Sarepta Therapeutics, Inc. (SRPT) Earnings Call Transcript & Summary

Good afternoon, everyone.

Good afternoon, everyone, and thanks for joining us. It's Brian Abrahams, one of the senior biotech analysts here at RBC Capital Markets. We're really pleased to have with us Sarepta Therapeutics, represented by their CEO, Doug Ingram. Doug, thanks so much for joining us.

Thank you for having us, Brian.

So a lot to cover in a short period of time, but maybe I'll kick it off with maybe one of the latest developments that we've seen in the DMD space which is an update on the gene therapy landscape that we've -- we saw last week. So I'd be interested, coming out of that, what your views are on the current competitive landscape in DMD? And what you're seeing as the biggest differentiator between your program and others pursuing micro- or mini-dystrophin gene therapies?

Sure. Thanks for that. Let me say -- before I start, I should say, we have forward-looking statements. I'll be making forward-looking statements. Look to our public filings for all of the various risks and uncertainties that accommodate making statements about the future. So to your good point, let's step back for a second and remind everyone. We have, right now, really 3 micro-dystrophin gene therapy programs for Duchenne muscular dystrophy that exist and that are in patients actually right now. Let's start with ours. I'll talk about ours, and then I'll talk about the 2 others, so you could see where we all are. So our program, which we call SRP-9001, again, is a gene therapy construct with micro-dystrophin, using rh74. And ours is unique. It's very different than the other 2, which have -- which in turn, have some similarities to one another. Our gene cassette, our promoter and our capsid were all designed, tested, optimized, tested again over years by Louise Rodino-Klapac and her team before we got to the place that we are today, where we could begin the -- to start dosing in children and that might explain why we've seen some of the results that we're seeing today, all of the thought that went to it. So we're -- we have a unique -- let's start with what we have. We have a unique capsid, which is rh74. The others don't use rh74. We have a unique cassette that was designed by Louise Rodino-Klapac, and we have a unique promoter. In this case, we use this heavy chain promoter, MHCK7. And as a result of that, we had results. And as you may recall, some time ago, we gave the results of our first 4-patient cohort for this program, SRP-9001, and those results were very impressive on really all measures. Let's start with expression. So the expression was truly astounding. The big issue with gene therapy is whether you can actually, first and foremost, get the gene to the right place so that it can get broad expression. And in neuromuscular, that could be a challenge. The -- if you think about it, muscles everywhere, striated muscles, lean muscle, cardiac muscle, diaphragm muscle. And the good news is that we saw extraordinary expression. We had over 3 genome copies per nucleus on the expression side of things, using both western blots and immunohistochemistry. We were over 90% of normal expression, so really impressive. On the safety side, the therapy was well tolerated by the kids. We didn't see the things that others have been worrying about recently, which is primarily complement activation, as an example, kidney damage and kidney issues as well. And then we looked at the 9-month functional data for these kids and every child at every single measure, and the composite measure, improved over the course of the 9 months and improved in ways that natural history couldn't explain. So we were excited by that. We moved into a placebo trial. We have, by now, in that placebo trial dosed over 35 kids with active therapy. So things are going really well there, and we can talk about what that means. The second program is Solid. So real briefly on Solid's. Solid is a company that was founded -- with a very laudable role. I'd remind everyone that the CEO of Solid is himself a parent of a Duchenne muscular dystrophy kid. So this is a company that was really trying to do the right thing. The problem with Solid's program is that it has been beset by serious safety issues. So Solid's different than our own. Solid doesn't use rh74, it uses AAV9, and it uses a mineralized CK promoter, which is different than what we use. And what they've seen, both in their low dose and their high dose, was significant complement activation, kidney damage as well. And they've been on multiple clinical holds with the FDA, and they're currently on an indefinite clinical hold. And we'll talk about expression in a second, but they were really struggling to see any expression with their therapy as well. So now we go over to Pfizer. So Pfizer's program, which is -- has the most recent data, which was last Friday, but that's the second release of the data, is very different than our own program, but shares a lot of similarities with Solid's. So like Solid, they use AAV9, and like Solid, they use this miniaturized CK promoter. And so what do we see out of their program? The -- let's start with the -- and what they've done, by the way, they've dosed very high. So they have a dose, while it is difficult to correlate precisely, for instance, with our own because they use a different titering method, it's probably 3 or more times higher dose, so really an enormous dose. And what have they shown? So they -- on Friday, they showed 6 -- the results of 6 children in their high-dose cohort, which is the dose they intend to go to their clinical trial with. And 3 of those 6 kids were sent to the hospital as serious adverse events, and they were seeing the kinds of things that you saw on the Solid programs, which is complement activation, there was a kidney failure and the like. And then on the expression side of things, while their dose is significantly multiples higher than our own, they appear to be struggling to get more-than-modest expression as well. I will remind you, Solid, for instance, had 2 doses: their first dose was, they were unable to see any expression of micro-dystrophin; they went to a higher dose, and there, they were able to detect dystrophin but they weren't able to detect it above the lower limit of [ quantification ]. Pfizer has done better than that, but still struggling. They have a dose that is multiple highers than Solid's or our own, and they're seeing an expression level that appears to be a fraction of what we're currently seeing. It is difficult to directly compare expressions in some part because there's pieces of information that they have yet to discuss. They haven't given their western blot data. They have yet to give their genome copies for nucleus, which would be telling. And they haven't given all of their intensity levels on immunohistochemistry, which might be interesting. But they did give their intensity levels. The last go around, they had -- they provided data at PPMD. While they didn't give the data in their main presentation, they did have backup slides from which one could deduce what their intensity level was. And as an example, their intensity appears to be kind of in the mid-teens, and that would compare to ours, that's in the 96% or so. So -- and then -- but let's go to the functional one, because there's a positive in the Pfizer data. Pfizer did seem to show signals of positive functional benefit at these expression levels with these children. It's somewhat difficult to fully deduce what that looks like because they haven't given all the baseline characteristics, but it does appear that these kids may be getting some benefit from this therapy, which is a positive. It's a positive for a host of reasons for us. First, it's a positive because these kids are taking a one-time gene therapy. They probably can never get dosed with gene therapy again. It's a very unforgiving in concept in gene therapy. And so it's good to believe that they can get some benefit from that and from taking that risk. Second of all, it's a significant proof-of-concept for our own therapy. If you can get a functional signal even at these doses and expression, then of course, it gives us only additional confidence over our own study and our own trial, and what we'll see with even more robust expression. So then the final thing is, they said, they're going to move to the next trial, and they're going to do it in the next sort of couple to several months. So they clearly intend to proceed, and that just creates for us a burning platform. We are confident that we have, among the existing programs today, the most -- both quantitatively and qualitatively, the best program for patients in the most robust program with the best, both efficacy, expression and safety profile, and it's incumbent upon us to keep moving to get this therapy to kids. And certainly, that's what we're doing.

