Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2016 September 30, 2015

OR

o         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from         to        

Commission file number: 001-35969

PTC Therapeutics, Inc.

(Exact name of registrant as specified in its charter)

(908) 222-7000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x  No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x  No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o  No x

As of November 4, 2015May 2, 2016 there were 34,271,69434,265,019 shares of Common Stock, $0.001 par value per share, outstanding.

Table of Contents

TABLE OF CONTENTS

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form10-Q contains forward looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts, contained in this Quarterly Report on Form10-Q, including statements regarding our strategy, future operations, future financial position, future revenues, projected costs, prospects, plans and objectives of management, are forward looking statements. The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “predict,” “project,” “target,” “potential,” “will,” “would,” “could,” “should,” “continue,” and similar expressions are intended to identify forward looking statements, although not all forward looking statements contain these identifying words.

The forward looking statements in this Quarterly Report on Form 10-Q include, among other things, statements about:

·                  our ability to work with the timingUnited States Food and Drug Administration, or FDA, to resolve the matters set forth in the Refuse to File letter we received in connection with our New Drug Application, or NDA, for Translarna™ (ataluren) for the treatment of PTC’s planned regulatory filings with respect to the results of our Phase 3 confirmatory trial in nonsense mutation Duchenne muscular dystrophy, or nmDMD, including with respect to timing and outcome, such as, among other things, whether we will be required to perform additional clinical and non-clinical trials or analyses at significant cost and whether such trials, if successful, may enable FDA review of a NDA submission by us;

·                  our ability to maintain the completionmarketing authorization of our new drug application,Translarna for the treatment of nmDMD in the European Economic Area, or NDA, withEEA, which is subject to annual review and renewal by the U.S. Food and Drug Administration, or FDA, our submissionEuropean Commission following reassessment of the clinical trials results withrisk-benefit balance of the authorization by the European Medicines Agency, or EMA, and is conditioned upon, among other filingsthings, our submission of the final report from our Phase 3 clinical trial in nmDMD, which we refer to as ACT DMD, which we submitted to the EMA in January 2016;

·                  our regulatory submissions, including with respect to timing and outcome of regulatory review and determinations in connection with our recent submissions with the EMA related to continuation of our marketing authorization for the treatment of nmDMD and our submission with the EMA related to a variation to our marketing authorization to include Translarna as a treatment for nonsense mutation cystic fibrosis, or nmCF, as well as our other submissions with regulatory bodies outside of the United States and European Economic Area, or EEA;

·                  the timing and conduct of our clinical trials and studies of Translarna™ (ataluren)Translarna for the treatment of cystic fibrosis,nmCF, mucopolysaccharidosis type I, or MPS I, aniridia, and aniridia,Dravet syndrome/CDKL5, each caused by nonsense mutations, as well as our studies in spinal muscular atrophy and our cancer stem cell program, including statements regarding the timing of initiation, enrollment and completion of the trials and the period during which the results of the trials will become available;

·                  the rate and degree of market acceptance and clinical utility of Translarna;

·                  our ability to commercialize Translarna in general and, specifically, as a treatment for nmDMD, including the timing of such commercialization and our ability to successfully negotiate adequate pricing and reimbursement processes on a timely basis, or at all, in the countries in which we may obtain regulatory approval, including whether the countries in the European Economic Area;

·                  the timing ofNational Institute for Health and Care Excellence issues final positive guidance with respect to Translarna and our ability to obtain additional marketing authorizations for Translarna and our other product candidates, and the ability of Translarna and our other product candidatesfinalize a managed access agreement with National Health Services England in a timely manner, whether on terms acceptable to meet existingPTC, or future regulatory standards;at all;

·                  our ability to obtain additional and maintain existing reimbursed named patient and cohort early access programs for Translarna for the treatment of nmDMD on adequate terms;

·                  our estimates regarding the potential market opportunity for Translarna, including the size of eligible patient populations and our ability to identify such patients;

·                  the rate and degree of market acceptance and clinical utility of Translarna;

·                  the ability and willingness of patients and healthcare professionals to access Translarna through alternative means if pricing and reimbursement negotiations in the applicable territory do not have a positive outcome, including whether patients in Germany will access Translarna via a reimbursed importation pathway provided under German law and whether such pathway, if utilized, will minimize any access issues for German patients while maintaining a sustainable price;

·                  the timing of and our ability to obtain additional marketing authorizations for Translarna and our other product

candidates, and the ability of Translarna and our other product candidates to meet existing or future regulatory standards;

·                  our ability to maintain the current label under the marketing authorization in the EEA or expand the approved product label of Translarna for the treatment of nmDMD;

·                  the timing and scope of our commercial infrastructure expansion, including the growth of our international presence in Europe and in other territories;

·                  the potential receipt of revenues from future sales of Translarna and other product candidates, including our ability to earn a profit from sales or licenses of Translarna for the treatment of nmDMD;

·                  our sales, marketing and distribution capabilities and strategy, including the ability of our third party manufacturers to manufacture and deliver Translarna in clinically and commercially sufficient quantities and the ability of distributors to process orders in a timely manner and satisfy itstheir other obligations to us;

·                  our ability to establish and maintain arrangements for the manufacture of Translarna and our other product candidates that are sufficient to meet clinical trial and commercial launch requirements;

·                  our plans to pursue development of Translarna for additional indications other than nmDMD and cystic fibrosis, MPS I, aniridia, and aniridia,Dravet/CDKL5, caused by nonsense mutations;

