One day after Sen. Bernie Sanders (I-Vt.) and Rep. Elijah Cummings (D-Md.) penned a four-page letter to Stephen Ostroff, acting commissioner of the FDA, questioning "the unusual circumstances" involving last month's approval of Emflaza (deflazacort), the drug's sponsor, privately held Marathon Pharmaceuticals LLC, agreed to sell the Duchenne muscular dystrophy (DMD) therapy to PTC Therapeutics Inc. for $140 million. The up-front amount, due at the transaction's close, consists of approximately $75 million in cash and the remainder in PTC common shares (NASDAQ:PTCT), which opened lower Thursday and slid throughout the day. The stock closed 3 cents above the day's low mark at $8.84 for a loss of $2.06, or 18.9 percent.

Marathon also keeps the rare pediatric disease priority review voucher (PRV) that came with Emflaza's approval. (See BioWorld Today, Feb. 13, 2017.)

On a conference call with analysts to report its year-end and fourth-quarter 2016 earnings, Stuart Peltz, PTC's CEO, described Emflaza as "the best-in-class anti-inflammatory disease-modifying therapy." The glucocorticoid, which has shown anti-inflammatory and immunosuppressant properties, is positioned as a safer and more effective alternative to prednisone.

Emflaza was approved to treat patients with DMD who are 5 and older, regardless of their genetic mutation.

Although not previously approved in the U.S., deflazacort was widely available elsewhere in generic form. DMD patients in the U.S. had access to the drug through Marathon's expanded access program or through prescriptions written by U.S. physicians that were filled abroad at importing pharmacies, such as the U.K.'s Masters Specialty Pharmacy. FDA approval, granted with fast track status and orphan drug designation – providing seven years of market exclusivity – changed all that.

Within days after Emflaza's approval, Marathon, of Northbrook, Ill., took the extraordinary step of pausing commercialization following blowback on the drug's $89,000 annual list price. The price rankled some DMD supporters and caught the eye of Sen. Chuck Grassley (R-Iowa), who chairs the Senate Judiciary Committee. A week earlier, Grassley had said he was opening an inquiry to examine whether potential abuses of the Orphan Drug Act may have contributed to high prices on drugs with orphan status that were in use for many years. (See BioWorld Insight, Feb. 13, 2017, and BioWorld Today, Feb 15, 2017.)

Speaking to analysts early Thursday, Peltz decline to disclose PTC's pricing strategy for Emflaza.

"Given the ability of Emflaza to maintain motor function with a favorable safety profile, we will work with health care professionals, the DMD community and the public to ensure they understand the benefits of this newly available therapy," Peltz said. "We are committed to make this important therapy available to all eligible patients in the U.S. and to study its long-term benefits."

Mark Rothera, PTC's chief commercial officer, called Emflaza "a really great strategic fit" for the company.

"We're excited to introduce Emflaza to the U.S. market following closing of the planned acquisition," he said. "We understand the importance of access and affordability to the community, and we plan to re-examine the price of Emflaza and work with key stakeholders to ensure patient access is a priority."

Expected to close in the second quarter, the transaction also entitles Marathon to payments beginning next year based on annual net sales of Emflaza, which PTC officials projected will range from the low to mid-20s as a percentage of net sales on a blended average basis. Marathon also could reap a one-time sales milestone of $50 million.

PTC said the Emflaza transaction is expected to be accretive to its earnings and cash flow beginning next year.

'HOW LOW IS LOW ENOUGH?'

PTC, of South Plainfield, N.J., badly needs a win. Earlier this month, the company said the FDA acknowledged the filing over protest of its new drug application (NDA) for lead candidate Translarna (ataluren) in DMD after the FDA issued a refuse-to-file letter on the NDA last year. In its slapdown, the agency maintained that "both the phase IIb and (phase III) ACT DMD trials were negative and do not provide substantial evidence of effectiveness." (See BioWorld Today, Feb. 24, 2016, and March 2, 2016.)

The FDA set a PDUFA date of Oct. 24 for its review of the NDA.

Translarna has conditional approval in the EU, but regulators have asked PTC to conduct an 18-month randomized, placebo-controlled study in DMD as a post-authorization obligation, followed by an 18-month open-label extension period where all patients will be switched to Translarna. (See BioWorld Today, April 19, 2016.)

For 2016, PTC reported $81.4 million in net sales of Translarna, representing a 142 percent increase over the previous year. For 2017, the company projected net Translarna sales of $105 million to $125 million.

The ataluren development program suffered another setback this month when the phase III Ataluren Confirmatory Trial (ACT CF) in nonsense mutation cystic fibrosis (nmCF) missed its primary and secondary endpoints, and PTC decided to halt the drug's development in CF. (See BioWorld Today, March 3, 2017.)

Whether the Emflaza deal will spell success for PTC, enabling the company, as Rothera suggested, "to establish a complete U.S. medical sales and marketing footprint" ahead of a potential launch of Translarna, remains to be seen. The company has a longer history than Marathon with the DMD community, potentially boding well for support from patient advocacy organizations. But questions raised by Sanders and Cummings won't go away simply because Emflaza changed hands. The two challenged the agency's decision to rely on 20-year-old efficacy data for the approval, asking in their letter whether that was standard practice, "and if so, how many times has this happened in the last 15 years?" And, "if this is not a standard practice, is Emflaza's approval an exception?"

The two also contested the FDA's decision to assign a brand name to a compound they contended "no longer had patent protection or market exclusivity in the U.S." In addition, Sanders and Cummings voiced skepticism about the agency's award of orphan drug status and the PRV, pointedly asking whether FDA employees raised any concerns about granting Marathon those benefits and requesting copies of any memos, emails or other records regarding such conversations.

Characterizing Emflaza's price tag as "obscenely high," the lawmakers reminded the FDA that it bears the responsibility "to ensure corporations are not gaming the system." They asked Ostroff to respond in writing to their questions by the end of the month.

RBC Capital Markets analyst Simos Simeonidis, who wrote after the ataluren failure in nmCF that EU regulators "may decide to do the right thing for patients and the health care system and remove it from the market," remained skeptical about PTC's move, questioning the company's "alternative facts" on Emflaza.

"We were surprised by the PTC claims today that deflazacort is 'disease modifying,'" he wrote. "This is a corticosteroid whose mechanism of action and impact on the disease has been known for decades. In addition, Marathon, which received approval for this drug, hasn't made this type of claim. We're perplexed by this novel claim and are wondering whether PTCT has new experimental or clinical findings about this corticosteroid's [mechanism of action] that allows them to make it."

Simeonidis lowered PTC's price target to $10 from $13. Beyond the questionable clinical claim, "what will PTC do differently, other than dramatically lower the price?" he asked. "The question is how low is low enough, especially when patients (and now politicians, given all the noise) know that the drug is available overseas for $1,000/year?"

Cowen and Co. analyst Ritu Baral also challenged the additive value of Emflaza to PTC's bottom line, calling the asset a "strategic fit but political buzz saw."

She wrote, "We see the Emflaza acquisition as empirically rational but risky, given the unresolved high-profile launch pricing by Marathon and approval controversy and subsequent delayed commercial launch. Additionally, given our lack of conviction for U.S. Translarna approval in 2017, we see few sales and marketing synergies associated with the acquisition: PTCT has no existing U.S. sales force, and we see limited Emflaza commercial potential ex-U.S. given the availability and very low cost of SNY's Calcort."

In short, Baral summarized, "We have little conviction in the stock."