PTC Therapeutics Inc

NASDAQ:PTCT

Earnings Call Transcript 2019-Q4

[Operator]

Ladies and gentlemen, thank you for standing by, and welcome to the PTC Therapeutics Fourth Quarter and Year-End 2019 Financial Results Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] As a reminder, today's program may be recorded.

And now, I'd like to introduce your host for today's program, Alex Kane, Head of Investor Relations. Please go ahead, sir.

[Alex Kane, Head of Investor Relations]

Good afternoon and thank you for joining us to discuss the PTC Therapeutics 2019 fourth quarter and year-end corporate updates and financial results. Joining me on today's call is our Chief Executive Officer, Stuart Peltz; our Chief Operating Officer, Marcio Souza; and our Chief Financial Officer, Emily Hill.

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 the slides posted on our Investor Relations website in conjunction with the call, which contains our forward-looking statements and other details shared during this call.

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 operation. For a detailed description of applicable risks and uncertainties, we encourage you to review the company's most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission, as well as the company's other SEC filings.

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.

[Stuart Peltz, Chief Executive Officer]

Thanks Alex and thank you for joining us this afternoon, as we provide our update for the 2019 fourth quarter and end of year review. Significant progress was made across our platforms and programs in 2019, which has continued in 2020. Our vision is to continue to grow as a diversified rare disorders company, with multiple science platforms, with the goal of at least $1.5 billion in revenue by 2023.

PTC's recent transformation has been remarkable to experience. Over the past five years, we have transitioned from a single-product company with Translarna to treat nonsense mutation Duchenne muscular dystrophy patients to accompany with two Duchenne muscular dystrophy products, Translarna and Emflaza to where we are now.

We are now selling four products globally and have the capabilities to bring therapies to patients in 50 countries. With potential approval for risdiplam to treat SMA patients in our gene therapy for AADC deficiency, our commercial portfolio is expected to further expand. Our pipeline is also expanding across multiple scientific platforms, which will continue to drive innovation and lead to value creation.

Let's start with our splicing platform. We recently presented the full results from our successful SUNFISH part 2 pivotal trial. This trial enrolled the broadest population of Type 2 and 3 SMA patients ever studied and more closely represent the type of patients that physicians typically see in practice.

Importantly, the vast majority of Type 2 and 3 patients are not currently on disease modifying treatment. The positive and statistically significant results observed in this trial confirmed the potential of risdiplam to be the most competitive global product for a broad range of SMA patients.

SUNFISH part 2 studied non-ambulant SMA patients, two to 25 years of age without any limitation to their motor function capabilities as evidenced by their baseline Hammersmith scores. We believe that these results further support potential approval and reimbursement for a broad patient population.

We also recently announced successful top line results from the pivotal FIREFISH study in Type 1 SMA patients. This trial met its primary endpoint and was statistically significant. Complete results from FIREFISH part 2 will be presented at AAN in late April. With these studies now completed, we anticipate an MAA filing with the EMA next quarter and look forward to the coming PDUFA date on May 24.

The next splicing modifier are moving towards the clinic is for Huntington's disease. We have selected a development candidate, which is in GLP safety toxicology studies and expect to have an IND filed by the end of the year.

As a reminder, there are no currently approved therapies for the treatment of Huntington's disease. In pre-clinical studies, our Huntington's disease development candidate demonstrated uniform Huntington lowering systematically and throughout the whole brain, including in the Striatum, Cortex and Cerebellum. This is critically important as Huntington's disease affects virtually all parts of the brain.

Similar to our SMA program, where we measured SMN2, MRNA and protein levels in healthy volunteers, we will also have the ability to measure Huntington lowering in blood.

In mice, we have shown that the level of Huntington lowering observed in blood reflects the level of Huntington lowering in all tissues in the brain with near one-to-one brain to blood the Huntington lowering ratio. This is exciting because it will allow us to rapidly demonstrate target engagement and clinically affects early in Phase 1 clinical program.

Moving on our next scientific platform. Late last year, we acquired assets from BioElectron focused on redox pathways, which we now refer to our Bio-e platform. These compounds are all small molecules orally by available, highly selective and efficiently cross the blood-brain barrier, similar to our other small molecule therapies. We're very excited about the progress in our Bio-e platform with two potentially registrational studies to begin later this year.

I want to take a moment to discuss the science behind this platform. PTC743 and PTC857 were both enter the clinic later this year, target 15-lipoxygenase, a key regulator of oxidative stress, lipid-based neuroinflammation, alpha synuclein oxidation & aggregation and cell death. Inhibition of 15-lipoxygenase leads to the reduction of key disease markers such as glial cell activation and glutathione depletion. These critical modulators underpin pathogenesis across broad range of neurodegenerative and mitochondrial diseases. Marcio will provide additional details on this platform later in the call.

Turning to our gene therapy platform. Our strategy is to replace genes of interest by targeting specific tissues, which limit systemic exposure and potentially lessens immunogenicity. By administering small doses, we also reduce our manufacturing burden. Furthermore, we are pursuing diseases and tissues with lower-cell turnover, such as in the CNS and the eye, which may lead to improved durability of response.

Being able to control our manufacturing space is key to our gene therapy strategy. In 2019, we entered into a long-term lease for a state-of-the-art biologics manufacturing facility. We expect to begin in-house gene therapy manufacturing efforts in the facility later this year. Importantly, we were able to retain the vast majority of biologics manufacturing talent at this facility. We are now well positioned to start gene therapy manufacturing on our own with the essential facilities, equipment and talent in place.

I want to highlight our most advanced gene therapy program for AADC deficiency, which has shown impressive clinical results in 28 patients. The AADC deficiency marketing authorization has been filed and accepted in the EMA. We plan to submit the BLA to the FDA in the second quarter of this year. Our patient identification efforts are ongoing, and we continue to identify patients globally with AADC deficiency.