·                  our ability to maintain the marketing authorization of Translarna for the treatment of nmDMD in the EEA, which is

                        conditioned upon, among other things, submission of the final report, including additional efficacy and safety data from our Phase 3 confirmatory trial in nmDMD during 2015 and which is subject to annual review and renewal by the EMA following its reassessment of the risk benefit balance of the authorization;

·                  our ability to advance our earlier stage programs, including our antibacterialcancer stem cell program;

·                  our plans to pursue research and development of other product candidates;

·                  the potential advantages of Translarna;

·                  our estimates regarding expenses, future revenues, capital requirements and needs for additional financing, including our ability to maintain the level of our expenses consistent with our internal budgets and forecasts and to secure additional funds on favorable terms or at all;

·                  our intellectual property position;

·                  the impact of government laws and regulations;

·                  our competitive position; and

·                  our expectations with respect to the development and regulatory status of our product candidatecandidates and program directed against spinal muscular atrophy in collaboration with F. Hoffmann La Roche Ltd and Hoffmann La Roche Inc., which we refer to collectively as Roche, and the Spinal Muscular Atrophy Foundation, or the SMA Foundation, and our estimates regarding future revenues from achievement of milestones in that program.

We may not actually achieve the plans, intentions or expectations disclosed in our forward looking statements, and you should not place undue reliance on our forward looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward looking statements we make. We have included important factors in the cautionary statements included in this Quarterly Report on Form 10-Q, particularly in Part II, Item 1A. Risk Factors that we believe could cause actual results or events to differ materially from the forward looking statements that we make. Our forward looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make.

You should read this Quarterly Report on Form 10-Q and the documents that we have filed as exhibits to this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 20142015 completely and with the understanding that our actual future results may be materially different from what we expect. We do not assume any obligation to update any forward looking statements whether as a result of new information, future events or otherwise, except as required by applicable law.

In this Quarterly Report on Form 10-Q, unless otherwise stated or the context otherwise requires, references to “PTC,” “PTC Therapeutics,” “the Company,” “we,” “us,” “our,” and similar references refer to PTC Therapeutics, Inc. and, where

appropriate, its subsidiaries. The trademarks, trade names and service marks appearing in this Quarterly Report on Form 10-Q are the property of their respective owners.

All website addresses given in this Quarterly Report on Form 10-Q are for information only and are not intended to be an active link or to incorporate any website information into this document.

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

PTC Therapeutics, Inc.

Consolidated Balance Sheets (unaudited)

In thousands (except per share data)

See accompanying unaudited notes.

PTC Therapeutics, Inc.

Consolidated Statements of Operations (unaudited)

In thousands (except per share data)

See accompanying unaudited notes.

PTC Therapeutics, Inc.

Consolidated Statements of Comprehensive Loss (unaudited)

In thousands

See accompanying unaudited notes.

PTC Therapeutics, Inc.

Consolidated Statements of cash flowsCash Flows (unaudited)

In thousands

See accompanying unaudited notes.

PTC Therapeutics, Inc.

Notes to Consolidated Financial Statements (unaudited)

September 30, 2015March 31, 2016

In thousands (except per share data unless otherwise noted)

1.             The Company

PTC Therapeutics, Inc. (the Company“Company” or PTC)“PTC”) was incorporated as a Delaware corporation on March 31, 1998. PTC is a global biopharmaceutical company focused on the discovery, development and commercialization of orally administered, small molecule therapeutics targeting an area of RNA biology referred to as post-transcriptionalpost transcriptional control. The letters “PTC” in the corporate name are an acronym for post-transcriptionalPost-transcriptional control processes which are the regulatory events that occur in cells during and after a messenger RNA molecule is copied from DNA through the transcription process. The CompanyPTC has discovered all of its compounds currently under development using its proprietary technologies. The CompanyPTC plans to continue to develop these compounds both on its own and through selective collaboration arrangements with leading pharmaceutical and biotechnology companies. The Company believes that systematically targeting post-transcriptional control processes represents an unexploited approach to drug discovery and development. The Company’sPTC’s internally discovered pipeline addresses multiple therapeutic areas, including rare disorders oncology and infectious diseases.oncology.

The Company’sPTC’s lead product Translarna™ (ataluren) received marketing authorizationcandidate is ataluren, an investigational new drug in the United States, for the treatment of patients with genetic disorders that arise from a type of genetic mutation known as a nonsense mutation. The Company holds worldwide commercialization rights to ataluren for all indications in all territories. The brand name of ataluren is Translarna™.

In October 2015, the European Commission, or EC, in August 2014Company announced the initial results of our Phase 3 clinical trial of Translarna for the treatment of nonsense mutation Duchenne muscular dystrophy, or ACT DMD, including that the primary efficacy endpoint in the intent to treat population, or ITT, did not achieve statistical significance.

The Company recently participated in a Type A meeting with the United States Food and Drug Administration, or FDA, to discuss the Refuse to File letter we received from the FDA on February 22, 2016 regarding our New Drug Application, or NDA, for Translarna for the treatment of nonsense mutation Duchenne muscular dystrophy, or nmDMD.  There is substantial risk that, notwithstanding any dialogue the Company has had or any further dialogue that it may be able to initiate with the agency, the FDA will continue to disagree with the Company’s interpretation of its trial results for Translarna for the treatment of nmDMD and it may be required to perform additional clinical and non-clinical trials or complete additional analyses, which, if successful, may enable FDA review of an NDA submission. Any such requirement for additional trials would also result in additional significant costs and would most likely result in the Company’s inability to sell Translarna in the United States for a significant period of time, if ever.

