PTC Therapeutics (PTCT) 8-K/A Financial Statements and Exhibits

Exhibit 99.2

Emflaza Business

Financial Statements as of and for the
Years Ended December 31, 2016 and 2015, and Independent Auditors’ Report

EMFLAZA BUSINESS

TABLE OF CONTENTS

	Page
INDEPENDENT AUDITORS’ REPORT	1–2
FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015:
Balance Sheets	3
Statements of Operations	4
Statements of Comprehensive Loss	5
Statements of Net Parent Company Deficit	6
Statements of Cash Flows	7
Notes to Financial Statements	8–12

INDEPENDENT AUDITORS’ REPORT

To the Board of Managers of
Marathon Pharmaceutical Holdings, LLC:

We have audited the accompanying financial statements of the Emflaza Business (the “Business”) (a wholly owned business of Marathon Pharmaceutical Holdings, LLC), which comprise the balance sheets as of December 31, 2016 and 2015, and the related statements of operations, comprehensive loss, net parent company deficit, and cash flows for the years then ended, and the related notes to the financial statements.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Business’ preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Business’ internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Emflaza Business as of December 31, 2016 and 2015, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

Emphasis of Matter

As described in Note 1, the Emflaza Business’ financial statements have been derived from the financial statements and accounting records of Marathon Pharmaceutical Holdings, LLC. The carve-out financial statements include the allocation of certain assets, liabilities, expenses, and income that have historically

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been held at the Marathon Pharmaceutical Holdings, LLC corporate level but which are specifically identifiable or attributable to the Emflaza Business.

/s/ Deloitte & Touche LLP

Chicago, Illinois

May 10, 2017

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EMFLAZA BUSINESS

BALANCE SHEETS

AS OF DECEMBER 31, 2016 AND 2015

(In thousands of dollars)

	2016	2015
ASSETS
CURRENT ASSETS:
Prepaid expenses	$ 1,565	$ 733
PROPERTY AND EQUIPMENT—Net	470	305
OTHER ASSETS	117	93
TOTAL ASSETS	$ 2,152	$ 1,131
LIABILITIES AND NET PARENT COMPANY DEFICIT
CURRENT LIABILITIES:
Accounts payable	$ 3,953	$ 1,588
Accrued compensation	2,605	2,096
Accrued expenses	753	756
Total current liabilities	7,311	4,440
OTHER LONG-TERM LIABILITIES	434	379
COMMITMENTS AND CONTINGENCIES (Note 5)
Total liabilities	7,745	4,819
NET PARENT COMPANY DEFICIT	(5,593)	(3,688)
TOTAL LIABILITIES AND NET PARENT COMPANY DEFICIT	$ 2,152	$ 1,131

The accompanying notes are an integral part of these financial statements.

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EMFLAZA BUSINESS

STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

(In thousands of dollars)

	2016	2015
OPERATING EXPENSES:
Salaries and benefits	$ 15,387	$ 11,820
Selling and distribution	7,416	1,279
Research and development	12,957	14,335
General and administrative	6,438	5,124
Depreciation	122	56
Total operating expenses	42,320	32,614
NET LOSS	$ 42,320	$ 32,614

The accompanying notes are an integral part of these financial statements.

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EMFLAZA BUSINESS

STATEMENTS OF COMPREHENSIVE LOSS

FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

(In thousands of dollars)

	2016	2015
NET LOSS	$ 42,320	$ 32,614
OTHER COMPREHENSIVE INCOME
COMPREHENSIVE LOSS	$ 42,320	$ 32,614

The accompanying notes are an integral part of these financial statements.

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EMFLAZA BUSINESS

STATEMENTS OF NET PARENT COMPANY DEFICIT

FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

(In thousands of dollars)

BALANCE—December 31, 2014	$ (2,098)
Net loss	(32,614)
Net transactions with Marathon Pharmaceuticals, LLC	31,024
BALANCE—December 31, 2015	(3,688)
Net loss	(42,320)
Net transactions with Marathon Pharmaceuticals, LLC	40,415
BALANCE—December 31, 2016	$ (5,593)

The accompanying notes are an integral part of these financial statements.

