Under fire, Marathon offloads Duchenne drug to PTC for $140M

Dive Brief:

  • Marathon Pharmaceuticals has agreed to sell its newly approved steroidal treatment for Duchenne muscular dystrophy to PTC Therapeutics for $140 million, offloading the drug after enduring a month of criticism and congressional scrutiny over initial plans to charge a list price of $89,000 per year.
  • PTC Therapeutics will pay $75 million in cash for Emflaza (deflazacort), with the remainder to be paid in shares of PTC. On a call with analysts Thursday morning, PTC CEO Stuart Peltz said the company was reexamining the drug's price but had not made a decision yet.
  • While Emflaza is the first corticosteroid approved to treat DMD, PTC will also inherit a high-profile controversy over whether the drug should have been approved as a branded orphan drug. Deflazacort has been used off-label to treat DMD cheaply for years, and Marathon relied in part on decades-old efficacy data to secure approval.

Dive Insight:

PTC Therapeutics has been on a determined quest to secure approval from the Food and Drug Administration for its own DMD treatment Translarna (ataluren), despite shaky efficacy data and earlier refusals from the agency to review the drug.

Picking up Emflaza certainly fits with PTC's efforts in DMD and will enable the company to lay a commercial groundwork ahead of a hoped-for approval of Translarna.

The FDA recently acknowledged PTC's filing of Translarna over protest, a rare procedural move that forces the regulator to review the drug even after it had rejected PTC's appeal of its original refuse to file decision. A target decision date is set for October 24, but PTC's chances of winning an okay look slim.

Despite the strategic fit, investors did not appear encouraged by the deal to buy Emflaza from Marathon. PTC stock slumped more than 11% in early Thursday trading on the news.

PTC is bullish on Emflaza, though, and talked up the drug as a best-in-class steroid for DMD. PTC's Peltz told analysts on the Thursday conference call that he believed Emflaza should be part of the standard of care for all DMD patients over five, regardless of genetic mutation — a population of about 9,000 patients in the U.S.

PTC expects Emflaza to be accretive to earnings and cash flow beginning in 2018. The deal should close sometime in the second quarter this year.

Peltz wouldn't give a new price for the drug, although he said a change is needed and that PTC would be reexamining the price originally set by Marathon.

Widespread backlash and criticism had forced Marathon to pause commercialization of the drug and start new discussions with stakeholders on how best to ensure patient access to the drug.

Congressional attention to Emflaza hasn't flagged, either. A group of eight senators penned a letter earlier this month demanding answers from Marathon, while Senator Bernie Sanders, I-VT, and Congressmen Elijah Cummings, D-MD, separately sent the FDA a list of questions on the review process for Emflaza this week.

PTC will now shoulder the burden of balancing patient access and legislator fury with the demands of investors for an adequate return on the $140 million invested in the drug. And, notably, the deal doesn't include the coveted priority review voucher given to Marathon for pushing Emflaza over the regulatory finish line. Such vouchers have sold for hundreds of millions of dollars in the past.

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Filed Under: Mergers and Acquisitions / Deals Corporate News
Top image credit: Pictures of Money