Translarna received marketing authorization from the European Commission in August 2014 for the treatment of nmDMD in ambulatory patients age five5 years and over in the 31 member states of the European Economic Area, or EEA. ThisnmDMD is a rare, life threatening disorder. The marketing authorization is subject to annual review and renewal bywas primarily based upon the European Medicines Agency, or EMA, following its reassessment of the risk-benefit balance of the authorization and is further conditioned on the Company’s submission of the final report, including additional safety and efficacy data, from its global, confirmatory Phase 3 clinical trial in nmDMD, which it refers to as ACT DMD, during 2015. See “Risk Factors - Risks Related to Regulatory Approvalresults of our Product and our Product Candidates” on page 61 for further detail regarding the annual EMA reassessment process, including a description of the risk-benefit balance.

In October 2015, the Company announced results from ACT DMD, including that the trial did not meet the primary efficacy endpoint of change from baseline at week 48 in distance walked in the 6-minute walk test, or 6MWT, which we also refer to as six-minute walk distance, or 6MWD, in the overall intent-to-treat, or ITT, study population, as it showed a 15 meter benefit (p=0.213) in favor of Translarna compared to placebo, which was not statistically significant. Analyses of data from pre-specified subgroups, including patients with baseline 6MWD of 300 - 400 meters, was also conducted. A pre-specified meta-analysis was also performed of combined data from the ACT DMD and ambulatory decline phase patients from the Company’s randomized,48-week, 174-patient Phase 2b double-blind, placebo controlled Phase 2b clinical trial evaluating the long-term safety and efficacy of Translarna in patients with nmDMD completed in 2009, or the Phase 2b trial. For further discussionThe marketing authorization is conditioned upon the Company’s submission of the final clinical study report, including additional efficacy and safety data, from ACT DMD. The Company submitted this data to the European Medicines Agency, or EMA, in January 2016 as a type II variation request. The type II variation request seeks to have the specific condition to our marketing authorization removed and a full marketing authorization granted.  The marketing authorization in the EEA is subject to annual review and renewal by the European Commission following reassessment by the EMA of the risk-benefit balance of the authorization, or the annual EMA reassessment, as well as the Company’s satisfaction of other conditions and obligations. In February 2016, the Company submitted a request with the EMA to renew its marketing authorization, which will otherwise expire on August 5, 2016. The EMA has provided the Company with assessment reports with respect to each of our type II variation and our annual EMA reassessment request. As noted in the reports from the EMA, based on the outcome of ACT DMD, see “Recent Developments”the risk-benefit profile of Translarna needs to be re-assessed within the EMA’s annual renewal procedure based on the totality of the data including the data from our Phase 2b and ACT DMD clinical trials of Translarna for the treatment of nmDMD. Both reports include requests for supplementary information. One such request, included in Item 2. Management’s Discussionour annual EMA reassessment report, is classified as a major objection. Generally speaking, a failure to adequately address a major objection would preclude a recommendation for renewal of a marketing authorization.

In June 2014, the Company initiated a reimbursed expanded access program, or EAP program, for Translarna for nmDMD patients in selected territories in the EEA and Analysisrecorded its first sales of Financial Condition and ResultsTranslarna in the third quarter of Operations.” See “Risk Factors - Risks Related2014 pursuant to the Development and CommercializationEAP program. In December 2014, the Company recorded its first commercial sales in Germany. As of our Product and Product Candidates” on page 40 for further detail regarding how ACT DMD results could impact our ability to commercialize Translarna.

The Company launchedMarch 31, 2016, Translarna was available in over 20 countries on a commercial basis in Germany in December 2014 and in Austria, Denmark, Norway, and Sweden in 2015.or pursuant to the EAP program. The Company expects to expand its commercial launch activities across the EEA inpursuant to the fourth quarter of 2015marketing authorization granted by the EMA

throughout 2016 and in future years, subject to continued renewal of its marketing authorization following annual EMA reassessments and successful completion of pricing and reimbursement negotiations. The market access process, including pricing and reimbursement negotiations, varies from country to country and can take over 18 months in certain circumstances. Concurrently, the Company has been making Translarna available under reimbursed early accessplans to continue to pursue EAP programs in selectedselect countries where those mechanisms exist, both within Europethe EEA and in those countries outside of Europe that will reference the marketing authorization described above.other countries.

During 2015,2016, the Company’s revenues have been and are expected to be primarily generated from sales of Translarna in countiescountries in the EEA where pricing and reimbursement approval is obtained at acceptable levels and in other territories where the Company is permitted to distribute Translarna under reimbursed early access programs, or EAPs. The Company is subject to a number of risks similar to those of other early stage companies, including dependence on key individuals, the difficulties inherent in the development of commercially usable products, the potential need to obtain additional capital necessary to fund the development of its products, and competition from other companies. As of September 30, 2015,March 31, 2016, the Company had an accumulated deficit of approximately $542.1$634.2 million. The Company has financed its operations to date primarily through the private offering in August 2015 of 3.00% convertible senior notes due 2022 (see Note 9), public offerings of common stock in February 2014 and October 2014, its initial public offering of common stock in June 2013, private placements of its convertible preferred stock, collaborations, bank debt, convertible debt financings, grant funding and clinical trial support from governmental and philanthropic organizations and patient advocacy groups in the disease area addressed by the Company’s product candidates.