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EMFLAZA BUSINESS

STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

(In thousands of dollars)

	2016		2015
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$ (42,320)		$ (32,614)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation	122		56
Deferred rent and other noncash items	55		259
(Increase) decrease in assets:
Prepaid expenses	(856)		(566)
Increase (decrease) in liabilities:
Accounts payable	2,365		547
Accrued expenses and other current liabilities	506		1,528
Net cash used in operating activities	(40,128)		(30,790)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment	(287)		(234)
Net cash used in investing activities	(287)		(234)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net transactions with Marathon Pharmaceuticals, LLC	40,415		31,024
Net cash provided by financing activities	40,415		31,024
NET CHANGE IN CASH AND CASH EQUIVALENTS	—		—
CASH AND CASH EQUIVALENTS—Beginning of year
CASH AND CASH EQUIVALENTS—End of year	$	—	$	—
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION—Cash paid for interest and income taxes	$	—	$	—

The accompanying notes are an integral part of these financial statements.

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EMFLAZA BUSINESS

NOTES TO FINANCIAL STATEMENTS

AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

(In thousands of dollars)

1. BASIS OF PRESENTATION

Basis of Presentation—Marathon Pharmaceuticals, LLC (“Marathon”) develops specialty pharmaceuticals for high-need populations, including patients who have limited or no other treatment options. On March 16, 2017, Marathon entered into an asset sale agreement with PTC Therapeutics, Inc. (PTC) for all rights to Marathon’s product Emflaza^TM (the “Company” or the “Emflaza Business”) contingent on customary closing procedures. This sale closed on April 20, 2017. Proceeds from the sale are comprised of up-front payments of $75 million in cash and $65 million in common shares of PTC, and contingent future sales-based milestone and royalty payments.

These financial statements present the results of the Emflaza Business, which consists of all resources, personnel and otherwise, devoted to the research, development, manufacture, distribution, sale, and use of Emflaza, including trademarks. Emflaza^TM was approved by the U.S. Food and Drug Administration on February 9, 2017 for the treatment of Duchenne muscular dystrophy in patients 5 and older. Emflaza^TM had not been commercialized during the periods reflected in these financial statements, as such no revenues have been allocated to the Emflaza Business.

The accompanying financial statements have been prepared on a stand-alone basis and are derived from Marathon’s accounting records. The financial statements reflect the Emflaza Business’ historical financial position, results of operations, comprehensive loss and cash flows prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”).

Cash and cash equivalents held by Marathon were not allocated to the Emflaza Business. All intercompany transactions and accounts with Marathon have been eliminated. All intercompany transactions between Marathon and the Company are considered to be effectively settled in the financial statements at the time the transaction is recorded. The total net effect of the settlement of these intercompany transactions is reflected in the Statements of Cash Flows as a financing activity and in the balance sheets as net parent company deficit. These amounts have been reflected as an investment by Marathon as it was not intended that these amounts would be settled at any time.

The financial statements include allocations of expenses related to certain corporate functions, including management, legal, finance, human resource, information technology, risk management and unit-based compensation. These expenses have been allocated to the Emflaza Business based on direct usage or benefit where identifiable, with the remainder allocated on pro rata basis of headcount and other measures. Marathon considers the expense allocation methodology and results to be reasonable for all periods presented. However, the allocations may not be indicative of the actual expense that would have been incurred had the Emflaza Business been operated as an independent company for the periods presented.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates—The financial statements have been prepared in conformity with GAAP. These accounting principles require management to make certain estimates and assumptions that can affect the reported amount of assets and liabilities and contingent liabilities at the date of the financial

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statements, as well as the reported amounts of expenses during the periods presented. Significant estimates include unit-based compensation expense and allocation of corporate expenses and liabilities. Actual amounts could differ materially from those estimates.

