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

Great. Good morning, everyone. Thanks for joining us. Really pleased to have Sarepta here with us. We have Ian Estepan, CFO. With that, Ian, let me turn it over to you for any opening comments.

Well, first off, thanks for having us. We're excited to be here -- a beautiful, and more importantly, nice to actually see people, so this is a really nice opportunity. So just generally speaking, as it relates to kind of how things are going, I think it's particularly interesting right now as we look at the market, it's obviously very challenging. But just last week, I actually looked at our overall performance compared to the index and actually, not that we look at relative performance, we're obviously trying to drive absolute performance for investors. But we're significantly outperforming, and so that got us to really think in this market, who are people going to ultimately be investing in? Obviously, we're going to be looking at the [ Fed ] today to see what they do. But once we get stabilization, where people are going to start deploying capital? You seeing right now, it's the Amgens of the world, even Vertex have been very defensive. But I think there's 3 elements that investors are going to be looking at to deploy new capital. First is probably where can you anchor a valuation? Around something very tangible, something numerical, right? So revenue or earnings, right? I think that's going to be important, except if you look at companies that are in this same space of BioMarin, Neurocrine, right? They're also performing very well in a defensive perspective, so you need something to really anchor a valuation around. You also need revenue growth -- potential revenue growth from a pipeline readout, which is going to drive significant growth in the '25 to '30 time frame, right? Obviously, every time Pfizer does an acquisition, they're very focused on this time -- in this time space. This is where all the revenue gaps are, and this is where investors are going to be looking for growth in that time frame. So significant catalyst where people are going to be able to drive significant revenue. And then finally, unsurprisingly, not having a financing overhang, right? Obviously, we have $2 billion in cash. I've already said on our earnings call that gets us well beyond the readout of Study 301 and into 2024. So those 3 elements, I think, are going to be very important. So once we really do see stabilization to see the names that are going to outperform. So we feel like we're in a really good position and in where companies with our other peers who have those same characteristics.

So with that, maybe let's start with your pipeline here. So SRP-9001, your gene therapy for Duchenne. At this point, could you remind us what's giving you confidence in a successful top line read for the Phase III data mid next year? How does the trial design incorporate your learnings from previous studies? And then what's the benchmark change for NSAA that'd be meaningful from a physician or patient perspective?

Yes. So right now, 301 is enrolling very well and remains on track. Our guidance is, like you said, in the middle of the year. So not by the middle of the year, which everyone is -- I don't want phone calls in the next 2 weeks, everyone saying when is enrollment done? We very intentionally set in the middle of the year, so -- and it's on track, so we feel really good. Now what's giving us conviction around the positive readout there? We've done multiple things, taking learnings from the 102 study and really applying them to 301. So some things that we did, one, is just the N, right? The N is 120 patients, obviously much larger. We obviously had a baseline imbalance in our first study. To flip a coin 10x, it's possible to get 10 heads, it's unlikely, but possible. But if you flip a coin 100 times, that's never going to happen. So just from a sheer numbers perspective, obviously, increasing the N will help. But more specifically, as it relates to the study, which now stratifying by NSAA also, which will be being incredibly important. We're also tightened our caps as it relates to the NSAA, so that should decrease volatility. All the kids are also on a stable dose of steroids, so you're not doing weekend dosing versus daily dosing. So all the kids are going to be on daily dose of steroids, so that should decrease [Audio Gap]. And then finally, all the children are going to have a rise time below 5 seconds. And why that's important is because rise time is predictive of loss of ambulation. And so if you are above 5 seconds, then you potentially can lose ambulation, you have a high probability of losing ambulation in the next 18 months. And if you're below 5 seconds, you don't have the probability of losing ambulation. So therefore, this will be incredibly important in terms of making a more homogeneous patient population. But what I will say is we applied this criteria to our 102 and 103 studies, and what we saw was a significant decrease in the standard deviation when you apply all the inclusion/exclusion criteria that's incorporated into 301 to those data sets. So they are -- it is working exactly in the way that we planned. So we feel high conviction that the study is going to be reading out positively. We have the 103 data, which we haven't released that only strengthens our conviction, and we'll be releasing that data at an upcoming medical meeting once our discussions with the agency have concluded. And what was your last question? I think it was about the clinical meaningfulness. Yes. I think this is an important question because I think people don't understand the NSAA scale very well. But if you put it in the context of SMA, I think it provides a much better perspective. So everyone realizes with that there's a milestone that these kids can achieve, which is sitting up, which they never do, right? And obviously, it's amazing, and I'm thrilled to see all the advancements that's happened in this disease population. But when you think about the NSAA score and put it in that context, if you get a 0 on the NSAA, you can't do an activity. If you get a 1, then you get -- then you can do that activity and it's assisted. If you can get a 2, then you can do the activity unassisted. So essentially, right, what these kids are able to do, as you know, in all of our data, we've seen approximately a 2-point increase in NSAA. And so these kids can essentially do an activity that they were not able to do, or do 2 activities that they needed assistance with that they can now do unassisted, right? So if you think about it in the context of SMA where these kids are now being able to sit up and they never could do it and everyone knows how remarkable that is, I think that puts in a much better frame for the data that we're seeing on the NSAA in Duchenne. And remember, this is only at 1 year. Because I think it's very important to realize that this -- we would expect the treatment benefit to increase over time, right? So very, very silly analogy. But if you and I race to the end of this door here, it's very close, right? Maybe I'd win, I run pretty fast. But maybe I'd win by a couple of feet, right? But if we ran a mile, well, maybe I'd win by 100 yards, right? And so this is the same concept here for Duchenne, which is these kids are either stabilizing or slowed progression or improving versus if you don't have the therapy, you're going to continue to decline and that treatment effect is going to widen and widen over time. So what we've seen from the data at just 1 year, I think is brilliant, and I think should continue to increase over time. And that is what we're seeing. You see that with the 101 data, you've seen it with the 102 data. And so we're -- the clinical meaningfulness of this therapy is very obvious.

