are preserved here that we are --- you're injecting on the area. We can go to the general area in the putamen. Maybe this was not clear before. So the precision of the procedure obviously has to be precise, but it's not as precise, and it's largely preserved. So these are normal brains in terms of neural anatomy, where you're just trying to get dopamine to be produced. And as you've probably seen before, [markings] like in the PET scan images we're seeing all the way to 5 years. That's why we have PET scans. We are seeing the production.

In Parkinson's, one of the potential issues here is you have [the generation], right, and what you are trying to do is to find the cells that are still able to have an effect. So underlying cause versus potentially reducing the effects, that those are likely, or actually in reality, the models to be quite different here as well. You might have a little bit different construct.

But if you look forward, it wouldn't be outside of the things we are considering potentially expanding this program. The current focus of the company, I think we've been clear, is on rare disease, and we're going to continue to plow through that and to deliver this treatment. The AADC team is laser-focused on getting the BLA filed next year and getting everything ready, but we continue to discuss the management and other areas of the company potentially expanding.

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Stuart W. Peltz, PTC Therapeutics, Inc. - Co-Founder, CEO & Executive Director [16]

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Yes. In that view also, we know that it could be -- for this, we know it’s due specifically from mutations in the DDC gene. In the case of Parkinson, there could be multiple of other genes that could be involved in this as well. So even from a dopamine, there might be one or the other gene. So you might have to -- when you think about how to do this, you may do it in a way where you have multiple genes being expressed. So there is more things to think about in general of how you would do in general gene therapy perhaps for treating Parkinson’s patients.

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Operator [17]

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Our next question is from the line of Joel Beatty with Citi.

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Joel Lawrence Beatty, Citigroup Inc, Research Division - VP & Analyst [18]

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First one is on Emflaza. Given the hundreds of patients that have a script but it's waiting to be fully processed, do you anticipate that most of those patients will go on to start Emflaza at some point in time? Or could there be a sizable number of those patients that may eventually not be able to transition for whatever reason to Emflaza?

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Marcio Souza, PTC Therapeutics, Inc. - COO [19]

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It's Marcio. So we are committed to get every patient who is prescribed Emflaza to eventually get it. The conversion rate is actually very high, and in the order, like, very, very high, as you would expect. It's just a matter of time in general. Obviously, some of these patients never qualify for one reason or another, and we have a PAP program as well, where some of those patients go through. We continue to look into ways for them to be on therapy. Sometimes they do have to -- they never had exposure [presence] on, and they are in a plan that really requires that, and they had to get that exposure.

But at the end of the day, we are seeing a terminal conversion extremely high, and we're considering talking about these numbers in the next call as we finish the year, and so on. So not as much of a problem in terms of getting them there eventually, but it's more on the timing of getting them there. And when a physician prescribe Emflaza right now, we are seeing, and Stu always highlights the publications and so on, they really believe it. It's more of a question of really the back-and-forth with the insurance that I guess you're always hearing from other companies as well as we are, right, on how much back-and-forth has been happening right now, and we are no different than that. The order of magnitude for Emflaza for a neuromuscular clinic is much higher than for the other products, so it's a lot of [their] attention and paperwork. And we've seen that's taken a little bit of the kind of slowing down that we mentioned before. And that's why we put extra incentive for people to really pay attention and give the attention this deserves, and we're seeing some good traction there.

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Stuart W. Peltz, PTC Therapeutics, Inc. - Co-Founder, CEO & Executive Director [20]

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Yes. I think also, as Marcio said, is that there's a -- while we had a large number of patients who were in the Bridge Program that transitioned over, and this is sort of -- there's always some where, if we don't -- if you don't put in some sort of an additional pressure, it would stay on until a pressure's being put on. And so this is our way now of sort of moving those patients through the process, and that additional pressure just seems to be working, sort of a reminder that it's not just -- it's not here forever, and that you have to move on to commercial drug.

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Joel Lawrence Beatty, Citigroup Inc, Research Division - VP & Analyst [21]

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If I could ask a question on the AADC program, could you give us an update on the key steps that still need to take place before filing the BLA in 2019?

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Stuart W. Peltz, PTC Therapeutics, Inc. - Co-Founder, CEO & Executive Director [22]

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Sure. I'll start, and then I'll -- so just to remind you, the AADC program, as we have discussed previously, and I even think I had talked here is that, obviously, we think the data is quite good, and that it's really now -- and from the regulatory discussions, that it was a matter of that it's ready to be filed. And so, really, we're having discussions now in terms of that. And obviously, what the next step is to make sure the CMC is ready for the [filing]. And so let me pass that to Marcio to focus on that.

