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

Okay. Hello, everyone. Thanks for joining us this afternoon at Baird's Virtual Health Care Conference, I'm Brian Skorney, I'm one of senior biotech analysts here. Joining us virtually next is the management team from Sarepta Therapeutics. It's a really exciting company. I've been following it for a number of years. I'll let them introduce themselves and the company to all of you before we get into more of a Q&A session. So maybe to start off, Doug, if you could give us a little bit of a background around Sarepta's history and where you guys are focused on right now?

Sure. Thanks a lot, Brian. Thanks for having us today. Two things, one, I'm supposed to remind you that I will -- you'll likely ask me questions that will require me to make forward-looking statements. You should look at our public filings about the risks and uncertainties attended with that. I am the CEO of Sarepta. With us also today is Ian Estepan, who is not only our Head of IR, but my Chief of Staff as well. And then just broadly. So just there has been some recent activity and issues, and we'll talk about all those. Let me give you the broader perspective on Sarepta. Sarepta is, of course, a company laser-focused on bringing a better life to patients with rare diseases, rare genetic diseases. It's really focused right now significantly on neuromuscular diseases and neurological diseases. And in the center of all that, we have this vision to bring a better life to children with Duchenne muscular dystrophy. We have done a lot over the last 3 years to really build out a vision and then bring together the tools and the resources to make that vision a reality. And we have now an over 40 program pipeline across those RNA. And we've got a number of approved therapies that are RNA therapies. We have another one that's been filed, and we'll hear about that in the early part of next year, all in Duchenne muscular dystrophy. And then we have a significant number of programs in gene therapy. We have made a very significant bet on the idea that gene therapy will be -- because of the -- where the science of gene therapy is today, will be a big part of transforming lives, and we've got some really exciting programs there, and the most near-term one is SRP-9001 to treat Duchenne muscular dystrophy with a form of dystrophin called micro-dystrophin. I'm sure we'll talk about that. We -- I mean we also have gene editing as well. I should note, we have a gene editing innovation center in Durham, North Carolina. So we're very focused on genetic medicine and bringing a better life to patients with rare disease, neuromuscular and neuro. Right now, we have done a lot of building over the last few years. We are sitting today at about 850 employees or about 1,100 total workers with contingent workers, starting at about 200. So we've really built for the future. We've built an enormous focus on manufacturing. We have nearly 400 or so, maybe 350 or so technical operations people, manufacturing quality, process development, analytical development as well that we're focused on, and of course, we're a commercial stage organization as well. So we've got a real opportunity to do a lot of good with the tools that we have in front of us. We started this year with a lot to do in 2020. And then, of course, as is always the case, it's difficult to predict the future. Hence, the need to talk about forward-looking statements, this pandemic hit. What I was surprised by, to be honest, but excited by, and I've said this many times, is that notwithstanding this pandemic and continuing to stay focused. And we are largely on track as a company to hitting our milestones across the course of this year, even as it relates to serving the community with our existing therapies. While we pulled our guidance for the year out of some uncertainty regarding whether certain patients can get in to the clinics to get their infusions and the like, really, generally speaking, the impact of COVID-19 even upon that has been very modest. So I'd say we've got a lot to do. We still live in a time of uncertainty with the pandemic. Team's getting it done. And we are generally hitting our milestones. We obviously have -- we'll talk about this, Brian, I'm sure very shortly, we have the results of the Type C that we're going to have to work our way through in the coming short period of time, hopefully. But other than that issue, I think things have gone very well from a manufacturing perspective. From a development perspective, I won't go into a ton of detail on it, but I'm happy to answer questions. From a science perspective, the science is really breaking our way on the science of gene therapy and the results that we're seeing early days, both the DMD and limb-girdle and the like, sort of making the point that we seem to be on the right track of this group from a gene therapy perspective. And also, I believe, from an RNA perspective. With that, I won't continue the monologue and I will answer questions.

So maybe diving right into kind of gene therapy program, SRP-9001. Talk maybe a little bit very high level for the generalists who are listening. What is that SRP-9001? And how is the gene therapy approach to tackling Duchenne muscular dystrophy hoped to be effective?