AADC deficiency is a rare and devastating inherited disorder that globally affects roughly 5,000 patients with an annual incidence of approximately 300 patients. Well, originally, there was a concept that AADC was confined to a genetically defined population in Southeast Asia. Approximately 80 different mutant alleles [ph] have been identified globally. This highlights that AADC deficiency is a genetic disorder that impacts patients all across the world. We anticipate more than 300 addressable patients will be identified by launch across the U.S., Europe and Latin America.

Taking all these updates into account, we are now well positioned to drive continuous value creation with a number of exciting upcoming milestones and a deep pipeline to drive sustainable innovation moving forward. We look forward to sharing more detailed information on our platform and pipeline on our Analyst Day on June 16.

With that, let me turn the mic over to Marcio. Marcio?

[Marcio Souza, Chief Operating Officer]

Hey, thank you, Stuart. Let me start with the commercial side of the business. Our DMD franchise remains the foundation for our growth. For Translarna, there is growth potential from multiple ongoing efforts. We expect increased penetration in existing territories, including Brazil for which recently received ANVISA approval. Geographic expansion into new territories increased disease awareness and early diagnose will also contribute to growth moving forward.

For Emflaza, we expect continued positive momentum with new patients and those switching from prednisone. With the recent label expansion, we are now able to treat all DMD patients two years and older and continue to increase treatment with Emflaza in these younger patients. Our PTC cares team is actively engaged with physicians and payers to ensure that patients receive access to treatment as quickly as possible.

Emflaza's clinical differentiation is further supported with new data recently published in the Journal of Comparative Effectiveness. In that study, treatment with deflazacort was associated with a more than two-year delay in loss of ambulation relative to treatment with prednisone.

In addition the onset of complications like scoliosis was significantly delayed among patients treated with the deflazacort versus prednisone and further functional benefits were observed in deflazacort patients. The data also demonstrated the positive risk-benefit of switching deflazacort from prednisone.

PTC continues to leverage our strong Latin America infrastructure to support ongoing and upcoming launches. The TEGSEDI launch continues to trend well with hundreds of newly diagnosed patients genetically confirmed through PTC-supported programs. We are finding and treating new patients and due to the hereditary nature of the disease. The process is likely to accelerate in the future.

As a reminder, TEGSEDI was the first-approved hATTR silencer treatment for Stage 1 and 2 polyneuropathic adult patients by ANVISA. There are an estimated 6,000 patients with hATTR in Latin America, the vast majority of them in Brazil. We believe that TEGSEDI is well differentiated and the best fit for these patients.

TEGSEDI of subcutaneous at-home injection performed by patients in a region where infusion clinics are often at or near capacity and in which travel requirements can be challenging, self-administration is the best solution for patients and healthcare professionals.

Through our early access program, patients are able to enter our patient service and obtain access and other kinds of supports allowing us to build a strong brand loyalty and lasting relationships.

Let me now touch upon the Bio-e platform that is still referenced earlier. As mentioned, we are very excited about these programs and they are fit within our current portfolio and the future with both the platforms and stand-alone therapies.

To reiterate, PTC743 and 857 are advancing in the clinic and they both targets 15-lipoxygenase. An additional compound, PTC 589 targets a different set of enzymes and it has been partnered with a Japanese company, Sumitomo Dainippon Pharma. And it's currently being developed for the treatment of ALS and potentially other neurological disease.

Following the recent completion of a positive proof-of-concept study, Sumitomo is planning to move forward with the development of PTC589 for ALS. Sumitomo has commercialization rights in North America and Japan while PTC remains commercialization rights in the rest of the world including Latin America and Europe.

Moving back to our lead compounds, PTC743, the first indication is in refractory mitochondrial epilepsy and we'll be initiating a potential registrational trial next quarter. 743 is rather unique, in that it has already been used to treat over 400 patients with mitochondrial disease for a series of compassionate-use and indication-specific studies.

Of note, PTC743 was studied in an expanded access program from 2009 to 2012 were 94 patients throughout the U.S., Europe and Latin America with inherited mitochondrial disease and within 90 days of end-of-life care were enrolled. That was a specific criteria.

43 of these 94 patients remain alive and on treatments today, which is remarkable, considering the expectations at the beginning of treatment of survival of only 90 days or less. This patient has also experienced a meaningful reduction in seizure frequency.

The upcoming 743 trial will enroll approximately 60 patients globally, who have inherited mitochondrial disease and associated refractory epilepsy. All patients will be followed for one month to ensure a baseline seizure frequency and then will be randomized to receive either PTC743 or placebo for six months.

The endpoint for the trial is a reduction in seizure. We expect that there are 5,000 to 6,000 addressable mitochondrial epilepsy patients in the U.S. and Europe combined. We also plan to initiate another registrational trial with 743 in Friedreich ataxia in the following quarter, the third quarter of this year, which should complement our gene therapy approach.

In an earlier Phase 2 trial in 63 FA patients in the U.S., treatment with 743 was associated with an improvement in long-term disease severity and neurological function when related to natural history. The private endpoint in that trial was measured at six months, which now understands is not sufficient to show a separation from placebo.

From a safety perspective, 743 has been dosed in hundreds of patients and has generally been well tolerated in the clinic. Incorporating the understandings from the fields that have emerged since the initial proof-of-concept trial, the upcoming trial of 743 in FA will enroll approximately 100 patients. We will be focusing on the younger cohorts and run a trial for one year in a one-to-one randomization scheme with placebo. As a reminder, we expect that there are 25,000 addressable FA patients globally.

Finally, PTC857 which we believe is ideally suitable for larger patient populations; we will enter into the Phase I healthy volunteer trial in the third quarter. Based on a very strong preclinical rationale, we are targeting GBA-defined Parkinson's as the first indication.

Now I wanted to provide some perspective on the Translarna aniridia trial. For background, aniridia is a genetic disorder often caused by a nonsense mutation in the PAX6 gene, which is associated with ocular defects and typically leads to blindness. This trial was randomized placebo-controlled study that followed patients for 48 weeks with an additional 96 weeks open-label extension.

