Why PTC Therapeutics, Inc. Is Crashing Today

By Markets Fool.com

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What happened

After providing investors with two regulatory updates related to its nonsense mutation Duchenne muscular dystrophy (nmDMD) drug, Translarna, shares of PTC Therapeutics (NASDAQ: PTCT) fell by 31% as of 12:00 p.m. EDT on Monday.

So what

PTC Therapeutics' attempted to win FDA approval for Translarna earlier this year, but the agency announced it refused to accept the company's submission in February. The FDA stated that the company'sapplication was "not sufficiently complete to permit a substantive review."

In response, PTC tried to appeal the decision, but news broke on Monday that the agency has denied that request, too.

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Here's what Stuart Peltz, PTC Therapeutics' CEO, had to say about the news:

"We believe that fair consideration of the totality of Translarna's data requires a full review of our application by theFDA. In light of this, continuing the formal dispute resolution process reflects our ongoing commitment to work with regulators and the Duchenne community to make Translarna available to nmDMD patients inthe United States."

Management stated they intend to escalate the approval process "to the next supervisory level of theFDA," maintaining that they should be provided with the same opportunity forreview that other DMD treatments have received. That jab relates to the FDA's controversial decision to approve Sarepta Therapeutics (NASDAQ: SRPT) DMD drug Exondys 51 roughly a month ago.

If this news wasn't bad enough,PTC also provided investors with an update related to the regulatory review process in Europe. As a reminder, Translarna won marketing authorization in the region in 2014, but the approval decision came with the stipulation that the drug would besubject to an annual review process.

PTC announced on Monday that theCommittee for Medicinal Productsfor Human Use (CHMP) has issued arequest for supplemental information, which included asking fordata relating to the drug's efficacy and overall risk-benefit profile. That request is beingcategorized as a "major objection."

The company stated that it is working on providing European regulators with the additional data and that it expectsCHMP to issue an opinion on the renewal before the end of 2016.

Given the downbeat news from the FDA and the renewed threat of being pulled from the market in Europe, it is no wonder why shares are falling hard on Monday.

Now what

PTC believes that Translarna will generate at least $65 million in total sales this year in Europe, making it the company's sole source of product revenue. If CHMP ultimately decides to pull the drug from the market then there is no doubt that the company would be put in a tough financial position. Operating expenses this year are expected to be about $190 million, so its current cash balance of roughly $270 million won't last long if revenue from Translarna disappears.

Given the company's heightened risk profile, I'dsuggest that potential investors should keep far away from this stock.

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Brian Feroldi has no position in any stocks mentioned. Like this article? Follow him onTwitter where he goes by the handle@Longtermmindsetor connect with him on LinkedIn to see more articles like this.

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