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Marcio Souza, PTC Therapeutics, Inc. - COO [23]

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Yes. So we have our strategic partnership with MassBiologics to manufacture this. The key step here, I would say the most important step, is really to continue to produce material towards do you want to be commercialized. We mentioned previously, and I believe we filed in the Q, that we had some interactions with the FDA. We're expecting to have more interactions with the FDA. This is progressing nicely in terms of conversations we had before and parameters and strategy for [CMC] that we had discussed, continue to look positively for what we are doing with MassBiologics and internally here at PTC as well. We reaffirm today that we are filing the BLA next year, right? So this is all progressing nicely.

On the clinical models of the BLA, on the preclinical models of the BLA, we are now moving towards finalizing the documentation. So we want to be as ahead as possible in terms of everything that is [not rate] limiting. And I'm very happy with the progress that that's taken. So at the moment, we have the final CMC package. We can submit it next year. So everything is moving, from a regulatory perspective with the U.S., very nicely. The package for Europe is very similar, so that’s all based on the same. Our team in Europe is working towards that submission as well, that includes few other steps, as you know, like (inaudible) plan and so on. So everything is progressing. We should be able to file a BLA and an MAA in Europe, and potentially other jurisdictions in a very short period of time to each other.

So we're very happy. Again, I'm just going to put -- I know it was not in your question, but one last thing here. The patient identification has been going very well as well as I mentioned, on my remarks, because obviously we want to make sure to get the launch, that you have a good base of patients you benefit from this launch. So they're going hand-in-hand.

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Operator [24]

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Our next question is from Gena Wang with Barclays.

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Xiaobin Gao, Barclays Bank PLC, Research Division - Research Analyst [25]

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This is Xiaobin Gao in for Gena. Maybe just a couple from me. For Translarna, can you give us more color regarding the growth in different geographies? Also if you can exclude the Latin America part. And the second part, can you update us regarding the U.S. regulatory status? When do you plan to start the dystrophin biomarker study?

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Stuart W. Peltz, PTC Therapeutics, Inc. - Co-Founder, CEO & Executive Director [26]

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So maybe I'll start, and then we'll go in. From the regulatory status for the dystrophin study, I think as we've said, we plan to start the dystrophin study by the end of this year so that it would be completed by the end of next year and would be filed after that. And so we're on target to do that as well. So we feel good about getting that going to then be able to -- and therefore, if anything really about background in terms of the amount of dystrophin, that would actually give us the accelerated approval. So we feel good about moving above that.

In terms of Translarna's growth and development, I guess what I could say on the high level is that we continue to grow Translarna in all the areas. And maybe I'll let Marcio go into some details in terms of the dynamics of the area.

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Marcio Souza, PTC Therapeutics, Inc. - COO [27]

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Sure. So 2 major areas for us, right, so the European and Middle East area, and the Americas, and that's how we look at the baskets of countries in each one of them. We see progression. Like when you look into the full year, and we always look into full year, because inside each one of those [divisions], there is several countries with very uneven order pattern. So it doesn't make sense to look quarter-on-quarter for us. So when I look into my full year latest estimates that we always run periodically here, that is double-digit growth in each one of them, which is exactly where we would like to be, which put us in a position to continue to reinforce and reaffirm the 15% long-term growth to 2022 that we mentioned before.

Specifically on Latin America that we called out in the [call-ins] part of your question, like Brazil, Argentina, Colombia, important business for us. And we always monitor there. They are countries that are used to only order periodically through the year in lump sum, I would say, orders for several patients. So we receive one of these orders after Q3 ended for Latin America specifically, working through the paperwork right now to get it shipped. But that's something that sometimes got little bit delay from one quarter to another, and that's why we always message that and talk to all of you about how lumpy it is. So having that in hand relatively early on Q4 give us confidence to get the guidance where we are for the year. Does that help?

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Stuart W. Peltz, PTC Therapeutics, Inc. - Co-Founder, CEO & Executive Director [28]

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Maybe it's also worth -- just for everyone to know is we always talk about lumpiness in Latin America. But even country-by-country over time, maybe it's worth talking a little bit about that as well.