39 patients were randomized and the primary endpoint was the change from baseline to week 48 in the maximum reading speeds, as measured by the MNREAD Acuity Charts only in patients older than eight years of age. While the trial did not meet statistical significance, a trend was observed in favor of ataluren. For reference, the data has been included in our slide deck posted in conjunction with this call. As a next step, we intend to discuss the results with experts on the following weeks and decide the path forward for the program. Importantly, this safe profile in aniridia patients was similar to that of previous studies and the ongoing commercial use of ataluren.

Moving on to DMD, we expect results from the ataluren U.S. dystrophin trial in the second quarter of this year. This is a 40-week open-label single study in 20 nonsense mutation DMD boys aged two to seven. Needle biopsies were taken at baseline in 40 weeks following treatment with ataluren. The primary endpoint is percent dystrophin change from baseline as measured by ECL. With a positive and statistically significant results as we expect, we intend to submit for accelerated approval in the U.S. which would be in conjunction with the current clinical data for atalauren from other studies.

Moving now to our AADC deficiency program. We continue to make good progress in patient identification using a multipronged approach. No-cost blood testing has been deployed globally and we have observed increased patient identification through this simple blood test after launching last year, particularly for patients with symptoms that mimic cerebral palsy epilepsy, which was across all regions including Europe and Latin America. As we can see which is this point for continued growth with upcoming clinical regulatory and commercial catalysts across all our platforms.

I will now hand the call over to our CFO, Emily Hill. So she can review the financial progress. Emily?

[Emily Hill, Chief Financial Officer]

Thank you. Marcio and Stuart outlined our several development and commercial products that place us in a strong financial position to have revenues and royalties that fund our ongoing innovation to drive us toward our $1.5 billion target in 2023. We made good progress towards that goal in 2019. The press release issued earlier this afternoon summarizes the details of our fourth quarter and year-end 2019 financial results. And I will take a few minutes now to review key details for the year and our guidance for the full year 2020.

Please refer to the press release for additional details. Starting with our top line results. We reported $307 million in combined net revenue for the full year 2019 compared to $264.7 million for the full year 2018. This includes a $15 million milestone payment at PTC from Roche triggered by the acceptance of the risdiplam NDA. Translarna net product revenues were $190 million for the year, compared to $171 million for the full year 2018. This growth reflects the expanded commercialization of Translarna. As a reminder, Translarna was the first therapy approved in Brazil for DMD last April with a near-term price impact, which should in long-term expanded market access.

For Emflaza, we reported net product revenues of approximately $101 million for the full year 2019, which compares to $92 million for the full year 2018. Emflaza sales were impacted by an increase in the utilization of Medicaid, which changed our gross-to-net assumptions and the transition to a new specialty pharmacy distributor. These factors impacted Emflaza's sales in the third quarter of 2019 in particular and we saw improvements in the fourth quarter that have continued through early 2020.

Total DMD franchise net product revenue was $291 million for 2019 and we anticipate full year 2020 DMD franchise net product revenue to be between $320 million and $340 million. New product launches including TEGSEDI revenue and potential risdiplam milestone and royalties are also expected to contribute in 2020.

Non-GAAP R&D expenses were $236.6 million for the full year 2019 excluding $20.8 million in non-cash stock-based compensation expense compared to $155.9 million for the full year 2018 excluding $16.1 million in non-cash stock-based compensation expense.

The increase in R&D expense reflects costs associated with advancing the gene therapy platform, increased investment in research programs, advancement of the clinical pipeline, and the upfront $10 million payment for the acquisition of BioElectron assets.

Non-GAAP SG&A expenses were $181.2 million for the full year 2019 excluding $21.3 million in non-cash stock-based compensation expense compared to $136.4 million for the full year 2018 excluding $17.2 million in non-cash stock-based compensation expense. The increase in SG&A expense is primarily due to continued investment to support our commercial activity.

We anticipate non-GAAP R&D and SG&A expense for the full year 2020 to be between $545 million and $575 million excluding approximately $65 million, an estimated non-cash stock-based compensation expense.

The anticipated increase in R&D and SG&A expense are based in part on highly leverageable and scalable investments towards the $1.5 billion projected revenue target in 2023 including gene therapy manufacturing and increase in the number of programs advancing into the clinic and in commercial launches.

Net loss for the full year 2019 was $251.6 million compared to a net loss of $128.1 million for the full year 2018. Cash, cash equivalents, and marketable securities totaled $686.6 million as of December 31st, 2019 compared to $227.6 million as of December 31st, 2018.

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

[Operator]

Certainly. [Operator Instructions] Our first question comes from the line of Alethia Young from Cantor Fitzgerald. Your question please.

[Alethia Young, Cantor Fitzgerald]

Hey guys. Thanks for taking my question and congrats Stuart on the progress over this last quarter. I guess I just wanted to maybe ask you two questions. One, just kind of wanted your perspective on how you guys kind of think about the risdiplam data as it relates to maybe the FIREFISH upcoming readout which some may believe may lead to a more comparable data set of sorts?

And then the second one just is can you talk about the synergies between Friedreich's ataxia and gene therapy and with the readout platform please?

[Stuart Peltz, Chief Executive Officer]

Sure. Thanks Alicia. Thanks for the question. I think from the perspective, yes, I think you're absolutely right in terms of the notion of the SUNFISH trial that we recently had data. That was a very broad trial with patients two to 25 years of age with a very broad inclusion criteria.

So, it's much likely the pacing population that physicians really see day-to-day in their patients. So -- and we did that on purpose because that's what we wanted to see how the drug would function in that line. And obviously we saw a one and a half points different that was statistically significant, so we're pretty happy with that.

In terms of the FIREFISH, I think that's probably in some ways a more homogenous population although there are differences, but I think you saw even in part 1 how well does the plan functions and even in comparison, you can see that it did quite well. And so my perspective was really sought to be the most competitive drug there.