Research and Development Expenses—Research and development costs are expensed as incurred. Payments due to third parties in connection with research and development collaborations prior to regulatory approval are expensed as incurred.

Fair Value of Financial Instruments—The financial statements include accounts payable and accrued liabilities, all of which are short term in nature and, accordingly, approximate fair value.

It is the Company’s policy, in general, to measure nonfinancial assets and liabilities at fair value on a nonrecurring basis. The instruments are not measured at fair value on an ongoing basis, but are subject to fair value adjustments in certain circumstances (such as evidence of impairment), which, if material, are disclosed in the accompanying footnotes.

Property and Equipment—Property and equipment are recorded at historical cost. These costs are depreciated over the estimated useful lives of the individual assets using the straight-line method. The Company depreciates leasehold improvements over the life of the respective leases or the service lives of the improvements, whichever is shorter. Any gains and losses from the disposition of property and equipment are included in the results of operations as incurred. The following table shows estimated useful lives of property and equipment:

Description	Useful Life
Furniture and fixtures	7 years
Computer equipment and software	3 years
Leasehold improvements	Lesser of asset life or remaining lease term

Income Taxes—Marathon is treated as a partnership for federal and state income tax purposes. Income is allocated to members in accordance with the terms of Marathon’s operating agreement and is included in their individual income tax returns. Therefore, no liability or provision for federal income taxes has been allocated to the Emflaza Business’ financial statements.

Equity Awards—Certain employees of Marathon have been granted value appreciation rights (VARs) in an affiliated company, MP Investor, LLC (“Investor, LLC”), an entity with a 67% ownership interest in the parent of Marathon. Certain other employees of Marathon have been granted value appreciation rights and unit options in Marathon Pharmaceutical Holdings, LLC (“Holdings LLC”), the parent of Marathon. Accounting Standards Codification (ASC) 718—Compensation—Stock Compensation, specifies that awards of the parent company to employees of consolidated subsidiaries are reported as a compensation expense with an offset to capital contributions, provided no consideration is paid from the subsidiary to the parent. Marathon has not provided any consideration to Investor, LLC or Holdings, LLC for such awards.

Accordingly, compensation expense incurred by Marathon related to such awards has been allocated to the Emflaza Business’ statements of operations on a specific identification basis by recipient. The expense is allocated to the Emflaza Business based on the recipients’ level of support of the Emflaza Business (see Note 6—“Equity Awards”).

Recently Issued Accounting Pronouncements—In March 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-09, Compensation-Stock

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Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. ASU No. 2016-09 provides amended guidance that simplifies several aspects of the accounting for employee share-based payment transactions, including the accounting for forfeitures, and statutory tax withholding requirements, as well as classification in the statements of cash flows. The new standard will become effective for the Company’s fiscal year ending December 31, 2018. Early adoption is permitted and the application of the guidance requires various transition methods depending on the specific amendment. The Company is currently assessing the impact of this amended guidance and the timing of adoption.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) which provides amended guidance to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The new guidance clarifies the criteria for distinguishing between a finance lease and operating lease, as well as classification between the two types of leases, which is substantially unchanged from the previous lease guidance. Further, the new guidance requires a lessee to recognize in the statements of financial position, a liability to make lease payments (the “lease liability”) and a right-of-use asset, initially measured at the present value of the lease payments. For finance leases, a lessee should recognize interest on the lease liability separately from amortization of the right-of-use asset. For operating leases, a lessee should recognize a single lease cost, calculated so that the cost of the lease is allocated over the lease term on a generally straight-line basis. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election not to recognize lease assets and lease liabilities. The new standard will become effective for the Company’s fiscal year ending December 31, 2020. The Company is currently assessing the impact of this amended guidance and the timing of adoption.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. ASU No. 2016-15 provides specific guidance on eight cash flow issues where current guidance is unclear or does not include any specifics on classification, including contingent consideration payments made after a business combination and distributions received from equity method investees, among other items. The new standard will become effective for Company’s fiscal year ending December 31, 2019. The Company is currently evaluating the impact of this ASU on the financial statements and related disclosures.