2.             Summary of significant accounting policies

The Company’s complete listing of significant accounting policies are described in Note 2 of the notes to the Company’s audited financial statements as of December 31, 20142015 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC) on March 2, 2015 (2014February 29, 2016 (2015 Form 10-K).

Basis of Presentationpresentation

The accompanying financial information as of September 30, 2015March 31, 2016 and for the three and nine months ended September 30,March 31, 2016 and 2015 and 2014 has been prepared by the Company, without audit, pursuant to the rules and regulations of the SEC. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States (GAAP) have been condensed or omitted pursuant to such rules and regulations. These interim financial statements should be read in conjunction with the Company’s audited financial statements as of December 31, 20142015 and notes thereto included in the 20142015 Form 10-K. Certain prior year balances have been reclassified to conform to current year presentation.

In the opinion of management, the unaudited financial information as of September 30, 2015March 31, 2016 and for the three and nine months ended September 30,March 31, 2016 and 2015 and 2014 reflects all adjustments, which are normal recurring adjustments, necessary to present a fair statement of financial position, results of operations and cash flows. The results of operations for the three and nine month periods ended September 30, 2015March 31, 2016 are not necessarily indicative of the results to be expected for the year ended December 31, 20152016 or for any other interim period or for any other future year.

Use of estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date ofin the financial statements and accompanying notes. Significant estimates in these consolidated financial statements have been made in connection with the reported amountscalculation of revenuesnet product sales, certain accruals related to the Company’s research and development expenses, duringstock-based compensation, valuation procedures for the reporting period.convertible notes and the provision for or benefit from income taxes. Actual results could differ from those estimates. Changes in estimates are reflected in reported results in the period in which they become know.

Inventories and cost of product revenue

On August 4,In 2014, the Company was notified that the European Commission, or EC, granted marketing authorization for Translarna for the treatment of nmDMD in ambulatory patients aged five years and older. The conditional marketing authorization allows the Company to market Translarna for the treatment of nmDMD in the EEA.31 member states of European Economic Area. The launch in these countries is on a country by country basis. This marketing authorization is subject to annual review and renewal by the European Commission following reassessment by the European Medicines Agency, or EMA, following its reassessment of the risk-benefitrisk benefit balance of the authorization, and iswhich the Company refers to as the annual EMA reassessment. In the third quarter of 2015, the EMA approved the annual renewal of the marketing authorization for Translarna for the treatment of nmDMD. The authorization was further conditioned on the Company’s submission of the final report, including additional efficacy and safety data, from ACT DMD during 2015.and the Company’s ability to implement measures, including pharmacovigilance plans that are detailed in the risk management plan for Translarna that was submitted to EMA. In January 2016, the third quarter of 2015,Company submitted the EMA approvedfinal ACT DMD report to the annual renewal ofEMA. The Company plans to seek to renew the marketing authorization for Translarna. on an annual basis until the Company’s obligations have been fulfilled and the approval is converted from a conditional approval into a full approval. If we failthe Company fails to satisfy renewalsuch requirements, or if it is determined that the balance of risks and benefits of using Translarna changes materially, the European Commission could, at the EMA’s recommendation, vary, suspend, withdraw or refuse to renew the marketing authorization for Translarna or require additional clinical trials. The Company does not have sufficient history or experience from which to accurately forecast product sales or demand generation. As such, the Company has not capitalized inventory and will not capitalize inventory until the completion of ACT DMD and satisfaction of the EMA conditions or until the Company can reasonably predict future product sales. The costs incurred related to the manufacturing of Translarna have been recorded as research and development expense in the consolidated statements of operations. The Company’s cost of product sales includes royalties and other miscellaneous selling costs, which were not material and therefore were included as a component of research and development costs in the current period presentation. The time period over which this inventory is consumed will depend on a number of factors, including the amount of future Translarna sales, and the ability to utilize inventory prior to its expiration date.

Recently issued accounting standards

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, “Revenue from Contracts with Customers”Customers (Topic 606)”. ASU No. 2014-09 will eliminate transaction- and industry-specific revenue recognition guidance under current GAAP and replace it with a principle-based approach for determining revenue recognition. ASU No. 2014-09 will require that companies recognize revenue based on the value of transferred goods or services as they occur in the contract. The ASU also will require additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. In July 2015,ASU No. 2014-09 is effective for annual reporting periods beginning after December 15, 2017. Early application is not permitted. Entities can transition to the Financial Accounting Standards Board voted to delaystandard either retrospectively or as a cumulative-effect adjustment as of the effective date of this standard until the first quarter of 2018. Companies are permitted to early adopt the standard in the first quarter of 2017.adoption. Presently, the Company is assessing what effect the adoption of ASU 2014-09 will have on its financial statements and accompanying notes.

In August 2014,April 2015, the FASB issued ASU 2014-15, “PresentationNo. 2015-03, “Interest—Imputation of Financial Statements—Going Concern—DisclosuresInterest (Subtopic 835-30): Simplifying the Presentation of Uncertainties about an entity’s AbilityDebt Issuance Costs topic of the Codification”. This standard provides a simplified presentation of debt issuance costs and requires that debt issuance costs related to Continuea recognized debt liability to be presented on the balance sheet as a Going Concern.” ASU 2014-15 provides new guidance related to management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern by incorporating and expanding upon certain principlesdirect deduction from the carrying amount of that are currently in U.S. auditing standards and to provide related footnote disclosures. This new guidancedebt liability, consistent with debt discounts. The standard is effective for thepublic companies for annual period endingperiods beginning after December 15, 2015. The Company adopted the guidance on January 1, 2016 on a retrospective basis and reclassed $2.8 million from “Deposits and other assets” to “Long-term debt” on the balance sheet as of December 31, 2015. The Company’s unamortized debt issuance cost at March 31, 2016 was $2.7 million which is included within “Long-term debt” on the consolidated balance sheet.