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Marcio Souza, PTC Therapeutics, Inc. - COO [29]

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Sure, and that's what I was mentioning in terms of even Europe, right, we are shipping to more than 40 countries now. And when you look into the combination of all of them, several of them have orders for more than 3 months throughout the years just because of that. That's how their supply agreements work. So we end up being lumpy in general, and one of the reasons why we got this question before, why not look into quarter-by-quarter. But for us, it's really not possible right now. We have an exclusive ex-U. S. business for Translarna, and it's fairly unusual. There is not a lot of other products there like that, but it's a fairly common pattern to (inaudible) point. We highlighted more Latin America before, but it's really in general in our business.

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Stuart W. Peltz, PTC Therapeutics, Inc. - Co-Founder, CEO & Executive Director [30]

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So we sort of know how many patients there are and how much we get over the year, but the ordering patterns could vary. And that's just I think important for people to understand over the time within Europe.

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Operator [31]

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Our next question is from Brian Adams (sic) [Abrahams] with RBC Capital Markets.

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Gilbert Roland Kinsey, RBC Capital Markets, LLC, Research Division - Senior Associate [32]

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This is Bert on for Brian. I wanted to ask, on your new oncology studies, could you just remind us of the pharmacology of 596 and 299, and maybe talk a little bit about the DIPG, like the incidents and prevalence in the clinical course of that disease?

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Stuart W. Peltz, PTC Therapeutics, Inc. - Co-Founder, CEO & Executive Director [33]

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Sure. So I think you're referring to what's the mechanism of action. So maybe we'll start with PTC 299, which is an inhibitor for dihydroorotate dehydrogenase, so it's a very potent, effective inhibitor of that. That turns out to be important in particular in leukemic cells, where you need polypyrimidines to be made. And if you inhibit that, you can actually cause differentiation of leukemic cells into that. And that's been seen not only over in the diverse array of leukemias, but in particular in AML itself. So we think this has a very promising effect, a possibility of having an effect in these diseases.

We also know already, just because of our previous clinical studies in this, that we know we can -- we do see inhibition in patients of DH/ODH by seeing increased levels of the dihydroorotate in the bodies when you treat patients with PTC 299. So we know we're on target. So it looks -- so now, all we need really to go is to prove the next hypothesis, which is that will cause leukemic cells to differentiate. So we feel pretty good about that.

PTC 596 is -- was identified as an inhibitor of DMI, which is a stem cell regulated protein that is important in many different tumors, in particular in brain tumors. The other thing is that, when we selected this as a molecule, in particular we selected it for -- be able to go to the brain and actually stay in the brain. And so we know that it's not inhibited or pumped out by brain pump, so I think that's an important aspect of this being an effective molecule that could get to the brain and stay into the brain. Do you want to talk a little--?

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Marcio Souza, PTC Therapeutics, Inc. - COO [34]

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--Yes, let me talk a little bit about the numbers that you mentioned, right? So DIPG, so the trials just reminds everyone, right, 299 we started in AML. It's a dose-escalating trial right now. We're trying to get to the dose that is the most efficient and most efficacious, and at the same time confirm toxicity, as we normally do here. I think the AML market is well understood in general.

For DIPG, so DIPG is a pediatric brain cancer, relatively rare, about 1,000 new case per year in the United States. The age of onset, or the age of symptoms, is between 5 and 6 years of age in these patients. It's absolutely devastating. If you look it up, you're going to see, for all the pediatric cancers, it's the one with the lowest 5-year survival. So the median survival, once the patient is diagnosed, is 9 months. So they virtually all die, unfortunately, before the second year with the disease is only 2% survival at 2 years, and 1% at 5 years.

The trial that we are doing right now is with the DIPG Network, are very happy to work with them. They are well-established out there. The game plan right now is really a numbers one, right? So we need to get sites open throughout the United States, and that's what we are doing. Because these patients die so quickly, we need to be able to get them. In terms of design, the trial's in combination with standard of care that is radiation on these patients, so we have to have the courses back-to-back. And one more reason to have a number of sites. We have sites open right now. We have patients coming through the network, but we really want to enroll this quickly, because, again, it's very unfortunate for the patients, but it relatively good for drug development, the mortality so high. So as we see clinical benefit, as we expect to do so, we'd be able to see this relatively quickly. So this is moving forwards, and we expect to include the second trial with 596 for glioma sarcomas to start later this year. So it's all lined up. We just need to get the site open to start that trial.

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Operator [35]

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And our next question is from Eric Joseph with JPMorgan.

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Eric William Joseph, JP Morgan Chase & Co, Research Division - Analyst [36]

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I just wanted to follow up on AADC manufacturing. You previously talked about having a CMC meeting with FDA by year (technical difficulty) your expectation? And I'm curious to know how iterative you expect that interaction to be.