Good. What are the right ways to make comparisons on expression? And I guess, what's your view of the contention that Western blot may overinflate expression? And then maybe as a corollary to that, you mentioned function and some -- you guys are seeing functional benefits versus natural history. There is some suggestions of functional benefits that Pfizer is seeing as well. I guess, are there ways to compare those on an apples-to-apples basis, given that the populations are different and they're looking at older and you guys are looking at your patients, at least in the Phase II or...

I think at least one analyst has done that work, and I don't have the analyst's name in front of me. I won't talk about your competitors on this call, but there are ways to correlate it. We haven't done that. On expression, I would say, yes, first of all, I don't think anybody credibly believes that there's -- that there isn't a significant difference in expression levels between our program and theirs. I would find that difficult to envision. The exact differences between those are difficult because they haven't provided their western blot data. They've taken western blot. They've done western blots on all of the kids. It's in their protocol. It's in there. It's disclosed in their protocol on ClinicalTrials.gov. They've updated it. I think their first, first go around, they said they weren't going to provide the western blots because they didn't have time. Then they did provide them a PPMD. They haven't provided that now. I've only heard most recently the contention that western blots might be -- might give greater expression than mass spec. That, number one, has not -- from me, I've never heard it before that was said. Number two, there is no credible reason to believe such is the case. That's certainly not the case in our hands at all. Number three, in fact, there is a reason to believe that what western blot does for sure -- and what -- and I would remind everyone, western blot is the current gold standard. It is the only basis upon which the FDA has ever approved a therapy. What Western blot will do is it calculates the potentially functional dystrophin that exists, and that's because it looks at monomers. It looks at actual monomers of micro-dystrophin or dystrophin. Mass spec can do something different. It may count things that would not be functional, dimers, trimers and the like. So if you were going to look at something and wonder if it was overstating things, one would imagine that it might be mass spec versus western blot. And fourth, to be fair, they could -- if they could resolve this issue by revealing the western blot data on all their kids. The contention that western blot's higher, so they're not revealing it, in fairness, strains credulity. So I've not heard that before, and that's certainly nothing that we've ever heard from scientists or we've seen in our own labs. So...