In November 2015, the FASB issued ASU No. 2015-17, “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes”. This standard requires all deferred tax assets and liabilities to be classified as non-current on the balance sheet instead of separating deferred taxes into current and non-current amounts. In addition, valuation allowance allocations between current and non-current deferred tax assets are no longer required because those allowances also will be classified as non-current. This standard is effective for public companies for annual periods andbeginning after December 15, 2016. Earlier application is permitted as of the beginning of an interim periods thereafter.or annual reporting period. The requirementsCompany’s deferred tax assets is provided with full valuation allowance as of ASU 2014-15 areMarch 31, 2016. As such, the Company does not expected toexpect that this standard will have a significant impact upon adoption.

In January 2016, the FASB issued ASU No. 2016-01, “Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities”. This standard enhances the reporting model for financial instruments, which includes amendments to address aspects of recognition, measurement, presentation and disclosure. The new guidance affects all reporting organizations (whether public or private) that hold financial assets or owe financial liabilities. ASU 2016-01 is effective for years beginning after December 15, 2017, including interim periods within those fiscal years. The Company expects to adopt this guidance when effective and is currently assessing what effect the adoption of ASU No. 2016-01 will have on its financial statements and accompanying notes.

In April 2015,February 2016, the FASB issued an amendment to U.S. GAAP to simplify the balance sheet presentation of the costs for issuing debt. The changes were adopted in ASU No. 2015-03, “Interest - Imputation2016-02, “Leases (Topic 842)”. This standard will require organizations that lease assets with lease terms of Interest (Subtopic 835-30): Simplifyingmore than 12 months to recognize assets and liabilities for the Presentationrights and obligations created by those leases on their balance sheets. The ASU will also require new qualitative and quantitative disclosures to help investors and other financial statement users better understand the amount, timing, and uncertainty of Debt Issue Costs”. Publiccash flows arising from leases. The standard is effective for public companies will have to apply the amendments for reportingfiscal years, and interim periods that beginwithin those fiscal years, beginning after December 15, 2015. This amendment requires2018, with early adoption by revising the balance sheets for periods prior to the effective date.permitted. The Company expects to adopt this guidance when effective and is currently evaluating the impact of this ASU and does not believeassessing what effect the adoption of this ASU No. 2016-02 will have a material impacton its financial statements and accompanying notes.

In March 2016, the FASB issued ASU No. 2016-09, “Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting”. This standard requires the recognition of all income tax effects of awards in the income statement when the awards vest or are settled, with Additional Paid in Capital (APIC) pools to be eliminated. In addition, the standard  will increase the amount an employer can withhold to cover income taxes on awards and still qualify for the exception to liability classification for shares used to satisfy the employer’s statutory income tax withholding obligation as well as allowing companies to elect whether to account for forfeitures of share-based payments by recognizing forfeitures of awards as they occur or estimating the number of awards expected to be forfeited and adjusting the estimate when it is likely to change, as is currently required. This standard is effective for public companies for fiscal years beginning after December 15, 2016 and interim periods within those years, with early adoption permitted but only if all of the guidance is adopted in the same period. The Company expects to adopt this guidance when effective and is currently assessing what effect the adoption of ASU No. 2016-09 will have on its financial statements and accompanying notes.

Revenue Recognitionrecognition

The Company recognizes revenue when amounts are realized or realizable and earned. Revenue is considered realizable and earned when the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services have been rendered; (3) the price is fixed or determinable; and (4) collection of the amounts due are reasonably assured.

Net Product Sales

PTC’sThe Company’s net product sales have consisted solely of sales of Translarna for the treatment of nmDMD in territories outside of the U.S. The Company appliesbegan recognizing revenue for payments received under the revenue recognition guidancereimbursed EAPs for Translarna in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Subtopic 605-15, Revenue Recognition—Products.nmDMD patients in select countries in the third quarter of 2014. The Company has now established a pattern of collectability and, since January 2015, the Company recognizes revenue from product sales when there is persuasive evidence that an arrangement exists, title to product and associated risk of loss has passed to the customer, the price is fixed or determinable, collectability is reasonably assured and the Company has no further performance obligations.obligations in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Subtopic 605-15, Revenue Recognition—Products.

The Company recordshas recorded revenue on sales where Translarna is available either on a commercial basis or through a reimbursed early access programEAP program. Orders for Translarna are generally received from hospital and retail pharmacies and, in some cases, one of the Company’s third-party partner distributors. The Company’s third-party distributors act as intermediaries between the Company and end users and do not typically paidstock significant quantities of Translarna. The ultimate payor for byTranslarna is typically a government authority or institution. Prior to January 1, 2015, the Company recognized revenue for commercial and reimbursed early access program sales oninstitution or a cash basis once the product was shipped on behalf of the government authority or institution and payment had been received, if all other revenue recognition criteria were met. Beginning in the first quarter of 2015, the Company is recognizing revenue for Translarna as product is shipped, as the Company has established a pattern of collectability.third-party health insurer.