We anticipate for part 2 the same event. We already said that it was statistically significant. And that we expect as you'll see coming up in the -- in AAN the results of that more clearly and so we're excited about that.

And I think you'll be able to more clearly have a little better comparison when you say how well did we do versus other drugs. So, I think that's probably -- while nothing is absolutely perfect in terms of apple-to-apple, that's probably as close as you can get. I think you'll see that risdiplam will do quite well.

In terms of FA both gene therapy and the drug. One is obviously gene therapy that will be directed into the -- directly into the brain whereas the other one us systemic molecule different mechanism maybe Marcio wants to go through a little bit.

[Marcio Souza, Chief Operating Officer]

Absolutely. Thanks Stuart. Hi Alethia. Thanks for the question. So, what we mentioned before right that our interest as a company, our goal at the end of the day is to treating our patient. When you look into disease like Friedreich's ataxia, you have a component that is systemic, specifically for this amongst many others the heart is fairly affected and then you have the deterioration -- neurotic deterioration that occur with the patients over time, specifically in their teenage years and later. What you're looking into with the two modalities really to try to address, most if not all of the issues these patients went through by injecting directly into the dentate nucleus of the cerebellum, we expect to stop the progression of the disease and hopefully, it will start some function there neurologically. And by giving 743 would have a more systemic measure including the heart.

So we see both approaches quite complementary. They are in similar development time lines, although 743 is more advanced in terms of the stage of the trial. So when we start the trial later this year including rolling that about 100 patients, we expect that after one year the result would be pivotal trials. So we should be able to register 743 before our gene therapy candidate.

[Alethia Young, Cantor Fitzgerald]

Great. Thank you.

[Stuart Peltz, Chief Executive Officer]

Thank you.

[Operator]

Thank you. Our next question comes from the line of Joe Thome from Cowen and Company. Your question please.

[Joe Thome, Cowen and Company]

Hi, there. Thank you for taking my question. The first one is on the aniridia data that were presented today. I guess, do the placebo arm perform as you would have expected with that 3.3% change? And is there anything different about sort of the patients that did respond to Translarna therapy and those that didn't in terms of your current disease severity?

And then one more on – a follow-up to the first question in Friedreich ataxia. In order to use the two products in combination if they are can we – control mechanisms, do you have to study those in a formal clinical study or just achieve independent registration? Thank you.

[Stuart Peltz, Chief Executive Officer]

Yes. Thanks Joe for the – of the question. Maybe the first one on aniridia let me just say that, you're pointing at what we expect in sort of – in a way we didn't know necessarily what to expect. And this was the first trial really ever done in aniridia in terms of following. And so the real natural history and understanding of the disease wasn't all that well understood.

And in fact we initially have the trial since it was sort of an early trial via safety study compared to placebo as a treatment. And we just thought that so that retains – still looking at mRNA [ph] to be able that if we saw something that we'd be able to go and talk to regulators.

But I think at the end of the day I think – at the end of the day it was hard to be able to power directly what we thought the trial would be because there wasn't just enough information. But that being said, in a way we learned a lot about this. And I think as you go and look at the data in the deck there, you'll see why we think that why the drug was effective in these patients.

So when you compare the number of cases that were – that saw benefit versus the placebo why we think that is just the change in variability of the asset I think that will prevent it from being statistically significant. I mean that's how we look at it. Marcio would...

[Marcio Souza, Chief Operating Officer]

Yes. Just little detail to complement that – thanks Stuart, the patients were not randomized based on this criteria, right? So we had something that like bioavailable coming from the randomization itself. That was not that well balanced. So your question about placebo. The placebo behaved similarly to what we're expecting. There was one patient as you saw there that had a response that was somewhat unexpected. But in general that was not an issue. It's more the size of the trial and the fact that they were domiciliary balanced at baseline since this was not the original endpoint.

As Stuart said, we are looking for safety and some biomarkers originally. So we learned a lot. We feel that for this size of the trial when the point estimate is moving on the right direction, it does not negates the effect we're expecting to see and very important lessons of warrants in the market in several countries for DMD, the safety profile is exactly what we're expecting there.

[Stuart Peltz, Chief Executive Officer]

And then the two products FA gene therapy versus the small molecule. So we're going to have two independent trials that will be going up. So I don't think you initially have to actually do them both together. So I don't think that would be an issue. We're going to be having two products that then might – with very different – one is the underlying cause of the disease that has the protein itself which is lost in the disease.

And the second one really affects most likely inflammation. And so the combination of those two, we think – obviously, when you have the inflammation you have a problem in the sense reducing it as often you could especially with chronic inflammation. The second one in terms of bringing the protein that has not made it with the import. So they can do work together but we don't think right now that we'll have to do a combination study.

[Stuart Peltz, Chief Executive Officer]

Great. Thank you and congrats on the progress.

[Operator]

Thank you. Our next question comes from the line of Martin Auster from Credit Suisse. Your question, please.

[Martin Auster, Credit Suisse]

Thanks for taking the call. I had a couple of questions for you as well. From the aniridia pivotal data, I'm curious if you see any read-through to the ongoing dystrophin study. I don't know if – as you look through maybe more of the secondary endpoints you had any chance to analyze some of those? There's anything in there that kind of elevates your conviction in the drug's MOA and kind of supports an expectation period for demonstration of dystrophin expression in that study. I know you've set some fairly granted expectations around that one.

And then the second, you guys have generally sounded I would say incrementally more excited about the Bio-e platform since that deal was signed and closed. And I'm curious then at the R&D day, is there going to be any new data presented then? Or will we be seeing just the tail presentations of preclinical and clinical results you've outlined to us already? Thanks.

[Stuart Peltz, Chief Executive Officer]

Sure. Yes. So yes. Aniridia and dystrophin I don't think are -- we need to take one from the other. One just trying to understand the clinical manifestations that would occur with treating which we learned in terms of -- which we learned as a consequence of that and the variability of the given endpoints.