And also as it relates to manufacturing, I'm wondering to what extent your current efforts with MassBiologics for AADC commonly apply to the Friedreich Ataxia program. And is the idea to have MassBio reproducing product that you would be taking into clinic when the IND gets underway?

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Marcio Souza, PTC Therapeutics, Inc. - COO [37]

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So we have discussed before, right, we're going to have a [5C] meeting with the FDA in relation to CMC before the end of the year, and we had the meeting. And we're moving forwards with the feedback that we got, very productive in general. We're extremely happy with the interactions with the officers at the FDA, and glad for all the feedback they've been giving. It's more a strategy and how we go through finalizing the process with MassBiologics, moving forward. But again, we got that milestone that we mentioned before. We normally don't give regulatory updates in general, so I hope it's not expected that we're going to give play-by-play. But since this was important, we thought we would give this update right now.

MassBiologics is now fully focused on AADC. We see the [capabilities] there to expand to other programs. We believe talk to them all the time. But part of the strategy here, and we do the same with Translarna, we just don't talk much about it, is have a diversified base for all the products we have. So we have other partners we are discussing with right now. At the appropriate time, we're going to be disclosing who they are and which stage they are, and look into other options for manufacturing in general.

Why would (inaudible) is more volume for FA? It's obviously in general a bigger incidence and prevalence of the disease, so we're going to need more material. And we are considering that as well, as we expect to be successful with AADC. They're going to have demands for MassBiologics in terms of production versus having FA, which we are getting to the point that the products have to be available for the clinical trial for next year, as we mentioned before, and I'm reaffirming now, we're filing an IND next year. So we are considering all the needs on the short and long term for this product and what is the best strategy, moving forward. But Neil and his team is really focusing on this, and I think we're all very happy to get them out there and talking to different folks, and getting the base expanded.

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Operator [38]

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Our next question is from Alethia Young with Cantor Fitzgerald.

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Eileen Connelly Maysek, Cantor Fitzgerald & Co., Research Division - Research Analyst [39]

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This is Eileen on for Alethia. Just one on JEWELFISH. Can you kind of characterize what data you're looking for that would really change the prescribing behavior beyond what we might see from the SUNFISH data set with respect to switching or anything that you guys are also thinking about?

And then, for Tegsedi in Latin America, how many of the 6,000 patients have been identified, or do you estimate, are under care right now? And have you gotten any feedback from regulators with respect to the safety or monitoring from a Latin America perspective?

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Stuart W. Peltz, PTC Therapeutics, Inc. - Co-Founder, CEO & Executive Director [40]

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Yes, so I think for the JEWELFISH with the switch, it's really for those patients who wanted to move from one therapy to the next therapy. So that's really what -- it's almost an open-label trial for that will be. But as you saw, probably what we did at the World Muscle, we did demonstrate, as we've seen for all the other trials, that the levels of the SMN protein went up to near-normal levels that we saw in carrier. So again, to me, that's a very important point because, at the end of the day, it's the loss of that protein that leads to the disease. And so you're getting to the right level for those patients, and then we'll be following them over time.

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Marcio Souza, PTC Therapeutics, Inc. - COO [41]

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And I think one additional point here, so obviously, as it gets to the launch and Roche obviously thinking a lot about that together with us in a collaboration, it's important to have some safety data that the patients can switch from one therapy to another, so that's going to give that data Stu just mentioned.

I'm just going to highlight that it's actual increase or change in SMN levels, not cartoonish change, like actual numbers, that is being out there. I think some people believe that just showing illustrations is good enough. We don't. We believe that we have to be able to show growth in expression increase. So I think that's quite important.

As we're looking to the numbers of Tegsedi in Latin America, the majority of those patients are identified. Some of them are not genotyped yet. And some of them are not being followed by the centers as we would want them to be. So the effort right now is twofold, right, is to obviously -- you can diagnose, and especially in areas like Brazil, where it's somewhat endemic because of the genotypic population, genotypic population by the clinic, but we believe that, for the best interest of these patients, they should have a genotype. They should have a mutation on the gene. So we establish a very robust program, which is up and running, to genotype these programs. The early feedback from the physicians, that they really appreciate what we've been proposing. It's an exceptional program, in my view, because they can not only diagnose hATTR patients, but also expand to other disease that might be common misdiagnose. So from the physician perspective, they are very happy.

We think only about 20% to 25% of the patients are currently genotyped, so we want to get this number to be much bigger. And we are moving towards that before the launch.