And you've talked about the potential for an accelerated approval pathway under the prior data for the younger age group. Maybe help us understand firstly, what division of the FDA you're dealing with, and how that overlap can play out with neuro? And then secondly, what the likelihood is that could actually play out?

Yes. So I mean, look, we set -- we're trying to set very, very realistic expectations as it relates to our possibility of getting an accelerated approval. We owe it to the patients to pursue this pathway. But we've set very low expectations that we would think that this would likely come to fruition. That hasn't changed. That being said, we're discussing -- we will be discussing and discussing with the CBER and OTAT, specifically within CBER, and those discussions will proceed. That being said, this is the same division who has told sponsors that they'll put a trial on a clinical hold and not tell the sponsors. The reason for that clinical hold until 30 days later. So they're obviously incredibly busy as it relates to COVID, I think there are 8 panel meetings just this month related to COVID. So I know the division is very taxed as it relates to them focusing on this. I did just hear remarks from Peter Marks, I believe yesterday where they are going to start being able to dedicate resources from COVID back to other indications, and hopefully, that will help move some of these therapies along. But I think right now, the expectations should be very low. But I think the investment thesis is really around 301, and our conviction that the probability of success of this study is only increasing over time, and so we feel like we're in a really strong position there.

And have you received any feedback on the use of propensity match cohort to evaluate the treatment benefit of 9001?

So just to give a little background, this propensity matching is essentially a regression analysis that takes in and creates a synthetic external controlled placebo arm, so it's a very conservative approach. There have been 2 drugs that have been approved using a propensity matching. It's defibrotide for VOD and then burosumab for XLH. And so it has been utilized. The agency has not given us feedback on it directly, but we know that it's been utilized. It's a very conservative approach. So it has certainly been used, especially under an accelerated approval pathway, as a comparator arm. But we haven't gotten feedback from the agency directly around that.

And then one important feature of your drug is that the safety profile to date has not included some of the serious adverse events that you've seen with other Duchenne gene therapy studies. What aspects of your construct or manufacturing in your view are drivers behind this? And maybe talk about the collaboration that you're doing with the other players that was announced at ASGCT?

Yes. So rh74, we now dose well over 100 patients. We've seen a very significant difference in safety events compared to AAV-9. The FDA just recently had a panel meeting around gene therapy and safety events, and it was really, really focused on AAV-9 and the adverse events that we've seen. What's driving that? I don't think we really know. There are some current hypothesis that maybe AAV-9 preferentially binds to platelets, which is causing the decrease in platelets -- a significant decrease in platelets that you're seeing. And then can spark a complement cascade, which is why some of the AAV-9s are using SOLIRIS as a rescue therapy for -- because you're going into this complement cascade. So we continue to see a differentiated profile from a safety perspective. And that's the leading theory, but I don't -- over time, we're going to continue to see. But I think right now, what's very clear is that the profiles are different.