In dystrophin, we feel pretty comfortable that we've done all we can do in terms of assuring that as best we can that this will be a positive study. We think that the assay that we have is incredibly sensitive and linear. And so we think we're in pretty good shape in terms of gaining that and we're hopeful that we're going to see. In a sense we have data already from the 004 study and this is -- we think there's more sense of assay that can replicate that. That being said, we've look at this as being able to have a positive result then be able to go to the FDA for approval in the United States.

In terms of the Bio-e platform, yes, we're excited about that. We think it's an important platform in a novel set of compound that work in a different way than other companies have worked on before. So we're pretty excited about that. And I think you'll see on Analyst Day we'll talk more about the not only the mechanism, but more in detail of some of the things we study. We alluded to into the talk here today in terms of the work with Sumitomo in terms of ALS and we'll talk more about that and so you -- more in terms of preclinical and clinical data in that as well. So I think there'll be a lot that you'll learn as a consequence of the Bio-e platform on the June 16 day.

[Martin Auster, Credit Suisse]

Great. Thanks.

[Operator]

Thank you. Our next question comes from the line of Vincent Chen from Bernstein. Your question please.

[Vincent Chen, Bernstein]

Hey, thank you very much for taking the question. Congrats on the progress. I was wondering if you could just -- following up on Translarna in DMD, I was wondering if you could describe the powering assumptions around the Translarna U.S. study. And what gives you confidence that the trial is adequately powered? For example, what are your assumptions around the variability and dystrophin levels in the absence of drug and in the expected effect size?

[Stuart Peltz, Chief Executive Officer]

Sure. Yes, Marcio, why don't you...

[Marcio Souza, Chief Operating Officer]

Yes. Hey, Vincent, its Marcio here. So the power the -- we believe that in all the scenarios there we look in terms of being likely, since we've been looking to just one scenario here with an absolute change. We're powered at more than 90% for -- to show a difference that is statistically significant on that trial. The way we control the variability or exactly the point that has to be controlled through a series of studies leading to -- and validation work leading to this where multiple cohorts were analyzed and different biopsies as well. And we were able to really control that, so we're not concerned that would be an issue.

There are obviously scenarios where a few patients show a large increase and the justifications shows a very small increase versus another one that I would say more likely that you see an increase throughout, but of a smaller magnitude. In either of them, we can see that trial being well powered to show benefit and statistical significance versus the baseline since this is the major.

Based on our validation work as well what it seems that the vast majority of the patients are going to be below the lower level of complication. So if that is to be replicated, we're going to have problems in terms of like the noise that we're seeing from some of the other measures one of the reasons why we went with this method and -- both from the acquisition of biopsy and complication of dystrophin as we did.

[Vincent Chen, Bernstein]

Great. Thank you.

[Operator]

Our next question comes from the line of Robyn Karnauskas from SunTrust Robinson Humphrey. Your question please.

[Robyn Karnauskas, SunTrust Robinson Humphrey]

Hi. Thanks for taking my question and congrats on a progress. Just a couple. So number one a big picture. You've guided as you have before to $1.5 billion over the next few years. What are your thoughts on making sure that that can help you achieve some profitability? Just I know you can't give guidance, but what's your thought on your goals there? And how you're going to think about business development now versus you have in the past?

Second question is on AADC. For the patient population that you have identified, can you give us a little more clarity as far as more recent splits in the United States and ex-U.S.? And then third on the aniridia data, if you were to exclude that high patient -- high responder patients, is there any difference between placebo and the treatment arm? Thanks.

[Emily Hill, Chief Financial Officer]

Hey, Robyn, this is Emily. Nice to talk to you. And answer to your question about reaching that $1.5 billion revenue target by 2023. What you've seen in the past couple of years is we've really invested in driving innovation to continue to grow our revenue and we'll plan to do that as we have new launches coming onboard this year with Tegsedi and WAYLIVRA then AADC and the risdiplam royalty. We assess and invest in our redox platform or gene therapy platform and our splicing platform.

Obviously, as we get towards that $1.5 billion target, there's likely a threshold of profitability, but I wouldn't say that's our priority. Our priority right now is to really invest in accelerating those pipelines to continue to drive innovation. And we've done that in the past, both through internal innovation and as you mentioned, through business development and while we have a lot on our plate on the internal side, we always cast a wide net and landscape the business development opportunities and we'll be selectively opportunistic as they arrive.

[Stuart Peltz, Chief Executive Officer]

And rest of the AADC deficiency, I think, the big picture is we've been finding patients in all the areas that we've been looking and we have more of that [Indiscernible]. So that we're -- so, I mean, in the sense one of the question which I had is this is a small population that you've found. In fact, that turns out clearly not to be the case.

And so, I think, the split, I think -- Marcio, one of your team has been working pretty hard on that. So why don't you give what we're looking for in the various periods?

[Marcio Souza, Chief Operating Officer]

Of course. So the splits, I think, it seems pretty even, I would say, between the U.S. and the key regions outside of the U.S. Just to remind you, we are focusing on five countries. That is first wave. So Brazil the U.S. and the three largest markets in Europe, so France, Italy and Germany.

We're secondarily looking to a number of other markets that you're seeing, as well, have increased in the number of patients there, but it's fairly balanced.

In terms of the key results that we expect from each one of the teams, since that's how we are measuring performance and how we're putting resource against, it's the split between the U.S. and outside of the U.S. So we expect about half of the patients to continuously coming from the Americas region and then other parts from the European region between like Eric and Adrian leaderships there.

In terms of the things we're doing as well, just to start a number of new programs as we learn more, the things are happening and that are working or not working very well. We've cycled through them very quickly. And this programs includes having more people in the field in the U.S., for example, and some of the points of contact that you're seeing returning more patients. So as we learn, we're able to, again, focus the resource or refocus the resource towards growth.