The Company records revenue net of estimated third party discounts and rebates. Allowances are recorded as a reduction of revenue at the time revenues from product sales are recognized. Allowances for government and other third-party rebates and discounts are established or estimated at the time of delivery. These allowances are adjusted to reflect known changes in factors thatand may impact such allowances in the quarter those changes are known.

Collaboration and Grant Revenue

The terms of these agreements typically include payments to the Company of one or more of the following: nonrefundable, upfront license fees; milestone payments; research funding and royalties on future product sales. In addition, the Company generates service revenue through agreements that generally provide for fees for research and development services and may include additional payments upon achievement of specified events.

The Company evaluates all contingent consideration earned, such as a milestone payment, using the criteria as provided by the Financial Accounting Standards Board (FASB), guidance on the milestone method of revenue recognition. At the inception of a collaboration arrangement, the Company evaluates if a milestone payment is substantive. The criteria requires that (1) the Company determines if the milestone is commensurate with either its performance to achieve the milestone or the enhancement of value resulting from our activities to achieve the milestone; (2) the milestone be related to past performance; and (3) the milestone be reasonable relative to all deliverable and payment terms of the collaboration arrangement. If these criteria are met then the contingent milestones can be considered a substantive milestone and will be recognized as revenue in the period that the milestone is achieved. The Company recognizes royalties as earned in accordance with the terms of various research and collaboration agreements. If not substantive, the contingent consideration is allocated to the existing

units of accounting based on relative selling price and recognized following the same basis previously established for the associated unit of accounting.

The Company recognizes revenue for reimbursements of research and development costs under collaboration agreements as the services are performed. The Company records these reimbursements as revenue and not as a reduction of research and development expenses as the Company has the risks and rewards as the principal in the research and development activities.

3.             Fair value of financial instruments and marketable securities

The Company follows the fair value measurement rules, which provides guidance on the use of fair value in accounting and disclosure for assets and liabilities when such accounting and disclosure is called for by other accounting literature. These rules establish a fair value hierarchy for inputs to be used to measure fair value of financial assets and liabilities. This hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three levels: Level 1 (highest priority), Level 2, and Level 3 (lowest priority).

·      Level 1—Unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the balance sheet date.

·      Level 2—Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).

·      Level 3—Inputs are unobservable and reflect the Company’s assumptions as to what market participants would use in pricing the asset or liability. The Company develops these inputs based on the best information available.

Cash equivalents and investments are reflected in the accompanying financial statements at fair value. The carrying amount of grant and collaboration receivables, accounts payable and accrued expenses, and debt approximates fair value due to the short-term nature of those instruments.

Fair value of certain marketable securities is based upon market prices using quoted prices in active markets for identical assets quoted on the last day of the period. In establishing the estimated fair value of the remaining investments, the Company used the fair value as determined by its investment advisors using observable inputs other than quoted prices.

The Company reviews its investments on a periodic basis for other-than-temporary impairments. This review is subjective, as it requires management to evaluate whether an event or change in circumstances has occurred in that period that may have a significant adverse effect on the fair value of the investment.

The following represents the fair value using the hierarchy described in this Note 3 for the Company’s financial assets and liabilities that are required to be measured at fair value on a recurring basis as of September 30, 2015March 31, 2016 and December 31, 2014:2015:

No transfers of assets between Level 1 and Level 2 of the fair value measurement hierarchy occurred during the periods ended March 31, 2016 and December 31, 2015.

The following is a summary of marketable securities accounted for as available-for-sale securities at September 30, 2015March 31, 2016 and December 31, 2014:2015:

At September 30, 2015March 31, 2016 and December 31, 2014,2015, the Company held securities with an unrealized loss position that were not considered to be other-than-temporarily impaired as the Company has the ability to hold such investments until recovery of their fair value. Unrealized gains and losses are reported as a component of accumulated other comprehensive (loss) income in stockholders’ equity. As of March 31, 2016 and December 31, 2015, the Company did not have any realized gains/losses from the sale of marketable securities.

Marketable securities on the balance sheet at September 30, 2015March 31, 2016 and December 31, 20142015 mature as follows:

Level 3 valuation

The warrant liability is classified in Other long-term liabilities on the Company’s consolidated balance sheet. The warrant liability is marked-to-market each reporting period with the change in fair value recorded as a gain or loss within Other expense,income (expense), net on the Company’s consolidated statement of operations until the warrants are exercised, expire or other facts and circumstances lead the warrant liability to be reclassified as an equity instrument. The fair value of the warrant liability is determined at each reporting period by utilizing the Black-Scholes option pricing model.

The table presented below is a summary of changes in the fair value of the Company’s Level 3 valuation for warrant liability for the period ended September 30, 2015:March 31, 2016:

Fair value of the warrant liability is estimated using an option-pricing model, which includes variables such as the expected volatility based on guideline public companies, the stock fair value, and the estimated time to a liquidity event. The significant assumptions used in preparing the option pricing model for valuing the Company’s warrants as of September 30, 2015March 31, 2016 include (i) volatility (62%(67%—70%72%), (ii) risk free interest rate (0.49%(0.59%—1.15%0.87%), (iii) strike price ($128.00-$2,520.00)2,520), (iv) fair value of common stock ($26.70)6.44), and (v) expected life (1.71—3.98(1.21—3.48 years). The significant assumptions used in preparing the option pricing model for valuing the Company’s warrants as of December 31, 20142015 include (i) volatility (68%(62%-70%), (ii) risk free interest rate (0.89%—1.65%(0.86%-1.54%), (iii) strike

price ($128.00—128.00-$2,520.00), (iv) fair value of common stock ($51.77),32.40) and (v) expected life (2.50—4.70(1.5—3.7 years). See Note 6 for a description of the warrants issued in connection with the convertible notes.

