PTC is trawling for a buyer with its risky DMD drug, Reuters says

PTC Therapeutics ($PTCT) is looking to get bought, Reuters' sources say, betting that a larger company will covet its treatment for Duchenne muscular dystrophy (DMD) enough to overlook a checkered history.

The report, citing unnamed people close to the company, sent PTC's shares up more than 20% on Monday afternoon, boosting the biotech's market cap to nearly $2 billion. Reuters' sources name-checked rare disease specialists Shire ($SHPG) and BioMarin Pharmaceuticals ($BMRN) as suitors who have expressed interest in acquiring PTC for its ataluren, the only approved DMD treatment in the world.

But the likelihood of such a deal is highly questionable, particularly for BioMarin, which months ago traded $680 million in cash for DMD biotech Prosensa Therapeutics. And even for companies not already active in the field, taking the plunge on PTC now, while it awaits make-or-break Phase III data on the once-failed ataluren, would be a risky proposition.

The drug, designed to treat the roughly 13% of DMD sufferers whose disease is caused by a nonsense mutation, missed its primary endpoint in a Phase IIb trial in 2010 after failing to significantly improve patient performance on a 6-minute walk test compared to placebo. That failure initially soured PTC's efforts to secure an early approval in Europe, but, on a second look, the European Medicines Agency noted "some evidence of effectiveness" at certain doses, factoring in DMD patients' serious unmet need and granting ataluren a conditional OK last year.

The condition being a positive late-stage trial, and PTC is currently working through a 220-patient Phase III study, again testing whether the drug can top placebo in 6-minute walk test performance over 48 weeks. Results are expected this summer and would form the basis for an FDA application, the company has said, and failure to impress European regulators would effectively rescind the drug's approval there.

So why spend more than $2 billion on a drug that has already missed a midstage mark and could be rendered almost valueless in a few months? It's hardly impossible that a buyout-minded outfit will make a bid for PTC before getting Phase III confirmation on ataluren, but most would-be acquirers will likely wait to find out whether the drug actually works before putting up that kind of money.

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