[Stuart Peltz, Chief Executive Officer]

And then aniridia outcome in terms of looking at the sensitivity analysis of removing -- we already have a pretty small patient population, but, I don't know, maybe you want to comment on that.

[Marcio Souza, Chief Operating Officer]

Yes. So it's more patient population to adjust that. Look, it's -- obviously, if we remove one patient with the large results, placebo effect would be seen a larger separation here and reaching nominal statistical significance. But I don't think it would be appropriate for us to speculate, because we don't know if that patient is an outlier or not.

What you're seeing is in the distribution and one of the reasons we put the waterfall in the slide, we see the distribution clearly skews toward increase with ataluren. So it gave us confidence, not only for this study, but also to some extent to deal with the overall platform of ataluren.

[Stuart Peltz, Chief Executive Officer]

Yes. And again, when we look at that study, when you look at the waterfall part, which I think is probably in the small patient population is a nice way to see, it's pretty apparent, the effect of the drug on these patients over placebo. And so, we look at this as a -- so we're going to be talking to physicians in the coming weeks and the key opinion leader and so, I think, we've learned a lot of this and I think helps as Marcio said, really giving people confidence in terms of the effectiveness of the drug.

[Robyn Karnauskas, SunTrust Robinson Humphrey]

Great. Thank you.

[Stuart Peltz, Chief Executive Officer]

Thank you.

[Operator]

Thank you. Our next question comes from the line of Raju Prasad from William Blair. Your question, please.

[Sami Corwin, William Blair]

Hi, there. It's Sami on for Raju. I was wondering if -- what format you might be presenting the dystrophin results? What kind of format you'll be presenting them in, whether it will be a medical conference or a press release? And if you have had any discussions or if you plan on having any discussions with the FDA ahead of that resubmission.

[Stuart Peltz, Chief Executive Officer]

Okay. Yes, we haven't yet defined whether we'll do it at a meeting or a press release. But our goal is that, when we know this to get this out as rapidly as possible, so there's a good chance of, yes, we'll put something out as a press release so people know. And then, we could be able to present either that or a call even if we -- well, we'll figure that out. And then, the second part was -- Marcio, wouldn't you --

[Marcio Souza, Chief Operating Officer]

Yes. Sure. So, in terms of interactions with the FDA, so we're having interaction throughout this planning phase and the execution of this study. We intend to have a pre-NDA meeting as well. If we come to that, at least, that is positive. It's been discussed already and with the agency it should be in the books pretty soon.

And there's many other matters as you can imagine, other than the study itself, right? There's the update of the safety database. There are the updates of the other studies, the completion of the DDI studies that were done between the two submissions. So a number of things there moving out into the agency and having productive discussions with them.

[Sami Corwin, William Blair]

Great. And then I was wondering if you could just discuss some of the potential outcomes or next steps for the aniridia program depending on your conversations with experts, are you guys kind of thinking the program might get tabled or running another study and having it power differently? Just what your thoughts are.

[Stuart Peltz, Chief Executive Officer]

So I think you know, look that's good question. And I think that's why we're going to go and talk to the key opinion leaders and talk among ourselves after that. And then we'll – if we come with the plan I think we'll talk about next steps then.

[Sami Corwin, William Blair]

Okay.

[Operator]

Thank you. Our next question comes from the line of Gena Wang from Barclays. Your question, please.

[Gena Wang, Barclays]

Thank you for taking my questions. My first question is also regarding the biomarker data for Translarna. Just wondering, could you remind us which muscle would the biopsy be taken? And then would that be taken from the same side of the patients and how many biopsy is taken from each patient each time?

[Marcio Souza, Chief Operating Officer]

Sure. Hey, Gena, Marcio here. So we're taking two samples for every patient, two biopsies, three course per biopsy. So we'd have a total of six as a base. There's an alternate muscle as well that we haven't described before in case that is always fat coming from the six. So we have enough sample coming there.

And as I mentioned on the answer to Vincent's earlier we have run some of the tests in terms of the validation. We know based on the very kind submission of time and sit-ins that we have from different patients that it shouldn't be a problem. We're doing the biseptics and gastroids for – beside the primary side and the TA [ph] as a secondary side or first area side may I say here. So the primary is really to read the six course that it would have. One of the nice things during the validation as well is that when we compare the course we've seen very, very small variability. So we can use any of them to measure. Does that answer?

[Gena Wang, Barclays]

Yes, yes. So - but will you have individual data or you will pool these baseline together?

[Marcio Souza, Chief Operating Officer]

Yes. So that's a very good question. So we will show – so the way the analysis is a difference for the individual patients from their baseline, right? Obviously, we're going to compute that nefarious task later statistically. But each one of those stations are going to be looking versus their baseline because while we expect that the baselines are going to be very, very small, even below the level of complication, we cannot guarantee that that's the case.

So a simple tools analysis has been changed because it skewed the results. So each one of them are going be looking individually and then going to compute the difference – any difference for all the patients.

[Gena Wang, Barclays]

So Marcio I was wondering, say each individual patient they have six samples. Will these six examples pool together or will be individual like a six baseline?

[Marcio Souza, Chief Operating Officer]

No. So just one – so it's the best sample for baseline in four weeks 40 for each one of the patients that's going to be used for the analysis.

[Gena Wang, Barclays]

Okay. Great. And then I have a question regarding the mitochondrial epilepsy trial. Just wondering, was the primary endpoint, was that based on the FDA discussion feedback? And also how do you measure the seizure? And then do you capture both generalized seizure or partial seizure? And how do you report the seizure events, especially for those having seizure if you wanted to cover them?

[Marcio Souza, Chief Operating Officer]

Sure. No absolutely. I would say the trial design is to some extent very similar to other drugs that were just approved with genetic epilepsy in general like I'm sure you know the ones I mentioned.