In terms of the feedback for the monitoring problem, we are discussing that as part of our regular interactions with [MDs] and other agencies. We do not expect that to be an issue for 2 reasons, right? So one, it is obviously -- can be it's only a small percent of the patients that might drop the platelets, but the second is we have a very robust program in Brazil and Argentina and Colombia and the rest of Latin America in terms of monitoring the patients right now for Translarna. Obviously, the monitoring is not as extensive as the one that is required for Tegsedi, and eventually Waylivra, but it's present. What we did earlier in the year, as we were discussing with Akcea, is we locked down the best vendor in the region, really the only one that can provide this kind of service to work exclusively with us. We have a process by which every patient's going to be visited on their house to get the blood draws and going to be sent to a central lab, and the physician's going to receive the results. And just a couple weeks ago, we had a large Advisory Board with a number of physicians there, and they all deemed this to be more than appropriate, and they're all happy actually that we're going to be doing that, because it's not only the monitoring. It's making sure the products -- are using product correctly, and obviously help get everyone's interest for proper use. So we feel very good about that.

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Stuart W. Peltz, PTC Therapeutics, Inc. - Co-Founder, CEO & Executive Director [42]

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And actually, to put it in perspective, when we think about ultra-orphan rare disorders, Marcio said 25% we already know. That's a huge number when you think about it from a disease that had no real treatment for it before. And in a way, in Brazil, many physicians know more of almost like the Portuguese disease, so that they're highly aware of this. So this should really help quite a bit in terms of patient identification.

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Operator [43]

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Our next question is from Raju Prasad with William Blair.

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Raju Yashaswi Prasad, William Blair & Company L.L.C., Research Division - Senior Research Analyst [44]

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One for me on Translarna. Can you just kind of provide some color on the non-ambulatory patient population and how that contributes to the 50% CAGR through 2022?

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Stuart W. Peltz, PTC Therapeutics, Inc. - Co-Founder, CEO & Executive Director [45]

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Sure. So right now, obviously as we said, that we've already submitted in to get a label expansion. As of right now, we don't have anything into -- as part of the CAGR for that. So it's not really counted now. And as we've said before, this obviously could be quite extensive, as there's 40% to 50% of the patients increase. So it would be an interesting addition, obviously, to these patients.

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Raju Yashaswi Prasad, William Blair & Company L.L.C., Research Division - Senior Research Analyst [46]

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And then on SMA, obviously Novartis kind of discussed some quality data today. Given their commentary in type 1 SMA, does that kind of change at all your thoughts on where Risdiplam may be used and pricing potential, obviously? Does that change at all based on how AVXS 101 is priced?

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Stuart W. Peltz, PTC Therapeutics, Inc. - Co-Founder, CEO & Executive Director [47]

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Obviously that's their consideration. From our point of view, what we think is that the Risdiplam has the potential to be best-in-class. Obviously I think the only drug that's really been able to show protein levels to the levels of what a carrier would have within patient, and we then -- that's one of the ways we define what's the appropriate dose to go after. So we think that, based on the data that we hope to have, both in the type 1s as well as in the type 2/3 experiments, the FIREFISH and SUNFISH, that that's the potential to be best-in-class. So obviously that's the way we're thinking about that now. And I know there was some discussion in their call today, but we think the fact that you have a drug that distributes not only to the CNS, but also is orally bioavailable, gets to every tissue that's affected, is what we think is a much bigger advantage to be able to get it both to muscle, bone, liver as well as nerves, and be able to treat the whole patient we think is an important advantage to treating the SMA patient, both type 1s, 2s, and 3s.

In terms of the pricing, actually what we think of that in terms of the -- I think more of that in terms of the AADC space, where when you look at the results that we currently have for AADC deficiency, where we have a fair number of patients who've been taking it up to 8 years that have demonstrated a very durable response, we think if that's the pricing that's being considered, that really bodes well for the data that we have for AADC. And I think that's an important consideration.

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Operator [48]

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Thank you. And I'm not showing any further questions, so I'll now turn the call back over to Stuart for closing remarks.

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Stuart W. Peltz, PTC Therapeutics, Inc. - Co-Founder, CEO & Executive Director [49]

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Well, thank you all for joining today. I hope that you've seen that our vision is really to continue to build this fully integrated rare disorder biotech company. And we're leveraging really our scientific expertise as well as the world-class commercial capabilities, that continuing on our 20-year history of innovative science. I think there's a number of milestones in the coming year that's going to create value both to the patients and shareholders alike. So thank you again for joining the call.

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Operator [50]

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Ladies and gentlemen, this does conclude the program. You may now disconnect. Everyone have a great day.