Got it. So okay. That's really helpful. And then it sounds like the commercial supply scale-up process for 9001 is going well. Can you just maybe describe in a little bit more depth? So what more needs to be done? What are those 2 remaining assays that need to be developed? Where do you stand with those right now?

Yes. So they're -- they -- so -- now let's go back and talk just for a moment about COVID-19 because COVID-19 could have played a -- could have been a significant obstacle for us for manufacturing. Fortunately, we were so far advanced and made so much progress in the preceding 9 to 12 months that we are fully on track right now, and COVID-19 has not created any delays. And so there's sort of 3 big issues: one is just getting facilities and suites and iCELLis units placed, and the good news is we have that largely done. We have a full facility with Thermo Fisher. We have our suites built out with Catalent, Paragon. So that's all in great shape. The next was process development. That was an enormous amount of activity for this organization over a long period of time. We are complete with process development. That's why we're in GMP runs right now. And then you mentioned assays. There are 24 total assays that needed to not only be built, but beyond built, they have to be validated or qualified, depending on the particular assay. The good news is that 22 of the 24 assays are not only complete, but they're all completely validated or qualified, so they're ready to go. The 2 additional ones are completely built, and they are in the final stages of being validated. And the good news on those, while we haven't disclosed the exact assays for competitive reasons, these are not the exotic assays. These are very much generally routine assays and it's -- So all of the most monumental assays and the bespoke assays are done and validated. We have 2 additional assays that are in late stage, and we're in great shape. We have -- we really have no concerns that our assays won't be fully qualified and validated by the time we have the GMP material available.

Great. And what are you guys learning from any initial comparisons between the commercial-grade material that you're currently producing and the clinical construct produced -- used in the first clinical trials? How confident are you that you're going to get to the same levels of expression and function? And the safety is going to look similar with this new product that you're producing. How big of a risk is this?

Well, that is the big focus on the organization right now. That's, I think, part of the process development work. So first, from a potency perspective and an efficacy perspective, that we're very confident we'll be at the right place there because that's, of course, just making sure that you have an understanding, as you move from the HYPERstack approach that we've taken it nationwide to an iCELLis approach, that you translate that over and that you get the same number of active capsids on a sort of a per-kilogram basis. And so I think we're confident about that. And on the rest of it, of course, we're doing all the work to ensure that we are as comparable as is possible between the clinical supply and the commercial supply, and I think things are on track right there as well. Then there will be modest differences, as there must be, as you move from one manufacturing approach to a different approach. But one of the reasons that we've chosen the approach we chose was to reduce the risk of big differences. And that's why people have said, "Well, you were at HYPERstacks, why not move to suspension? Or why not go even further? Why not move to Baculovirus? Maybe you could get even more therapy out of Baculovirus." But one needs to consider the risks what you're taking when you start jumping too far away from the clinical supply. The good news here is that iCELLis units are different than HYPERstacks, but they bear a lot of similarities. We're a mammalian -- we're doing adherent mammalian HYPERstacks. Now we've moved to commercial supply, which is mammalian-adherent, but the iCELLis is essentially a 3-dimensional structure. You -- so you can make more in a smaller place than you can with a more 2-dimensional HYPERstack. So I think we've -- we feel very confident about the approach that we're taking.

Great. We're going to be coming up on some data from your limb-girdle gene therapy program. Can you talk a little bit about the data readouts? And I guess, once you see the high-dose data, what are going to be the key determinants in your decision on dose selection for limb-girdle 2E? And then how much can we conclude at this point, in terms of where patients are, following dosing of the high dose as to the overall safety of that program, of that dose level and really, of the vector -- the rh74 vector itself?

