Is The Likelihood Of An FDA Complete Response Letter Fully Priced In To PTC Therapeutics?

Analyzing the possibility of PTC Therapeutics, Inc. PTCT receiving a complete response letter for its non-sense mutation Duchenne Muscular Dystrophy candidate Translarna, JPMorgan downgraded shares of the company.

Taking out U.S. Translarna from its model, which would eliminate $200 million to $250 million in peak revenue and about $7 per share, the firm downwardly revised its price target for the shares.

As such, the firm downgraded shares of PTC Therapeutics from Neutral to Underweight and lowered its price target from $23 to $15. The firm believes that the shares would be fairly valued in the mid-teens, as opposed to its current valuation.

At last check, PTC Therapeutics shares were sliding 5.86 percent to $18.48.

Analysts Anupam Rama, Eric Joseph and Yuko Oku noted that FDA's Advisory Panel voted definitely that the current Translarna data were inconclusive and more work is needed to determine its effectiveness. Therefore, the analysts see low probability of Translarna approval in the U.S.

The PDUFA date for Translarna is set for Oct. 24.

Moving onto another pipeline candidate, JPMorgan said it feels it is too early to tell the clinical potential for RG7916 on the World Muscle Society. The firm views the data for the treatment candidate in part 1 of the phase 2 SUNFISH study in Spinal Muscular Atrophy to be inconclusive. Therefore, the firm feels it does not warrant an increase in the probability of success.

"Currently, while OUS Translarna and US Emflaza sales do provide a valuation backstop, we do not see any material upside in PTCT shares nearterm; rather, we see potential meaningful downside risk, particularly given the high probability of complete response letter (CRL) later this month (while widely expected, sentiment / headline downside remains a risk and there is a valuation disconnect, in our view)," the firm said.

However, JPMorgan said it would look to get more constructive on PTC Therapeutics shares in the low-teens level.