PTC Therapeutics stock launched north of a profit-taking zone Monday after Novartis agreed to pay up to $2.9 billion to license its Huntington's treatment.
The deal centers on a drug called PTC518, which uses splicing technology to control how proteins are expressed. In Huntington's disease, a mutation in a protein called HTT causes nerve cells in the brain to break down over time. This can cause mood changes and balance problems, and eventually movement challenges and personality changes.
Under the deal's terms, Novartis will pay $1 billion up front and up to $1.9 billion in development, regulatory and sales milestones. Novartis also agreed to a 40% profit/loss share in the U.S. and double-digit tiered royalties on sales outside the U.S.
This is "a good deal, any way you splice it," RBC Capital Markets analyst Brian Abrahams said in a note, referring to PTC Therapeutics' splicing technology.
"The timing was somewhat unexpected, especially as PTCT was in the midst of engaging with FDA on a potential accelerated approval path for the program (which we have thought is unlikely; look for more clarity on the call around this)," he said. "We view the deal as a meaningful positive for PTCT."
PTC Therapeutics stock surged 18.7%, closing at 52.07. That put PTC shares about 28% above a buy point at 40.69 out of a consolidation, according to MarketSurge. Savvy investors are encouraged to take some profits when a stock rises 20% to 25% above its entry. Novartis stock fell almost 1% to 104.80.
Lowering Mutant Proteins
In midstage testing, patients who received PTC518 showed lower levels of mutant HTT protein in their blood and cerebrospinal fluid, as well as improvements on key clinical measures after a year. The results improved with higher doses.
Novartis will take over developing, manufacturing and commercializing PTC518 after PTC Therapeutics finishes the ongoing study, Pivot-HD. That's expected to occur in the first half of 2025.
The deal is a boon for PTC Therapeutics stock, RBC's Abrahams said.
"The up-front payment is robust for an asset in early/mid- (Phase 2) development, and should help PTCT fund continued R&D, as well as commercial prep activities for the sepiapterin launch," he said.
Sepiapterin is PTC's treatment for phenylketonuria, a disease in which the body can't break down the amino acid phenylalanine. The Food and Drug Administration is currently reviewing the data around sepiapterin ahead of a potential approval.
'Considerable Risks' Remain
Notably, Novartis will also have rights to related molecules in Huntington's disease treatment.
Abrahams kept his sector perform rating and 39 price target on PTC Therapeutics stock. He noted PTC518 still has "considerable risks."
Among those is the uncertainty around getting an accelerated approval for a drug based on a biomarker with limited validation. In this case, that's the drug's ability to lower levels of mutant HTT protein in the blood and cerebrospinal fluid. Placebo recipients have also declined, making it more difficult to interpret the effectiveness of PTC518. Other metrics have also had unclear trends.
"Monetizing the asset at this stage enables PTCT to share those risks," he said.
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