Let's step back for just a second and say, one of the great things about limb-girdle, the limb-girdle approach that we're taking is that it bears a lot of similarity between -- with the approach we're taking with SRP-9001, which is our DMD. So to remind everyone, it's the same capsid, rh74. It's the same promoter, MHCK7. So there is a lot of read through in both directions between limb-girdle and DMD. And so with respect to both limb-girdle and DMD. We have a wealth of preclinical and animal data that describes the safety. So we have a good view in advance, and of course it all comes down to dosing patients. But in advance, we have a good view on where -- on what safety ought to look like and what the safety windows ought to look like. As I'll remind everyone, with respect to SRP-9001, and this is equally applicable to our LGMD, which is called 9003, we had a safety window up to 3x our current dose, as opposed to using supercoiled PCR up to 6xE^14. So we have a good understanding kind of going in on safety and some of the issues. So that -- where are we with limb-girdle? So with respect to limb-girdle, first, we've dosed 1 group of 3 kids at a dose, again, I'm using all supercoiled PCR when I talked about this, at 5 x E13. And we're -- and the good news is, we're in a great place. We're in a privileged place right now because we saw there was, it's -- the therapy is tolerated. Even in larger kids, the 2 kids, just to remind -- 2 of the 3 kids were over 50 kilograms. So these are probably among the largest kids that have gotten gene therapy, and we got great expression. So the good news there is we had, I think, on immunohistochemistry, 51%; and on Western blot, we had 36%. And we have good genome copies per nucleus. So we're in great shape. So that -- the therapy is fit-for-purpose even as we speak. The question for us is, will we get even more expression if we can go to a higher dose? And does it make -- do we get the benefit of a higher expression that justifies the higher dose? And I want to be very clear. With respect to these gene therapies, let there be no doubt, higher is better. Higher expression is better, okay? The -- we want to get the highest possible expression that we can get with a reasonable safety profile because our goal isn't to make -- isn't to bring a better life to child and an adult, sometimes in the case of limb-girdle, for 1 year or 5 years or 6 years, we're trying to extend significantly the potential benefit of this therapy. And so durability is something we need to think about if, obviously, there is going to be much greater possibility of durability the higher you go. So we want to see if we can get higher. So we're doing 1 higher dose of 3 kids. That's at 2xE^14. It's the same dosing that we've done with all the DMD kids. So we feel confident going in on the safety profile in any event. We've dosed all 3 kids. We've -- notwithstanding all of the COVID-related challenges that exist, we biopsied those 3 kids, and we'll get the readout on that in -- we said in the second quarter. So this will be a June event. We're going to find an opportunity in June to disclose the data on the high dose. And what we'll be looking there, to answer your question on this, is just going to be simply a risk-benefit analysis across the 2 doses. And there is no doubt that the second collection of kids are being subjected to a higher amount of capsid and viral load than the other kids. And so to justify that, we need to see a significantly greater amount of expression. For instance, we're seeing 51% protein-positive fibers, if it was -- without judging in advance, if it was 54%, we would probably really question whether those kids would benefit from a significantly higher dose. So we need to -- so that's -- because it's going to be basically a balance of viral load and safety against the -- whether we can see additional expression. One of the exciting things about that high dose as well is, it is 2xE^14. It's the same dosing that we're using with Duchenne muscular dystrophy. And so I say this at a bit of risk, I don't have the data in front of me. So please don't read anything into this. But there will be interesting read through back and forth between DMD and limb-girdle. So if we see -- it'd be really interesting to see if we can start getting really significant expressions even above 51% if we went to a higher dose. I think it would start providing additional evidence that there's something about our construct and probably, most likely rh74, that explains why we get this great tropism. We get great genome copies, and we get great expression, and we can do it safely. So I think there is going to be a lot of read-through from the high dose of limb-girdle, but we'll see what that looks like.

Any reason you're aiming to present the high-dose biopsy data, expression data alongside the 48-week functional data for low dose? Does that just -- are they coming at the same time? Or is it important to contextualize one versus the other as you kind of talk publicly about the potential risk-benefit in the dosing decision going forward?

No, it's completely coincidence. So it's just coincidence. It's just -- we would like to get the data on the high dose as soon as possible. That's the absolute soonest possible. That's all. And we won't have functional data on the high dose, of course, because it's only 2-month biopsies. With that said, I would remind us, with DMD, the question on function is an important one. You take a gene and you significantly edit it, and then you create a resulting protein. And the question is, does that protein remain structurally viable and provide a benefit? There's a lot of good reasons to believe, animal models, natural history and the data we've seen so far that it is, but that's a real question one answers. This is beta-sarcoglycan, the 2E native. It's the native. So I mean without being overly -- I have not yet heard a good thesis on why it isn't going to be bad for kids. It's the very thing. It's well-characterized structural protein. This is what they're missing. This is why they're dying. And so if we can replace this in robust amounts, one would naturally presume that you're going to get the benefit from that.