Yes. Okay. So I apologize for talking to people about things they may know a ton about, but just so we're clear. So we're talking about gene transfer therapy here, right? This is not gene editing. This is not CRISPR-Cas9, we're excited about SRP-9001. This is gene transfer. So what we do there is we essentially in gene transfer therapy, we highjack a virus, a viral vector, which is AAV, which is the one that is used commonly today. We use it as the delivery device. We engineer out the self-replicating aspects of it. And we engineer what we want to deliver and understand Duchenne muscular dystrophy. Duchenne muscular dystrophy is a devastating disease. It is a kill. Not some of the time, all of the time. It will kill 100% of children who have it. And for a frustratingly -- for frustrating reason that in our muscles, you and I, Brian, and others on the call, we have this shock absorber called dystrophin. It attaches to the short limb of our muscle and it protects our muscles so -- when we move. So when we move our muscles, it spreads sheer force and it ensures that our muscles don't essentially rip themselves apart in the process of activity and moving. And we have an infinitesimally small amount of this dystrophin. We have 0.002% of our muscle mass, that equivalent is dystrophin. And yet that small amount of the shock absorber is the difference between being, let's say, you say both or being one of these children who have Duchenne muscular dystrophy because they have a mutation on the gene that makes dystrophin. And they don't make any dystrophin. They basically make 0 dystrophin. As a result of this, every time they move their muscles, they're damaged, they degenerate it every day, and they will, through a fairly predictable course, struggle by the time they're very young, in the 2, 3, 4 years old, they'll be struggling. By the time they're 8, they'll be struggling to walk. By the time they're 13 or so, there'll be in a powered wheelchair. By the time they're in their late teens, they'll be struggling to breathe, they'll be struggling to move their upper limbs. And the -- by the time they're in their early 18s and their early 20s, this disease will take them. Our program does the following. We have engineered -- now understand this, as little as -- even though there's a small amount of dystrophin in our body, the actual gene, the codes for dystrophin is quite long. It's so long that it doesn't fit into the capsid. So we have used natural history and design and the like to create what's called micro-dystrophin as they edited down versions of dystrophin that -- but that, at least, according to all our animal models and even our early work, retains its functionality. And we code -- we create that micro-dystrophin gene and we put it in the vector and then we dose these kids with trillions upon trillions of this viral vector. And the great news is, and we've got early results to show it we get an enormous amount of this construct to the right place in the first 4 boys that we announced some time ago. We had about 3.3 genome copies per muscle nucleus. So just an enormous amount at the right place. And then really extraordinary expression, we're getting expression up here in the nearly normal range of expression. And then there's a -- there's tons of good reason to believe that it acts functionally and could be potentially transformative to kids with Duchenne muscular dystrophy. So that's where we are with the construct, and that's why we're very excited about it. It really does, at least, provide for us an opportunity if it works to greatly extend the lives and then transform literally thousands of children, 10,000 or more children in the United States and then thousands and thousands more around the world who are going to suffer with and otherwise be taken by this disease Duchenne. So that's what we're excited about. We're moving like mad. Just to tell you where we are quickly, you already know about that, but I'll say we did an early proof-of-concept, we had dosed 4 kids. We announced the 1-year results on those kids, [indiscernible] announce it actually was in JAMA Neurology, fantastic results. They're outperforming natural history. They're also improving in NSAA, which is the functional measures and all the time tests. It's been generally safe and effective and well tolerated in those first 4 boys. So based on all of that, we went to a placebo-controlled trial using clinical material. We've now dosed all the children for the main study. By the end of this year, we'll have dosed, between the first study and this study, 45 kids, that's a significant number of kids. And we'll have the readout on that placebo trial early next year. And our goal right now is to get -- we've now got to create -- we have already created it, the commercial material and the process and the assay development work for -- to be able to serve the market commercially. And we need to start a trial to use that commercial material to confirm that the commercial material will operate in the same way as the clinical material. And it's our goal to get that started in the second half of this year.

Got it. So maybe focusing on the clinical side of things right now with the placebo-controlled study 102, outcomes coming, hopefully, early next year or sometime next year, certainly. What gives you confidence in a 1-year study being able to show a statistically significant effect on a functional endpoint like NSAA given the size of the study?

Yes. So we've done a lot of work on the powering of the study. And in fact, you will -- may recall, when the study started, it was a 24-patient study. Now the powering for a 24-patient study suggested that -- hold on just 1 second, I'm going to just -- I think if you're hearing a pinging noise, I want to try to turn this off. These are the vagaries of work from home, I'm sorry about that. The powering assumptions for 24 patients in the study suggested that it was sufficiently powered but just so. The great news is -- but it was limited because we didn't have the clinical material to go bigger. We were able to work with our clinical material supplier, Nationwide Children's Hospital, get additional material. And that's where we got the 41-patient study that we have today. And we did a lot of powering calculation in advance of determining that what was to be a 40-patient study, it over enrolled to 41. And we feel very confident about it. So we have very good data on the way kids -- the course of the disease over the 4- to 7-year-old period. We limited the trial to a patient population where you would see the functional benefits of this from a mechanism of action perspective. We then -- we're even more careful to make sure that we balance the age ranges to 4- to 5-year-olds, at similar to, but slightly differently than 6- and 7-year-olds. So even as between those age groups, we balanced them across the placebo and active arm. We've also placed in ceilings and floors to ensure that we don't have outliers that could create additional variability and standard deviation that would be inconsistent with our powering. And based on that, based on our understanding of the natural history, we've got probably more than anyone else having been in Duchenne muscular dystrophy for over a decade now. We've got more patient level data, I think, than probably anyone in biotech on Duchenne muscular dystrophy. We feel very good about the powering. At the time of the powering, we were well over 90% powered. So we will get those results early next year, but we feel very good about the study and its design.

All right. So when we think about the next study that you're planning to run, commercial product study. There's been a lot of debate coming off of last night. You got an announcement that maybe there's a delay or at least the FDA, in a Type C meeting, asked for some additional assays. So maybe you can just kind of walk through with us, what exactly the FDA requested? What it sort of implies for the time line to get the study up and running? And any other color the FDA had, there's been a big debate on the reasonableness of the manufacturing process and the plan to kind of integrate the dystrophin expression data from this next study with the placebo-controlled functional data from the 102 study. Any response from the FDA on that side?

Well, we -- that latter point is not -- I think I have said to people before, that's not a point that we have raised with the agency yet. So that's not been a subject of the Type C meeting. So just to remind everyone about where we were going and where we are. One of the things we had said often is there were 2 -- we need to -- we want to -- if we can, we want to start a study using commercial process material this year. It's extraordinarily important that we do that. And we've known for quite some time that, that's an important step toward getting this therapy approved and to patients assuming that this therapy ends up being as we've certainly hoped and believe it will be safe in effication for Duchenne muscular dystrophy. And that the big gating item there is to have a Type C meeting and get the concurrence of the agency. And the approach that we're taking and the manufacturing approach and the process of all approach and the like and allowing us to start. So we have -- so that's in the formal of what's called the Type C meeting, and that just happened within the last few days. And there's one thing to understand because when we get to time lines, you're going to hear a certain amount of uncertainty from me and you're going to wonder, why are you so uncertain. And it really relates to the fact that this has been a meeting on the written record, not on a live dialogue. And so I want -- let's make sure we understand that. We call this a Type C meeting, but it's a meeting all in the writing. So we briefed the meeting. We requested that -- of the agency that we have a live meeting. We think this is extraordinarily important this Type C meeting for the program, but more importantly, for patients. But we were not granted a live meeting. And in fact, we weren't -- there was no dialogue or exchange in advance of the meeting, so no exchange of e-mails or dialogue or teleconferences or the like. Now before one wonders about that, that, as I understand it now, is not atypical right now in this division. Remember, this division is already very burdened with an enormous amount of cell and gene therapy, INDs and the like and a lot of work. But of course, the COVID-19, I'm quite confident, has placed additional burdens on this group. So we are not being treated, as far as I know, any differently than others right now. This is a typical issue, but it does create for us some uncertainties because all we can do is see the written record. And so what we got in the minutes, there are a number of suggestions and requirements and we can address all those. But the gating item that we see in the minutes to starting the next trial was a disagreement from the agency or a request for additional information and an additional assay on our potency assay. Now we are -- we -- now to a couple of things just to understand so we're on the same page. There is no complaint about the results of our potency assay. It is not as if we have set a spec. We're comfortably within the spec for potency. That isn't the issue. The issue is that the agency, as best we can tell from the written record, once an additional assay or orthogonal assay confirming potence. That is -- on its face, that surprised us. I want to be direct about it, it surprised us for 2 separate reasons. The first reason it surprised us is that we were very proud of our potency assay. And we actually think it's a very elegant approach to answering the potency issue as a release assay. We have sort of prove with the potency assay of broadly 2 things with respect to gene therapy because the gene therapy is complex. You have to prove that the viral vector gets to the right place in a consistent manner, and that it has the biological functional activity -- the gene that's inserted has the biological functional activity that one would desire. And in this case, of course, it's the creation, the making of the protein and its micro-dystrophin protein. And that our assays that we've used, from our perspective, do a very elegant job of showing just that. We're in a unique position to be able to do that because we have this very well-validated long-held model, which is the mdx mouse for Duchenne muscular dystrophy. So we were surprised that they -- that, that was their perspective. And we were also surprised for another reason, which was that we have provided this to them in May. We had submitted our approach to the potency assay in May. At least under the strict regulatory requirements, you would expect to hear no later than 30 days from the agency if they have a disagreement or a concern or a question, otherwise, you would assume that the approach was acceptable. And of course, that happened in May and we didn't hear until the last couple of days. But with that said, I do want to remind people yet again, the agency is overburdened right now with COVID and cell and gene therapy. So it's not -- with the benefit of hindsight terms that it's not an atypical situation that we're dealing with right now and address it. And more important than that, it's a very resolvable issue on its face. We have -- we are not going to stand on our view on assays. We're happy to understand the agency's perspective and then address the issues and then satisfy them. And we have a host of potential assays that we've already developed that could easily be very rapidly qualified or validated and that could, in addition to what we already have, provide additional confirmation of potency. So on the face of it, this seems to be quite a direct and fairly solvable issue. Now with that said, the real issue for us is timing. Our goal here in the Type C was to get the blessing to start our next trial really as soon as possible. And we can't do that until we get the concurrence of the agency, and there are a number of ways to do that. In a normal world, if you weren't dealing in this strange world with the pandemic and otherwise, one would assume that an informal discussion and dialogue would resolve these issues because all we need to do is understand what they want, and we have a number of different approaches that can give them what they want, and we can do that very quickly. And that could be very rapid. But I can't say yet whether that informal process is going to be the process given where we are, there's a more formal process, of course, a more formal process would to be to request the Type A meeting. That is officially about a 60-day process. It can be a little bit longer if you have clock stops and the lag. You could imagine it being a longer process like a formal dispute resolution process. We have been through that in the past in another area. That was about a 4-month process there. I do not believe that they sit here today with the understanding that there is some speculation on what the process is. I do not believe that's going to be the process that we're going to go down. But the bottom line on all of this is to say the agency would like another approach to potency assays. We can certainly understand better what they would like, and we can easily satisfy them. We believe we could do it rapidly, but we need to see if the process is a formal process or an informal process. And of course, these are early days as we don't have the answers to those questions yet.

Okay. Is the FDA actually a gating factor? Or are you just choosing to ensure that the FDA has buy-in prior to the start? I mean this is just a potency assay, that you feel you're meeting their thresholds. Could you not just get IRB signed off to run clinical studies at centers and go with what you have?

I cannot, as a standard today, comfortable proceeding with the trial until I know that the agency generally agrees on our approach to the potency assay. So I would like -- the agency plays an enormously important role. They are the watchdog for patients and regulator. And so I want to make sure we listen loudly to them. We understand their issues and we satisfy their issues. So I really do want to get their concurrence before we commence the next trial. And I think that's necessary, and I think it's appropriate.