We are developing like a diary – specific diary for this trial. That's going to account for this patient population. So looking to generalize seizures at this point in time for these patients and looking for the change. There were obviously discussion with the different regulatory agencies here. The key design of the trial of agreed under our Scientific Advisory working party protocol with EMA and we're using this time for the FDA of course.

[Gena Wang, Barclays]

Okay. Sorry just one more question. Regarding generalized seizure, so in a case that patient I'm just wondering will caregiver also have a follow – if a patient have a generalized seizure and then the patient actually wasn't aware he had a seizure because he was passed out? And how would you recall the events like that?

[Marcio Souza, Chief Operating Officer]

Well, that's going to be recorded by the caregiver after they should have made that clear, right? So most of the patients we're talking about are infants or toddlers or young kid, so we're talking about the caregiver-recorded diary here.

[Gena Wang, Barclays]

Okay. Okay, thank you.

[Marcio Souza, Chief Operating Officer]

Thank you.

[Operator]

Thank you. Our next question comes from the line of Brian Abrahams from RBC Capital Markets. Your question, please.

[Brian Abrahams, RBC Capital Markets]

Hey guys, thanks very much for taking my questions. Can you give us a sense of the agency's comfort around the ECL assay just in terms of validation and quantitative ability for dystrophin measurement relative to other techniques versus Western?

Secondly, can you characterize in general how the regulatory interactions have been going for risdiplam initially and your level of confidence in a timely approval with broad label?

And then lastly to maybe just an earlier question a different way on risdiplam. Now that you guys have had an opportunity to further explore the FIREFISH and SUNFISH data and looking at potentially comparative subgroups and endpoints. What's your level of confidence that the magnitude of benefit is comparable to SPINRAZA in types 1, 2 and 3 patients? And are there any subtypes where you think efficacy may be better? Thanks.

[Stuart Peltz, Chief Executive Officer]

Yes. Sure. So, maybe we'll start with the dystrophin measurement. That was one obviously when we've had substantial discussions with the FDA on this. And it wasn't one where we -- in the essence we actually -- I remember I was discussing first saying how I'm sure you would want a Western blot. They said no not really. And I assumed they don't like Western blot. They understand the limitations for those if you have a better assay, would be interested. And so we had been working on and we have been using in our own laboratories this unique form of an ELISA in ECL. And so -- and they like that.

So, they -- we worked with them and Marcio and the team had worked for quite some time. And so maybe why don't you talk a little bit about sort of the -- it was sort of a six to eight-month interaction and they were pretty much pleased I think very much with the work and the sensitivity. I mean I think we're very excited about this assay.

[Marcio Souza, Chief Operating Officer]

That's right. So, we worked very closely with the FDA and specific officers there on the validation of the assay and they are completely on the stage as we are in terms of the measure itself, right?

Obviously, the results we're going to see after the trial. If reads the results soon, but the assay itself and the sensitivity on the way was validated was obviously a concern I would say in general from us and from the FDA from the beginning because this is full and they're certainly very different than what others were doing. We had to have an external standard.

Once you are doing the ECL, the external standard has to be hyperpure and so on. So, we did all this work with them and to the satisfaction of the agency and obviously ourselves as well.

We decided to use a third-party lab to do this -- to eliminate any potential bias that an internal lab could add to such matter not unblinded study. So that was how we done that. Again, I think we're all pleased. It took a very long time to validate and to discuss with the agents, but we're on the same page now.

[Stuart Peltz, Chief Executive Officer]

Yes. And in terms of the risdiplam in terms of the broad label I think we're -- in terms of the having FIREFISH and SUNFISH and the part -- that was part 1. But part 2, I think both of them actually help really understand further the drug itself and how effective it can be.

I think in terms of the SUNFISH trial. Really it's hard to compare to concern that no one else has done a two to 25-year-old trial. We're in such a broad label, broad inclusion criteria that we have facing with scoliosis with Hammersmith baseline scores less than 10. And I should point out that those -- in the real-life cases even in the two to five-year old, 20% of the patients had Hammersmith scores of less than 10 and there was also scoliosis and often fractures.

And so you're really going to have a hard time. So, we're pretty excited of the fact that with a statistically significant improvement in this broad population. And we think that gives us a leg up and that no one else has this data when we talk not only for physicians but to the payers that you've actually studied the types of patients that you're going to be intruding. And in fact no one else has that.

I think in terms of -- when you think about FIREFISH and a FIREFISH, I think is anything but comparable. I think that becomes clear. And I think in terms of looking at age is probably the most determinative figure and you could see -- and I think you can look at the risdiplam data and if you have patients of greater than five months of age you still saw increases in sharp in 10. And that wasn't seen in other cohorts as well.

So, at the end of the day, I think when you're going to compare -- if you wanted to do a comparison, those are the closest and you could look at the other trials and they have basically far younger patients then what we saw and yet we saw a very strong data, not only in the early patients, but also though in the Type 1 takes that were even older. And so we're pretty happy about that. We look forward to actually talking far more about that at the AAN. So, I feel pretty strongly that risdiplam is a highly efficacious drug that will be used quite broadly in the population.

[Brian Abrahams, RBC Capital Markets]

Thanks so much Stu. Thanks Marcio. And congrats on all the progress guys.

[Stuart Peltz, Chief Executive Officer]

Thank you.

[Marcio Souza, Chief Operating Officer]

Thank you.

[Operator]

Thank you. Our next question comes from the line of Joel Beatty from Citi. Your question, please.

[Shawn Egan, Citi]

Hi, guys. This is Shawn Egan calling in for Joel. A few questions from me today. First few on the LatAm franchise with on potro getting ANVISA approval. Can you talk about what advantages having an established LatAm infrastructure to give you guys for marketing TEGSEDI? And then, onto WAYLIVRA following a positive Phase 3 broaden study in FPL; will any of the data be included when you guys submit in the second half? And then I'll have one follow-up on the redox agent.