4.             Other comprehensive lossincome (loss) and accumulated other comprehensive items

Other comprehensive income (loss) includes changes in equity that are excluded from net income (loss), such as unrealized gains and losses on marketable securities.

The following tables summarize other comprehensive income (loss) and the changes in accumulated other comprehensive items for the three and nine months ended September 30, 2015:March 31, 2016:

5.             Accounts payable and accrued expenses

Accounts payable and accrued expenses at September 30, 2015March 31, 2016 and December 31, 20142015 consist of the following:

6.             Warrants

All of the Company’s outstanding warrants were classified as liabilities as of September 30, 2015March 31, 2016 and December 31, 20142015 because they contained non-standard antidilution provisions.

The following is a summary of the Company’s outstanding warrants as of September 30, 2015March 31, 2016 and December 31, 2014:2015:

7.             Net loss per share

Basic earnings per share is computed by dividing net loss available to common stockholders by the weighted-average number of common shares outstanding. Diluted earnings per share is computed by dividing net lossincome (loss) available to common stockholders by the weighted-average number of common shares plus the effect of dilutive potential common shares outstanding during the period.

The following tables set forth the computation of basic and diluted net loss per share:share for common stockholders:

*In the three and nine months ended September 30,March 31, 2016 and 2015, and 2014, the Company experienced a net loss and therefore did not report any dilutive share impact.

The following table shows historical dilutive common share equivalents outstanding, which are not included in the above historical calculation, as the effect of their inclusion is anti-dilutive during each period.

In August 2015, the Company issued, at par value, $150.0 million aggregate principal amount of 3.0% convertible senior notes due 2022 (the Convertible Notes) (see Note 9, Convertible Senior Notes). The conversion rate for the Convertible Notes was initially, and remains 17.7487 shares of the Company’s common stock per $1,000 principal amount of the Convertible Notes, which is equivalent to an initial conversion price of approximately $56.34 per share of the Company’s common stock. For the three and nine months ended September 30, 2015, there was no dilutive effect of the Convertible Notes as the stock price did not exceed the conversion price and the Company reported a loss.

8.             Stock award plan

On March 5, 2013, the Company’s Board of Directors approved the 2013 Stock Incentive Plan, which provides for the granting of stock option awards, stock appreciation rights, restricted stock, restricted stock units and other stock-based awards in the aggregate of 739,937 shares of common stock. On March 5, 2013, the Board approved a grant of 735,324 shares of restricted stock and 4,613 stock options. There are no additional shares available for issuance under this plan.

In May 2013, the Company’s Board of Directors and stockholders increased by 2,500,000 the number of shares authorized under the 2009 Equity and Long Term Incentive Plan, which provides for the granting of stock option awards, restricted stock awards, and other stock-based and cash-based awards.

In May 2013, the Company’s Board of Directors and stockholders approved the 2013 Long Term Incentive Plan, which became effective upon the closing of the Company’s IPO.  The 2013 Long Term Incentive Plan provides for the grant of incentive stock options, nonstatutory stock options, restricted stock awards and other stock-based awards. The number of shares of common stock reserved for issuance under the 2013 Long Term Incentive Plan is the sum of (1) 238,427122,296 shares of common stock available for issuance under the Company’s 2009 Equity and Long Term Incentive Plan and 2013 Stock Incentive Plan, (2) the number of shares (up to 3,040,444 shares) equal to the sum of the number of shares of common stock subject to outstanding awards under the Company’s 1998 Employee, Director and Consultant Stock Option Plan, the 2009 Equity and Long Term Incentive Plan, and the 2013 Stock Incentive Plan that expire, terminate or are otherwise surrendered, cancelled, forfeited or repurchased by the Company at their original issuance price pursuant to a contractual repurchase right plus (3) an annual increase, to be added on the first day of each fiscal year until the expiration of the 2013 Long Term Incentive Plan, equal to the lowest of 2,500,000 shares of common stock, 4% of the

number of shares of common stock outstanding on the first day of the fiscal year and an amount determined by the Company’s Board of Directors. As of March 31, 2016, awards for 290,868 shares of common stock are available for issuance.

From January 1, 20152016 through September 30, 2015,March 31, 2016, the Company issued a total of 2,086,3001,357,045 stock options to various employees.

Of those, 691,10067,100 were inducement grants for non-statutory stock options. The inducement grant awards were made pursuant to the NASDAQ inducement grant exception as a material component of our new hires’ employment compensation.compensation and not under the 2013 Long Term Incentive Plan.

A summary of stock option activity is as follows:

The fair value of grants made in the nine monthsperiod ended September 30, 2015March 31, 2016 was contemporaneously estimated on the date of grant using the following assumptions:

The Company assumed no expected dividends for all grants. The weighted average grant date fair value of options granted during the ninethree month period ended September 30, 2015March 31, 2016 was $32.32$18.42 per share.

The Company uses the “simplified method” to determine the expected term of options. Under this method, the expected term represents the average of the vesting period and the contractual term. The expected volatility of share options was estimated based on a historical volatility analysis of peers that were similar to the Company with respect to industry, stage of life cycle, size, and financial leverage. The risk-free rate of the option is based on U.S. Government Securities Treasury Constant Maturities yields at the date of grant for a term similar to the expected term of the option.