And you have 3 drugs approved right now under the PMO platform and are working on the PPMO platform, your next-generation PMO. How do you think the gene therapy drugs will exist -- coexist with your PMO and PPMO platform

So sorry, before -- just before we go to that, I didn't answer one of your questions, which was the collaboration at ASGCT related to what we've seen. So just to give everybody a perspective, there was a safety event which occurred, and every program is actually seeing the safety event since everyone is now a resident immunologist due to COVID, I think I can explain this and everyone will appreciate it. So essentially, there are very, very rare mutations where a patient has essentially never seen a dystrophin gene at all. So when they get dosed with any capsid, their body sees the protein, which is being formed as foreign and then amount some immune response to it. And so this has been seen across the board for all of the programs, and it was good really in the spirit of collaboration and patient safety, all of the companies got together to discuss and share their data. What became wildly obvious when everyone shared it is that there are very, very rare mutations where essentially, there are huge deletions that happen, and these are the patients who are at risk of this. We've actually dosed 8 patients safely with no adverse events, but there was just this one patient where there was one. And so getting all of that data and being able to see it get us a very clear understanding of the patients who potentially could have this adverse event. And so the press, unfortunately, at ASGCT, I think confounded this one very narrow specific adverse event with what you're seeing with AAV-9. So I want to make it very clear this would affect a very, very small part of the patient population. However, the adverse events and unfortunately, the most unfortunate event that we've seen in this field recently with the Pfizer program and a patient's death, that was not related to this issue. This was -- that was related to a complement issue that you see with AAV-9, not around this very narrow issue around the patient not seeing the protein before. So sorry, now going to your next question that now you have to remind me of.

Yes. The gene therapy portfolio coexisting with your PMO, PPMO portfolio.

Yes, it's interesting. Obviously, we generated data from our PPMO in the MOMENTUM Part A study, where we're seeing significant dystrophin production at only 12 weeks. So we're seeing greater than 6% dystrophin production. And with the PMOs, the mechanism of action is that you actually see dystrophin increase over time. So the fact that we're seeing such high levels compared to our PMOs at such an early time point is very, very encouraging. For the MOMENTUM Part B study, we're going to be looking at dystrophin production at 28 weeks. And so we expect to see even higher levels at that time frame. So it does beget the question of, okay, what does the landscape look like with the gene therapy and PPMO? It's interesting, we're generating and doing studies right now, generating data to support combination use. Looking at what the SMA market currently is doing, you're not seeing a ton of combination use. And so obviously, from an access and reimbursement perspective, that becomes somewhat challenging. But we're looking to generate data over time to see if we're going to be able to get patients on both therapies if there's a clear benefit by doing so. So it's good that it's under one company where we're starting to look at combinations and can generate long-term data that could potentially support the use of a combination.

And how is enrollment progressing in the pivotal study here? And when would we get an update?

For our PPMO?

Yes.

Yes, it's very well. So what our guidance is that we're supposed to look at data and finish enrollment by the end of the year. We're doing very well from an enrollment perspective, and it's a 28-week endpoint. So right now, it's pretty neck and neck as to when the data is going to be coming out from our PPMO program and our gene therapy.

How are you thinking about going beyond the population you're initially targeting? And what would be the follow-through plan there?

For 9001 or for...

For 505.

So it's actually a very wide enrollment criteria, I believe it's 7 to 21, and so most of the data is very interesting. You bring up a good point. Most of the data that we've generated is actually from the non-ambulant patient population, which is very different than EXONDYS and even for the microdystrophin population where most of these results have been from the 47-year-old group. Although we have done studies in the non-ambulant patient population and the later ambulant patient population with those 12 patients there safely up to 80 kgs. And as everyone knows, this is a weight-based dosing, and total viral load can likely lead to safety events. So the fact that we've dosed very, very heavy patients and seen a very consistent profile is incredibly encouraging. But now as it relates to the PPMO, most of the data is from the non-ambulant patient population, and so we're seeing these results in that group. And the PMOs gives a very clear story around what that label will look like. If you remember, all of the data which we've generated was in the 7- to 12-year-old range, and we've gotten a broad label across the board for AMONDYS, VYONDYS and EXONDYS. And so we would certainly expect the same thing for a PPMO as it relates to -- and again, I'm not trying to guide anyone around an accelerated approval for 9001. However, if we were to make forward progress there, we would be going for an ambulant label there.