[Stuart Peltz, Chief Executive Officer]

Sure. So thanks for the question. Talking a little bit about LatAm, right? So, the approval of TEGSEDI last year giving us a lot of advantage here in terms of the overall timing, first, a lot of things were done in between. So one of them -- obviously, you have to characterize and agree with the government just to cite you. That takes some time and we are well underway here.

The second is the genotype infrastructure. As mentioned on my prepared remarks, about hundreds of patients now we cannot typically confirm hATTR, not only in Brazil but in Argentina and Colombia and other places. So, we are way ahead of the game there.

And then the last one that is not less important, I would say, together with the infrastructure that we have in the country, that is very robust since we have substantial sales of Translarna from the region, is the fact that the health system I can -- look at the situation we are right now. Discussing how system capacity in the words in general, don’t think you want to overload hospitals with IV deliveries in general.

So the ability to deliver this on people's home, the ability to monitor them as we have the nursing network, have been quite fundamental and we've seen really positive feedback. So the launch is now underway and we're expecting to see -- we should expect to see more and more updates on this in relation to that.

And your second question in relation to WAYLIVRA, right? So, the first approval we expect for FPL and shortly thereafter to complement that data set with FPL. So, we wouldn't be -- at least our base case right now is not to have the two indications upfront.

[Shawn Egan, Citi]

Got it. Thank you, Marcio. And then, on the 743 redox agent in epilepsy, for that pivotal study, can you maybe talk about how you plan to enroll? Will it be an all-comer study for patients with metabolic mutations? Or will you be enrolling any kind of particular mutations more or less?

And then kind of going one step further, what could -- if the study is successful, what kind of the indication look like? And is there a potential for -- if there's like a clear benefit in some genetic subpopulations for like a smaller approval?

[Stuart Peltz, Chief Executive Officer]

Yes. No, this is a great question. So, it's kind of both, right, in this study. As we went through the scientific advice what we've heard very loud and clear specifically from the EMA that they wanted both a very general population in terms of genetically fine mitochondrial epilepsy with seizures that are not controlled, so we could potentially treat any patient, any comers after the approvals come, an approvals to come.

We also do have the most common mutations being represented. So I'm going to be discussing that a little bit more in detail, but there are four major groups of mutations that we're going to have a balance for those patients. One of them, one of the most common is Leigh syndrome, might be familiar and may last as well amongst others.

So on the June 16, we’re going to be well underway on planning that and hopefully executing as well, going to be discussing exactly what is the expectation of the trial and the market potential and so on. As I mentioned on the prepared remarks as well, we do expect about 5,000 to 6,000 patients in the geographical population here. So it's very large. And this patient because of the type of strap they have, they do not respond well to any of the common therapies that are available right now. So this will be really life-changing for them. And we really expect more power in the drivers of that.

[Shawn Egan, Citi]

Great. Thanks, Marcio. I appreciate it.

[Marcio Souza, Chief Operating Officer]

Thank you.

[Operator]

Thank you. Our next question comes from the line of Vincent Chen from Bernstein. Your question please.

[Vincent Chen, Bernstein]

Great. Thanks for taking a few follow-up questions. Just a few on the DMD trial for Translarna. First one is simply, did I hear correctly that you'll be comparing the best sample of baseline and the best sample at the end? How is the best sample to determine and why not use the average?

Second is, I was wondering you alluded to very low variability in the validation test. I was wondering if you could quantify the degree of variability you've seen and how are those run?

And then - maybe a third actually, given the FDA has shown comfort with using Western blot historically, even it has its imperfections, what was the rationale for going through the work to sort of move to ECL rather than using Western blot given that regulators seem to be willing to use Western blot?

[Stuart Peltz, Chief Executive Officer]

Yeah. So I’ll start with the last. First, was that well, maybe been, I don’t think they’re actually all that comfortable with the Western blot. I think it's the best that they probably had, but they don't think that it's a great assay for a large protein that that doesn’t blot very well.

And that -- and so we thought also gives you that's -- I think that in the situation, it could give you depending on how it works with greater variability more chance for potential missing things that are positive.

So at the end of the day, we think about a more reliable assay gives a better chance versus that. In the month of -- Marcio will go through that.

[Marcio Souza, Chief Operating Officer]

So, the decision about using the fast case, right? So, one, it obviously result-simulated, in the way, the most reliable. So, one, you can have a situation or one of the cohorts or one of the samples is contributing to data biceps. So that's one of the reasons not to average, because it wouldn't be a true average, rather than just getting lucky to some extent and I think when you look into other studies, our study for an example all these studies you have gained by marine wanting to expand some of the others drugs that are in the market, you do see samples that cannot be used or have to be heavily compensated because of that. So, that's one of the reasons you use.

The other as you asked in terms of the validation cell, the expectation we didn't know where the sample was coming from upfront, right? We're asking the question can I biopsy a patient multiple times and see the results that are very similar, and the answer is yes with this method.

One more reason not to use other methods like if you're looking to both types of biopsy that were used before number one in classification assays that were used before, you see intra sample were available like 30% or 40% sometimes and that's obviously not acceptable.

And as Stuart said, when you blot a protein that is big we're going to have intrinsic variability unless you're looking for super-truncated part of the protein and that's not a case like where we're looking into full length here.

[Vincent Chen, Bernstein]

Okay. Thank you very much.

[Stuart Peltz, Chief Executive Officer]

Thank you.

[Operator]

Thank you. This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Stuart Peltz, CEO.

[Stuart Peltz, Chief Executive Officer]

Thank you. Thanks for joining us today on the call. And I don't know -- as you may be aware, the Rare Disease Day that was this past Saturday and I think it's a good time for us to take stock of where we are as a company and the importance of the work that we do that ultimately will benefit patients.

And so with that in mind, we're quite proud to be a global commercial diversified biopharmaceutical company that's focusing on these therapies to help treat rare genetic disorders.

So, with that let me thank you again and we look forward to seeing you at our Analyst Day later this year. Thank you.

[Operator]

Thank you, ladies and gentlemen for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.