Good. Just a couple more quick questions. I guess on the commercial side, obviously, COVID's been a headwind to some of the new drug launches. What are your latest thoughts as to when a patient's eligible for VYONDYS 53 could start to making into the clinic to get therapy? And how do you envision the competitive landscape amongst the exon 53 patients playing out with a competitor potentially arriving in the market soon?

Yes. So as we said on our earnings call, COVID-19 does create some headwind on dosing and therefore, like -- let's use it as a market for that revenue. And so we've said, we will take a haircut to revenue over the course of this year, some on EXONDYS, more on VYONDYS. I gave the classic example as you can't get into a site to get infused. And if that happens, that's going to slow revenue. The good news is, by the way, looking at the broader picture, as we've said, everything we see right now tells us it's going to be modest, and it's going to be short-lived. This is not some significant long-term issue, but it does have a headwind. It's a bigger headwind when we were at launch than it is with an existing therapy. For a host of reasons, this obviously launched alone, is one reason. The other reason is that with respect to these Duchenne muscular dystrophy therapies and EXONDYS and VYONDYS, the kids often start in hospital, and then they rapidly move to in-home infusion. So the vast majority of EXONDYS, boys and occasionally, girls, are at home. They're getting home infusions. So they're not having that particular issue in the hospital, and that reduces some of the COVID-related concerns. With a launch product like VYONDYS, there are more that have to initiate in-hospital. And that will dampen the launch and just essentially slow the line a bit. That's what we will see over the course of this year. It won't be a long term issue, but it'll -- it will certainly be a short-term issue. We're doing a lot of things to resolve that. Kids are getting into hospitals right now. I don't want to create the impression that this is an all-or-nothing. There are hospitals that are open. There are infusions that are open, and we're getting kids to -- some kids to initiate in an in-home infusions, even with respect to VYONDYS. So it's not an all-or-nothing, but it definitely will slow the way. Looking out into sort of the August timeframe, one would assume that we will have a competitor, which is Nippon Shinyaku, NS Pharma. They have a competitive therapy out there for exon 53-amenable kids. So it'll be competing directly against VYONDYS. The short answer on that is, that's good for us. I think a competitor out there is going to be good for us. Certainly having a competitor -- I would like to test our mettle with a competitor in advance of the launch of micro-dystrophin, as an example, so we invite it. It -- there's nothing about that therapy that will have any features that are, from our perspective, based on all the data that we know, preferable to the -- to VYONDYS. So we're not concerned about it, and certainly, we are an organization that has spent well over a decade single-mindedly focused on bringing a better life to children and families with Duchenne muscular dystrophy. And so I think we're going to do quite well in that competitive arena. I frankly find it a positive for all of us and for families.

Great. One more quick one. I know we're at the top of the hour, but just maybe for you or for Sandy. I see Sandy on the line as well. Given where you guys are with your balance sheet, following the Roche deal, the Priority Review Voucher sale. What are your latest thoughts on capital allocation strategy? I mean is it squarely focused on ramping up manufacturing? Or are there other areas that you might look to expand into or build upon?

Doug, you want me to take it?

Yes. Yes, go ahead. That's for you, Sandy.

Yes, sure. So Brian, we don't expect to change our capital allocation strategy significantly at this point. It's really -- we focused on execution. Most of the cash is being spent on manufacturing, making sure that we have the capacity building, other efficiencies that we can get in the organization as well. And then BD is going to remain unchanged. As you've seen we did a small -- a few smaller deals with Dyno recently. Prior to that, we did StrideBio, gene editing with Harvard. So you'll see those kinds of deals. Nothing transformative, but from an overall focus perspective, it will be unchanged in terms of capital allocation.

Okay. Great. That's super helpful. Well, still a lot more to cover but unfortunately, we're out of time. So Doug and Sandy, thank you guys so much. Really appreciate you taking the time. Great to catch up. And thanks, everyone, for listening. This ends the session.

Brian, thank you.

Thanks, Brian.

Thanks.