And then with the PPMO platform, just how do we think about the other -- the same way you went from EXONDYS to VYONDYS, how would we think about you jumping into other exon skipping populations within -- groups within Duchenne?

Yes. No, it's exactly right. So obviously, AMONDYS, VYONDYS and EXONDYS are for 45, 53 and 51, respectively. One of the reasons why it now turns into a very good fortune that we raised money last October was to -- after the data that we saw for 50, 51, being able to start doing scale up for 45 and 53, so we follow a very similar pathway for that. But then also looking to some of the follow-on exons, probably about 6 or 7 other follow-on exons, which would be an additional probably 20% to 30% of the population. So AMONDYS, VYONDYS and EXONDYS currently address about 29%, 30% of the population, and so this would be essentially double it with these next follow-on exons.

And on your limb-girdle program here, what are the gating factors to starting that registrational trial? And perhaps give us some insight into the design of the study here and the population that you look to target?

Yes. So I wish I could give insight into the design, but this very closely ties to the first question, which is around where are you from a manufacturing perspective. So we're doing great from a scale-up perspective. We've got great yields, process is locked. We're in a really good place. We -- there's 2 parts to this, which is we also essentially have to have all of our assays qualified and validated, so we're in the process of doing that. You can see how challenging this could be. I think Pfizer was held up well over a year, 18 months as they were trying to figure out their potency assay. So the very good news is that this is a matter of when, not if. We obviously did it for 9001 brilliantly, so we're in the stages of assay validation. I can't give you an exact time frame on when that's going to be complete only because it's an iterative process, and you obviously have to meet the specs of the agency. So we're in the process right now. Hopefully, it won't be too long. That being said, we can't get insight into the design until we lock the full manufacturing process. And so we need that data around the assays to really engage with the agency. The agency is really forcing companies rightly to have everything locked before starting a "pivotal study" from a CMC perspective, which is why you saw Pfizer not being able to start their Phase III study until they had all the data from their potency assay. And so they're not going to have that conversation with us about a pivotal study without having all the information from a CMC perspective. And so we're just waiting on that to discuss what a potential accelerated approval would look -- pathway would look like, which obviously includes the initial design. But also what a confirmatory study would look like for the limb-girdle program.

Let's move to the to your launches that have played out. You've guided to over $800 million in product revenue this year, and said the AMONDYS launch has surpassed expectations. Could you remind us on the drivers here? And how this might play...

The audience, everyone, [ she's up here to sell me ].

And how this might play out going forward? And are you seeing any competitive pressures at all for any new market entrants?

Yes. Well, thanks for this question, because it gives me an opportunity to give a big shout out to Dallan Murray and our commercial team at home. They've done an absolutely brilliant job launching these products. I think we've had 22 consecutive quarters of growth, and the amount in this launch has been absolute gangbusters, really delivering these therapies to patients. And the dynamic that you're seeing there is that I just think we've gotten much better getting patients on the drug faster, right? So navigating the access and reimbursement landscape, converting what a start form is and so patients actually getting the therapy. And so that's why you're seeing that. So the -- it may be that AMONDYS is also a larger market than we were anticipating based on our data, but it's also that we're converting them on faster, which obviously means you're going to peak earlier also. But it's good that you're just being able to convert patients onto therapy faster. And we're not seeing -- so the biggest pressure that we're seeing on our commercial launches is actually ourselves. And for EXONDYS, for example, where the growth is coming from? Our new patient starts. And the average age of diagnosis of patients with Duchenne is 4.9 years old, right? And so those patients potentially can get enrolled in our gene therapy, right? So you're directly competing with the patients who actually would be creating some growth in the new patients, they're qualifying for EMBARK. We're also enrolling our MOMENTUM Part B study, which is obviously for 5051, which obviously puts pressure on EXONDYS. And then obviously, we're very committed to completing our post-marketing commitments for EXONDYS, so we're enrolling patients there also. So we are putting a significant pressure on the business. And obviously, that also applies for both AMONDYS and VYONDYS also, especially as it relates to gene therapy. So we're seeing significant pressure. But then obviously, to your good point, the field is also looking to enroll patients in clinical studies. But the biggest pressure we're actually feeling is from ourselves as we're competing with our own clinical studies. And I think people should factor that in, right? So we've given guidance of $800 million. We shouldn't just do a straight line of our growth, right? We are factoring that in. And obviously, there's going to be a lot of enrollment between now and then in the end of the year and the like, and so that's been factored into our guidance. And so we were very clear on our last earnings call what the dynamics were. So again, a ton of conviction on the amount of patients who are available, especially since we're seeing our best access and reimbursement in an ambulant setting. The non-ambulant setting has more patients who have not been penetrated yet. So there's still even more room to grow if we were able to make inroads there, but it's much more challenging. But all of that's factored into our guidance of $800 million. So we're tracking well there, but people should be acutely aware of the dynamics, and that's factored into our guidance.