Restricted Stock Awards—Restricted stock awards are granted subject to certain restrictions, including in some cases service or time conditions (restricted stock). The grant-date fair value of restricted stock awards, which has been determined based upon the market value of the Company’s shares on the grant date, is expensed over the vesting period.

Restricted Stock Units—Restricted stock units are granted subject to certain restrictions, including in some cases service or time conditions (restricted stock). The grant-date fair value of restricted stock units, which has been determined based upon the market value of the Company’s shares on the grant date, is expensed over the vesting period.

The following table summarizes information on the Company’s restricted stock:stock awards and units:

The Company recorded share-based compensation expense in the statement of operations as follows:

As of September 30, 2015,March 31, 2016, there was approximately $75.2$89.9 million of total unrecognized compensation cost related to unvested share-based compensation arrangements granted under the 2009 Equity and Long Term Incentive Plan, the 2013 Stock Incentive Plan, the 2013 Long Term Incentive Plan, and equity awardsaward plans made pursuant to the NASDAQ inducement grant exception for new hires. This cost is expected to be recognized as share-based compensation expense over the weighted average remaining service period of approximately 2.92.84 years.

9. Convertible Senior Notes

In August 2015, the Company issued, at par value, $150.0 million aggregate principal amount of 3.0% convertible senior notes due 2022.2022 (the Convertible Notes). The Convertible Notes bear cash interest at a rate of 3.0% per year, payable semi-annually on February 15 and August 15 of each year, beginning on February 15, 2016. The Convertible Notes will mature on August 15, 2022, unless earlier repurchased or converted. The net proceeds to the Company from the offering were $145.4 million after deducting the initial purchasers’ discounts and commissions and the offering expenses payable by the Company.

The Convertible Notes are governed by an indenture (the Convertible Notes Indenture) with U.S Bank National Association as trustee (the Convertible Notes Trustee).

Holders may convert their Convertible Notes at their option at any time prior to the close of business on the business day immediately preceding February 15, 2022 only under the following circumstances:

On or after February 15, 2022, until the close of business on the business day immediately preceding the maturity date, holders may convert their Convertible Notes at any time, regardless of the foregoing circumstances. Upon conversion, the Company will pay cash up to the aggregate principal amount of the Convertible Notes to be converted and deliver shares of its common stock in respect of the remainder, if any, of its conversion obligation in excess of the aggregate principal amount of Convertible Notes being converted.

The conversion rate for the Convertible Notes was initially, and remains, 17.7487 shares of the Company’s common stock per $1,000 principal amount of the Convertible Notes, which is equivalent to an initial conversion price of approximately $56.34 per share of the Company’s common stock.

The Company may not redeem the Convertible Notes prior to August 20, 2018. The Company may redeem for cash all or any portion of the Convertible Notes, at its option, on or after August 20, 2018 if the last reported sale price of its common stock has been at least 130% of the conversion price then in effect on the last trading day of, and for at least 19 other trading days (whether or not consecutive) during, any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption, at a redemption price equal to 100% of the principal amount of the Convertible

Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. No sinking fund is provided for the Convertible Notes, which means that the Company is not required to redeem or retire the Convertible Notes periodically.

If the Company undergoes a “fundamental change” (as defined in the Indenture governing the Convertible Notes Indenture), subject to certain conditions, holders of the Convertible Notes may require the Company to repurchase for cash all or part of their Convertible Notes at a repurchase price equal to 100% of the principal amount of the Convertible Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

The Convertible Notes Indenture contains customary events of default with respect to the Convertible Notes, including that upon certain events of default (including the Company’s failure to make any payment of principal or interest on the Convertible Notes when due and payable) occurring and continuing, the Convertible Notes Trustee by notice to the Company, or the holders of at least 25% in principal amount of the outstanding Convertible Notes by notice to the Company and the Convertible Notes Trustee, may, and the Convertible Notes Trustee at the request of such holders (subject to the provisions of the Convertible Notes Indenture) shall, declare 100% of the principal of and accrued and unpaid interest, if any, on all the Convertible Notes to be due and payable. In case of certain events of bankruptcy, insolvency or reorganization, involving the Company or a significant subsidiary, 100% of the principal of and accrued and unpaid interest on the Convertible Notes will automatically become due and payable. Upon such a declaration of acceleration, such principal and accrued and unpaid interest, if any, will be due and payable immediately.

The Company accounts for the Convertible Notes as a liability and equity component where the carrying value of the liability component will be valued based on a similar instrument. In accounting for the issuance of the Convertible Notes, the Company separated the Convertible Notes into liability and equity components. The carrying amount of the liability component was calculated by measuring the fair value of a similar liability that does not have an associated convertible feature. The carrying amount of the equity component representing the conversion option was determined by deducting the fair value of the liability component from the par value of the Convertible Notes as a whole. The excess of the principal amount of the liability component over its carrying amount, referred to as the debt discount, is amortized to interest expense over the seven-year term of the Convertible Notes. The equity component is not re-measured as long as it continues to meet the conditions for equity classification.

In accounting for the transaction costs related to the issuance of the Convertible Notes, the Company allocated the total costs incurred to the liability and equity components of the Convertible Notes based on their relative values. Transaction costs attributable to the liability component are amortized to interest expense over the seven-year term of the Convertible Notes, and transaction costs attributable to the equity component are netted with the equity components in stockholders’ equity. Additionally, the Company initially recorded a net deferred tax liability of $22.3 million in connection with the Notes.

The Convertible Notes consist of the following: