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

Great. Thank you, Andrew. Really appreciate it. Thanks, everyone, for joining us. We've gone towards the end of our first day of our Oppenheimer Healthcare Conference. We got Sarepta Therapeutics. And the CEO and the CFO of the company, Doug Ingram and Ian Estepan joining us today. This is a company that we've gotten very bullish on recently, and part of that is just the tremendous amount of work the company has been doing in muscular dystrophies over the last 3, 4 years. Work that is really becoming very fulsome. So we're excited to have both Doug and Ian on here to talk about the company and all the projects ongoing. So with that, welcome, gentlemen.

Thank you. Thanks for having us.

Great. And what we'll do, Doug, if you don't mind, give us about a 3- to 5-minute pitch on the state of the business, and then we can go ahead into kind of a fireside discussion of the biz.

Sure. I will say -- I bet people say this about me, and it is to a person right now, I think, Sarepta as far as I can tell. We are executing in 2022 with an enormous amount of enthusiasm. Even as I think the external biotech world has been challenging, certainly from an investor perspective, we're in really an extraordinarily good place right now as an organization. And we track into 2022, as you saw recently, we had a 21st straight quarter of strong quarter-over-quarter growth. We now have 3 therapies approved. We'll do over $800 million in revenue today. We've never taken a price increase. So every dollar of that relates to serving the patient community. We've had a CAGR over the last 5 years of about 40%. We'll be growing over 30% this year. And then when you look at our pipeline, we're really at an interesting place. We have a very deep pipeline. As I think everyone knows, we've got a multi-platform pipeline in over 40 programs, but they're in our pivotal trials. And our lead candidates in 2 of our 3 platforms, and third, which is gene editing, is a research still. But on the other 2, we've got our next-generation RNA therapy PPMO, which is the MOMENTUM trial Part B, and we're dosing kids there and that's a pivotal trial. And we'll -- if that looks good, data is confirmed, the data we've already seen in Part A as confirmed and Part B, then we'll be seeking an accelerated approval there, and I have a lot of conviction around our probability there. And then we've got EMBARK, and EMBARK is for SRP-9001, which, of course, is our gene therapy for Duchenne muscular dystrophy, microdystrophin. And if that is successful, and we have an enormous amount of conviction there, and we're dosing kids even as we speak, The only global trial, the only trial may be of any kind of dosing in a microdystrophin gene therapy right now and certainly the only real global pivotal trial for Duchenne muscular dystrophy is dosing and the dosing in the United States, which is, of course, important. If that's successful at EMBARK, that means we'll be launching the largest gene therapy so far by a pretty significant magnitude. And we'll be doing that in 2024, we'll be profitable by the end of 2024. We'll be by 2025 multibillions of dollars, all which is very nice and kind of synergistic all through bringing a much better, longer, higher quality of life to patients who have Duchenne muscular dystrophy, which I think is SRP-9001 in my opinion is the greatest hope that we all have for a greater life if it's successful at EMBARK. And then we'll be able to continue to fund the rest of our pipeline. And if you look out at the end of this decade, we'll be, I think, pretty clearly if we're successful, the next big biotech. But right now, things are going very well. And we -- our big issue right now is continuing to execute.

No, Doug. That is really great. And it's kind of interesting about how you sort of pitch this -- the state of the business as I call it. The PMOs and the PPMOs, your antisense algonucleotide, has always been something that we were fascinated by. And now you've got your dosing patients with these next-gen. So I'd just like to change it up a little bit and start talking about SRP-9001 first. Maybe just talk about those because you've actually got a really -- you've got therapies that continue to grow, right, the PMOs, in a sense all the nucleotides. And you've got the next-generation following them. Now the thesis being that you're basically creating a moat around these franchises, and these franchise can actually take you to profitability also, right? Because it doesn't seem like you need gene therapy to get to profitability. So can you just talk a little bit about how important these franchises are to the business? How much you've learned about the DMD community? And then we can sort of transition to SRP-9001, how that will help with SRP 9001 assuming it's successful in clinical trials.

Sure. I mean there's a lot to think about when we think about the PMOs. The first thing, I have got our Chief Customer Officer sitting off to the side here with a conference together, Dallan Murray. And he and his team has just done a brilliant job serving this community. As I said, all of our growth has come through serving the community. We have not been one of those companies that is successful through taking unnecessary price increases. We've never taken one. The PMOs have been brilliant. And one of the proof of their brilliance is that the adherence and compliance rate on these therapies for the last 5 years has been well over 90%. I mean patients really fight to get on the therapies. And then when they have the experience with these therapies, which, by the way, are not simple therapies. These are families that have to get weekly infusions, either in their home and sometimes in a hospital, they fight to stay on these therapies. And that explains the -- I think that kind of gives you some view on what these therapies are doing in the eyes of these families. The interesting on profit is an interesting question. If we didn't have gene therapy, we'd be profitable today, okay? I said from very early on in a very real sense, being profitable is a choice. And we don't want to be profitable right now because we have a bigger ambition than that. And our big ambition is to transform the lives of more than just 29% of Duchenne families, but as close to the great majority of these families as we can, both in the United States and around the world, and we want to move on to limb-girdle and then we're going to move on to neuromuscular, neurodegenerative cardiomyopathies and the like. So we're investing. If we didn't have -- so our current plan assumes profitability at the end of 2024 with the success of EMBARK. And that profitability would depend on the approval of SRP-9001 after EMBARK. But if we didn't have those gene therapies, we would be, I'm very confident, already profitable today. So the PPMOs are extraordinarily important. And then finally, one additional thing I'll say. We are -- and I don't think this is unnecessarily a modest of me. We are, I think, pretty undoubtedly the leaders in knowledge of and the ability to serve the Duchenne muscular dystrophy community. And we've proven over the last 5 years, not only that we deeply are patient-driven and mission-driven, but that we know how to serve this community and we know how to make the most of the therapies that we get approved. And so -- that's one of the things that really excites me about SRP-9001. You can look -- there's a lot of really interesting challenges associated with gene therapy and launching gene therapy. But I'll tell you, there's no team I would rather be associated with in launching the largest gene therapy than this team launching it for the treatment of Duchenne muscular dystrophy. And so PMOs and then the PPMO have provided us with an enormous amount of experience. And then also at the same time, I think, an enormous amount of benefit to patients.

I mean, I think that for us, one thing that, again, surprised us was during COVID-19, how little disruption there was for Sarepta and it's servicing of the DMD community with its PMOs. I mean, honestly, as an analyst, I was actually taken aback. And that's why that's also led us to reevaluate our opinion and come to a much more bullish stance. And with PPMO, just one question there before we go to SRP-9001 and then end with LGMD, Doug, is could you see the PPMO extending your franchise? Could you see -- within that same mutation, could you see, even though you've got 90% compliance, more boys or older boys being put on in PPMO? Any just any thoughts there? Or it's TBD based on the data?

Well, I do think -- and this is -- well, in a real sense, a lot of what we talk about is hypothesis, right? We're going to have to live a lot of this to know the answer to some of our questions. And one of the most interesting questions is what does the world look like with gene therapy and for instance, a next-generation RNA like the PPMO, which if it is successful, could be an order of magnitude even greater benefit than EXONDYS, VYONDYS, AMONDYS. But we do think that there is a -- putting gene therapy just to one side, we think there's an enormous opportunity to treat a lot more patients with the PPMO. I think it will open up access ex U.S. in ways that we have been restricted with the PML. If you're making something in the order of 10% or more of truncated dystrophin which is what we are kind of modeling from what we've seen in Part A, and we saw 18x more EXON skipping, I think there's going to be a really compelling opportunity to bring this therapy around the world, and maybe even deeper in the United States. And then when gene therapy is launched, there will still be a place for PPMO. Even though our models, our own internal models and the numbers we've given you presume an enormous amount of cannibalization. I actually really wonder subjectively whether we're going to be wrong about that and that there might be an opportunity for those to really coexist more robustly than even we understand. And we're doing some work on that right now to really understand that paradigm. What is the confidence of value of a onetime therapy like SRP-9001 and a chronically dosed therapy of truncated dystrophin like PPMO, SRP-5051? We've got more work to do there. But they will at least coexist and there may not be as much cannibalization as our current models presume.

Yes. No, no, that makes a lot of sense. I mean in some ways, it's almost like analogous to a vaccine versus therapeutic approach, right? One is supposedly one and done and the other one is you treat on treatment on the disease. So it will be fascinating to see how this plays out. Maybe just go to SRP-9001, Doug. And I guess there, really the question is, we get from investors still accelerated approval. So just to -- I know you've been asked this question probably about a million times, right? So maybe we tackle it slightly differently. How -- if -- when could you try to apply for accelerated approval if it was possible? Could it be this year or next year? And what would be the specific data sets you would need to maybe go to the FDA to have that discussion?

So a couple of things. I want to start first with the cautionary statement because my natural enthusiasm can create the false impression that I'm trying to give people a bullish view on accelerated approval. I believe -- I strongly believe, and I think we all should consider as our major investment thesis, the idea that EMBARK is our pathway to approval, that we'll get if we dose the middle of this year EMBARK, we'll get a read out in the middle of next year, and we'll get this -- I have an enormous amount of conviction about the success of EMBARK. And then we'll have that therapy approved in the United States and around the world shortly thereafter. And that will be an amazing event for patients around the world with Duchenne. With that said, we are going to have conversations with the FDA this year about the potential for an accelerated approval for SRP-9001. And we already have the data to justify that conversation. So if you ask me, do I have a significant amount of conviction that we meet the standard for accelerated approval? Well, then I recognize readily that I may be bias. I am the CEO of Sarepta, and I'm very close to this therapy. I think we have a very compelling argument for accelerated approval. I think the safety profile of this therapy versus other full-body infusions is clearly differentiated so far. And we've dosed over 80 -- I think it doesn't at 84 kids before we even get to EMBARK. We dosed the heaviest kid. We've dosed the lightest kids. We dosed the oldest kids. We dosed the youngest kids, And we have what appears, at least for now, to be a very stable profile and now means after having dosed 84 kids, that's actually quite a bit for gene therapy and for a rare disease in any event. So I think we have a very compelling story to be had on the functional benefits we have over what will now be 3 studies, 101, 102 and 103. And I think we meet the standard. The standard for accelerated approval, as we all know, is that we have a surrogate endpoint that is reasonably likely to predict the clinical benefit. And this is not some downstream correlative biomarker. This is the very thing that if it's working, and I think the data is pretty clear on that point is disease modifying and actually directly changing the course of this disease. With that said, so we will have those conversations. I've always been very cagey and I intend to continue to be cagey about exactly when we're going to have those conversations because it may not be one conversation. It may be a couple of conversations. We're going to have those conversations with the agency this year. We'll take their input. And then based on that input, we'll know whether there is a substantial likelihood of that pathway. On that basis, of course, we would file a BLA. Or we'll proceed with EMBARK and EMBARK will be our pathway to success and that will read out next year. Either of those scenarios are exciting, right? Either of those scenarios are tremendous. EMBARK is going to read out just the middle of next year, and that's not far away, right? And that's why we're very focused on execution. And if we can get accelerated approval, it would just be an extraordinary benefit to the patients that we serve and that would be exciting, too. But if you ask me the probability of success, I can't put a high probability of success until we have those conversations. And I find out -- we find out whether the FDA's perspective on the probability of an accelerated approval could match our perspective on it. We won't know that until we have more conversations with the division.

Yes. I mean, Doug, I mean, in all fairness, I mean to you and the team, right, that I don't think it's just your enthusiasm that sometimes biases people about a potential accelerated approval. I also think that Sarepta has a track record of getting drugs approved in accelerated approval, right? In all fairness, I mean, you had eteplirsen approved. You had casimersen and golodirsen. So it's not like you all are kind of new to this ballgame, right? So I think that's probably also where some of the investor kind of bullishness comes from and they just want to hear it from you, I guess, when they talk to you. Maybe one other thing I just want to talk about SRP-9001 is focus on is just focus on the safety profile rh74. We had Rachel Potter from your company yesterday on a gene therapy AV panel. And it was fascinating. She made a comment that just stuck in my mind about how Sarepta is building on over a decade worth of experience with the rh74 with Louis and I guess, her team at Children's Nationwide in Idaho state. Can you just talk a little bit about how long the company and it's partner hospital have been working on rh74? And how much confidence that gives you on the safety profile, which I think quite a few [ KLs ] we've talked to, I believe, is the best in class among DMD gene therapies.

Yes. This is a really important issue. I think you could miss this and people could just imagine that somehow as SRP-9001 was just sort of -- we popped the contract out a couple of years ago, and now we're testing it to see what happens. Of course, there's nothing that could be further from the truth. Louise Rodino-Klapac, in partnership with Dr. Jerry Mendell, both of whom, by the way, just spoke at a symposium here in Nashville. And you wonder why I'm particularly enthusiastic watching those 2 speak on stage with Dr. Adman and Dr. Proud just made me proud, to use a stupid pun. They've been working on it well over, I think it was 14 years a few years ago. So we're getting close to 2 decades of work. And it was a really interesting iterative approach, where they started with a thesis based on a natural history case that of an ambulatory 60-something-year-old man who had a very truncated version of dystrophin, they designed a construct that was similar to that. But then they kept iterating and then empirically testing and empirical testing. In fact, they've tested on patients even before it got to Sarepta, by the way, through IM. And they changed the construct. I'm going to get this number wrong, but I think it was over 40 different combinations of constructs, various constructs, various promoters, I think they look very careful at capsid's AAV viral vectors to eventually empirically come to a view based on a lot of that, a lot of preclinical data, an enormous amount of preclinical data that they had a therapy that had the highest probability of being very tropic in muscle. And without a good safety profile and would be functional and would have the least number of potential, for instance, unique junctions, that would reduce any risks associated with the construct itself. Now all of that's fantastic. And then we go from this big -- this -- from there through over a chasm to patients. So that's all fantastic. But you can do all of the preclinical models and large animal models and the like. But now the real test is when you start testing in patients. And that's what really excites me because I think sometimes -- when we were talking to some thought leaders a couple of days ago. And I think that people saw some data we had in 2018. And then they kind of might have walked away and imagined, that's the data we have today. We have 84 kids worth of data. We have 3 studies already and a fourth is enrolling. And the data from my perspective, is very consistent and it's very consistent functionally. Again, I'll readily admit I'm the bias CEO of the company, but I think it's not only consistent, but is strongly suggesting that this isn't merely a benefit, but a disease-modifying benefit. And I think the safety profile is becoming very consistent over time as well. So I don't want to be overly competitive. I think we have a lot of companies working really hard to try to do something for these patients. But I have to say, I am particularly enthusiastic and proud of where we are right now and the construct we have right now. And I think when I was meeting with some patient families yesterday, I'm really excited about what we might be able to do for patients if this all works out.

Yes. No, no, Doug. I mean it was around this time when I first -- sorry.

And I just want to step in really quickly, just please address one of your comments that you noted about people having some level of conviction due to our history with getting drugs approved via accelerated approval. And I just wanted to highlight that those approvals were all in CBER. And I think we would have tremendously high conviction that microdystrophin would get an accelerated approval if CBER was reviewing it. However, it is at CBER, and CBER has actually never approved a drug via accelerated approval pathway before. And so that's why I think Doug is rightly cautioning people regarding what the probability of success is even though we obviously owe it to the patients who try and we certainly, from our perspective, I think the drug deserves an accelerated approval, but we really won't have conviction. So we have the conversation with CBER specifically.

I'll say this, Hartaj. I will say this. I think -- I agree with all of that, but there's no team that I would be more confident will put our best foot forward than the team we have right now, our development team, our regulatory sciences team, our research team, our translational team, the commitment to excellence these folks have. We will -- I can at least assure you, we will have a good, robust discussion. And then to Ian's good point, we are dealing with a lot of uncertainty with OTAT and gene therapy and whether accelerated approval really is a path that they would be interested in. But if not that, then it will be EMBARK and that should be our base case.

Yes. No, Doug, I like that. That means I'm hearing you're 2 and second down, 4 yards to go at your 30-yard line. You're still ahead, but you still might take a shot for a touch down, tell the receivers to go along. I get it. Our base case is EMBARK approval. I mean that's what our valuation is based on. So we'll be happy with either one of those. Maybe we can just end with LGMD. We've got a few -- some time, just a little bit about 5 or 7 minutes left there, and I just got to check to see if there's any questions. On LGMD, what's fascinating to me is -- and this is another reason we became bullish. I know that LGMD is different from DMD because you've got all these subsets, right? They're much smaller. But one of our learnings from Moderna from other companies, even Selecta is which is cell therapy and they've had allogeneic CAR-T and they've had some issues, but they keep on bringing products into the clinic, right? It's a clinic where they actually -- the panel has to meet the metal. But it seems that your ability to bring projects, gene therapy preclinically and into the clinic are speeding up, right? So there's actually among muscular dystrophies, there's the potential for Sarepta to be really be a platform play, right? Would you agree or disagree with that, Doug. Just any broad thoughts there?

First, I would 100% agree. I mean the good news, for instance, with the limb-girdle. So everything takes more time than I would be -- than I would like, right? Ian will tell you, I'm never satisfied with the time that anything takes. But we know exactly what it takes to bring each therapy through. And all the work that we have done with SRP-9001, and never see the benefit of the limb-girdle programs. Remember, our lead limb-girdle program, we -- is exactly the same caps as rh74. And I think that is a big standout for us, rh74 as a platform. It's the exact same promoter. It works in the same area. It's also a structural protein, monogenic, et cetera. So we know what we need to do. And I think we will get faster and faster and faster over time. The manufacturing is a brilliant part of it. Like the ability to manufacture these therapies was not only unknown to us a few years ago, it was actually really unknown to everybody. The amount of capacity we needed to plan for had never been done before. In fact, when we started this journey, at the beginning of '18, we knew we needed more capacity at that time. Then at that time at least, existed in all the world with all of the biotech companies, big and small, put together. And we've learned that. So we really know how the manufacturing is becoming more and more sophisticated. Now with respect to 2E, we still have to build all the assays. That's our rate limiter right now. We're still working on assays for 2E. And then that will invert the benefits to the next sarcoglycan. So then we'll get the other sarcoglycans as alpha and gamma. Those sarcoglycans will move. We want to move those all as fast as possible together. And then for instance, we're going to do a pilot project for a really exciting gene therapy for deferral. And right around the end of this year, that should be kicking off. And then in the long run, the limb-girdles each individually are significantly smaller than Duchenne. But together, we now have 6 or more different constructs for different forms of limb-girdle and they start approaching the size of a Duchenne muscular dystrophy. And in fact, some places in the world, they actually compete in size because limb-girdles are different. There are founder effects around the world with some of these limb-gurgles. So we do think there's an enormous opportunity and an unbelievable unmet need here. I mean this has not historically been an area that enough people have focused on. And this is a -- these are devastating and typically life-ending disease. And so I'm very excited. We just -- I was walking here today as a Director for whatever the big patient advocacy -- well, one of the only patient advocacy groups for limb-girdle, the Jain Foundation and company we were chatting a bit, there's a lot we need to do to help these families. And we're working as fast as we can to do that.

Yes. No, no, Doug. And then, Doug, just on that. So you just mentioned you're at that assay development point with 2E, and then you'll start looking at the sarcoglycans. Can you just walk us through what is the tempo of steps needed to get your first project into the clinic for LGMD?

So the biggest thing we -- ironically, we have material manufacturing. So we know how to manufacture the material. But there are a panel and a significant number of assays that one needs to develop. And some of these assays were, while very similar for instance, between 9001 and 9003, are bespoke. They have to be specific to the therapy. And so that's the big rate limiter for us. We will have conversations with the division and figure out what the development -- what the actual trial itself will look like. But the big rate limiter for us is getting this assay work done, and that just takes time because it is a combination. It's really a combination of building and testing and building and testing and iterating. The good news is that there really isn't any significant inventive step in any of this. This is an engineering process. And it's an engineering exercise. And so there's not -- it's not like we have to figure something out and that can't be figured out, we just have to get the work done. And patients are waiting. So we're working really hard on that. But that's the big rate limiter. We're doing all the preclinical work on the other limb-girdles right now, particularly the sarcoglycans. And we're trying to get those to hustle up and be at about the same pace is in limb-girdle 2E, because one of the things we would love is to take all the sarcoglycans, which bear a remarkable similarity to one another and get those in a place where they could be approved around the same time if possible and then launch and serving the community around the same time.

No, no, that's -- yes, yes, absolutely, Doug. Is the goal still that you -- could you be in the clinic with 2E this year? Or you'll update us when you have more information on that one?

Yes, we'd love to be in the clinic by the end of this year, but it really is dependent on when the CMC work can get done in the assays. I can't commit to that until we get a little further. It's very much an iterative and pure goal process, so it'll take some time.

And then, Doug, as you're thinking about other areas, I know you've got a lot going on. You've got PMOs, PPMOs work, Sarepta probably will become a multinational biotech company, right? You'll start going ex U.S. And then you've got gene therapy and LGMD. What other areas are you looking at? I mean, would you want to stay a muscular dystrophy company, which is huge? It could be. What other areas of interest are there to you over the next sort of 2 to 3 years?

What we already have -- from a therapeutic area perspective, we've already advanced out through adjacency. We don't want to go so far away from adjacent that we end up in areas that we ignorantly think we know and don't know. But we already have therapies for neurological therapies. We already have cardiomyopathy that's an enormously interesting area for us. We're already building constructs around that. Those all share a very similarity to neuromuscular. And then beyond all of that, interestingly enough, the therapeutic area is we're going to improve the very concept of genetic medicine and gene therapy along the way as well. So for instance, another big opportunity is to be able to knock down pre-existing neutralizing antibodies so that we can dose children and adults who have genetic disorders but who, because they have some environmental exposure to neutralizing antibodies, couldn't be dosed today. For us, we have a very -- the vast majority, we just did a seroprevalence study, the vast majority of patients are negative for rh74. That's one of the reasons that Louise chose it because it comes from [ RESI's ] monkey. So you're not going to actually come in contact directly with rh74 unless you work in a zoo or something. I mean that's the -- one of the values of rh74. But still 15%, 14% or so of children are going to have preexisting neutralizing antibodies. And we have to fix that for them. The other enormous opportunity that I think a lot of us are working on is getting to the place where we can redose gene therapies. And I think this is -- ironically, there are invented steps in this process for sure, but this is an engineering issue as much as anything else. I think we and a lot of other folks would agree with us. We'll find -- we'll get there as a people. We'll figure that redosing paradigm out. That's something we're really focusing on. And then as leaders in gene therapy and RNA and the like, we want to improve these things. And one of the things we're working on is actually improved AAV, improved caps. We've got some really exciting things that we're working on there. And even finding opportunities to move into alternative deliveries like, for instance, lipid nanoparticles, and we're working on a number of partnerships to try to do that. So we've got a lot that we're working on right now, but a lot of opportunity that's near and midterm as well.

Very cool stuff. It's good to see you. Have safe travels. Give our regards to Louis and Dr. Mendell. Ian, always a pleasure. And to the team, we look forward to keeping this conversation going.

All right. Thank you very much. Thanks for having us.

Thank you.