PTC Therapeutics has acquired a controversial Marathon Pharmaceuticals drug for the rare disease Duchenne muscular dystrophy for approximately $140 million, potentially placing the South Plainfield, NJ, company squarely in the crosshairs of the national drug pricing debate.
PTC (NASDAQ: PTCT), whose own Duchenne drug is conditionally approved in the Europe but not in the U.S., has bought the market-ready drug deflazacort (Emflaza), which was approved by the FDA in February. Marathon, based in Chicago, will receive $75 million in cash and approximately $65 million in PTC stock. Marathon also stands to gain a percentage of net sales of the drug starting in 2018.
Duchenne is a rare and fatal genetic disorder that causes the muscles to progressively weaken. There are few treatments for the disease. Cambridge, MA-based Sarepta Therapeutics (NASDAQ: SRPT) received the first FDA approval last year in Duchenne for its drug eteplirsen (Exondys 51), which is meant to slow the progression of the disease in a small subset of patients.
Marathon’s deflazacort is a corticosteroid that reduces both inflammation and the activity of the immune system. The drug comes in two forms, a tablet and a liquid, both taken orally. Though deflazacort has been available for Duchenne patients in other countries for years, it wasn’t approved in the U.S. until Marathon’s FDA approval last month. The drug is approved for treating Duchenne patients age 5 and older, regardless of their genetic mutation.
Once Marathon won FDA approval of deflazacort—and bagged a potentially lucrative priority review voucher in the process—it quickly incited the latest drug pricing controversy. Marathon announced its drug would cost $89,000 a year, a high price tag that sparked public outcry and the threat of a congressional inquiry, particularly since the drug is available at a fraction of the cost elsewhere and Marathon didn’t conduct the initial clinical research to discover it. Marathon was forced to delay deflazacort’s launch, and was even publicly scolded by the industry lobbying group PhRMA.
On Wednesday, Vermont Sen. Bernie Sanders and Maryland Rep. Elijah Cummings sent a letter to the FDA, expressing concerns about deflazacort’s price and questioning the process that led to the drug’s approval. The letter notes that deflazacort is an old drug that has no patent protection or market exclusivity in the U.S. Now decisions about pricing and launching the Duchenne drug fall to PTC. Marathon, meanwhile, can step out of the spotlight.
The firestorm already created by Marathon might leave PTC in a bind, according to RBC Capital Markets analyst Simos Simeonidis. In a research note, Simeonidis wrote that he expects the drug’s launch to have a “very difficult time being successful given the already raised awareness, current pricing environment and the existence of alternatives.” PTC will have tough time turning the drug into a profitable product, he added.
At the very least, however, the acquisition gives PTC an approved Duchenne drug in the U.S.—something that has eluded the company for years. PTC’s flagship drug, ataluren (Translarna), was conditionally approved for Duchenne in Europe in 2014. But the drug has failed three different clinical trials—two in Duchenne, one in cystic fibrosis—and the FDA has twice declined to consider PTC’s application for approval on the drug. PTC is trying a third time, having filed earlier this month over the protest of the agency. An FDA decision is not expected until October.
Besides receiving $140 million in cash and stock from PTC, Marathon stands to gain another $50 million milestone payment tied to the drug’s sales. The details of that milestone were not disclosed. PTC and Marathon expect to close the deal in the second quarter.