3. PROPERTY, PLANT, AND EQUIPMENT

Property, plant, and equipment at December 31, 2016 and 2015, consist of the following:

	2016	2015
Leasehold improvements	$ 478	$ 241
Computer equipment and software	180	99
Furniture and fixtures	54	54
	712	394
Less accumulated depreciation	(242)	(89)
	$ 470	$ 305

Depreciation expense was $122 and $56 in 2016 and 2015, respectively.

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4. ACCRUED EXPENSES

Accrued expenses at December 31, 2016 and 2015, consist of the following:

	2016	2015
Research and development services	$ 360	$ 490
Professional fees	240	198
Consulting and other services	153	68
	$ 753	$ 756

5. COMMITMENTS AND CONTINGENCIES

Lease Commitment—The Company has various operations in leased facilities. Rent expense allocated to the Emflaza Business and included in the statements of operations for 2016 and 2015 was $452 and $469, respectively.

The following summary presents, in the aggregate and for the indicated years, future minimum lease payments required under the terms of the present operating leases:

Years Ending
December 31
2017	$ 511
2018	522
2019	523
2020	33
Minimum operating lease payments	$ 1,589

Litigation—From time to time, the Company is subject to claims and suits arising in the ordinary course of business. The Company accrues for such liabilities when they are known if they are deemed probable and can be reasonably estimated. There were no such liabilities reflected in either of the balance sheets as of December 31, 2016 or December 31, 2015.

6. EQUITY AWARDS

Employees of Marathon are eligible to receive unit options, VARs and Restricted Incentive Units under a variety of incentive plans. Awards under these plans have a 10-year contractual term and vest over the period specified in the applicable award agreement (generally four or five years from the date of grant), at achievement of a performance requirement or upon a change of control (as defined in the applicable plan).

Unit-based compensation expense allocated to the Emflaza Business was $2,372 and $3,345 for the years ended December 31, 2016 and 2015, respectively.

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7. RELATED-PARTY TRANSACTIONS

Marathon is party to a management agreement for professional services provided by a related party. The related party is an entity that shares common ownership with Marathon. In addition, Marathon’s chief executive officer is the president and owner of the entity. For the years ended December 31, 2016 and 2015, the Emflaza Business was allocated $1,712 and $1,800, respectively, in management fee expenses to this related party that is included in general and administrative expenses within the statements of operations. As of December 31, 2016 and 2015, there were management fees payable of $402 and $483, respectively, reflected as a component of accounts payable.

The operations of the Company are funded by Marathon. All such funding is accounted for through parent company investment. Marathon’s funding of the Emflaza business was $40,415 and $31,024 for the years ended December 31, 2016 and 2015, respectively.

8. SUBSEQUENT EVENTS

The Company has evaluated and, as necessary, made changes to these financial statements for subsequent events through May 10, 2017, the date these financial statements were available to be issued.

On February 9, 2017 the US Food and Drug Administration approved the Company’s New Drug Applications for Emflaza oral tablets and oral suspension for the treatment of Duchenne Muscular Dystrophy in patients of five years of age and older. This approval triggered a milestone payment of $2 million, which was capitalized as an intangible asset.

On March 16, 2017, Marathon entered into an asset sale agreement with PTC Therapeutics, Inc. (“PTC”) for all rights to Marathon’s product Emflaza^TM, contingent on customary closing procedures. Assets transferred under this agreement exclude the Company’s Priority Review Voucher. This sale closed on April 20, 2017. Proceeds from the sale are comprised of up-front payments of $75 million in cash and $65 million in common shares of PTC, and contingent future sales-based milestone and royalty payments.

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