How penetrated are you at this point into the U.S. market with EXONDYS?

Yes, significantly. Now I say significantly, but again, with the caveat of what I just said, which was you're seeing very good access and reimbursement for the ambulant population, significantly less in the non-ambulant population. So there -- it would be significant room to grow, but it's just challenging. And we fight like mad to get them on therapy. There are significant patients who are not on EXONDYS, but it's just challenging to get them through the reimbursement process.

And remind us where you stand with COVID impact? I know you -- there was a recovery that you were seeing. Just wondering if that's continuing.

Yes, we've done a really good job managing COVID. Obviously, the most recent rise had some impact, not in any way that would affect our guidance. We were very proactive as it relates to this, so everyone knows the vast majority of patients who are receiving our PMOs actually get infused in their homes. So we are proactive sending out PPE to the patients and the nurses who are coming in. But with this latest disruption, there's been some slight disruption but still navigating it very, very well because of that dynamic of people coming into their home. So we haven't seen too much of a significant disruption related to COVID.

Any questions from the audience? One last one here for me, 2 questions here. One is you have several partnerships. Could you -- and you have a really big pipeline outside of the programs that are going into pivotal. Maybe help us understand how you're allocating resources to them and what you think the next kind of interesting programs will be to monitor? And secondly, how are you thinking about technologies like gene editing, where you will have probably a competitor at some point in the clinic?

Yes. So as it relates to gene editing, I don't think people really realize that gene therapy is an extension -- gene editing is an extension of gene therapy, and that you're still currently using the AAV vector to deliver the gene editing, right? You just have the CRISPR/Cas9 included within the construct. And so we are one of the leaders in the field that relates to gene editing, and we have a partnership with Charlie Gersbach out of Duke. We have an entire gene editing center in North Carolina centered around that. And so we are very much pushing that field forward. Doing, and some of our partnerships are around non-viral delivery. I think that's going to be the new breakthrough as it relates. So any genetic medicine, right, not being able to be confined by some of the issues related to vectors and the like. And so that's just an emerging field that we're continuing to invest in and continue to see if we can make progress in that space. And especially there are issues as it relates to delivering those approaches to muscle specifically. We've made some good headway, but that's where a lot of the research is focused right now. As it relates to your first question, though, around how we're managing the pipeline, I think we have over 40 programs in development continue to look multiple programs forward. That being said, we have to be very mindful of our spend and our cash position, especially in this market. We started out saying, like, you can't have a financial overhang, right? And so we have to be very mindful of that. And we are -- we've actually stopped 4 programs recently to -- because of data, and two, just because of the market opportunity, right? So it's really focusing the resources that you have on the most promising approaches to -- so that you can dedicate the resources there. And so we're following that to a T now. As it is -- one of the most exciting programs, I would say, it's probably CMT1A. Pleased to announce that we've made some progress as it relates to manufacturing that's been holding the program up previously. Mechanistically, what you're doing with CMT1A is upregulating NT3, which is an enzyme, which can potentially regenerate the myelin sheath, so it's not directly replacing the gene like you've seen in D&D or [ Lingard ] and the like. So it's a riskier approach, but if it works, it's -- it can not only be used in CMT1A but in multiple other indications. And so -- but it is going to take -- because you're not just replacing the gene, it's going to take longer to generate that data, so it's a longer pathway. But obviously, if it works, it would have tremendous implications and be a huge program. So we're excited that we've gotten over that manufacturing hurdle, but it will still be a ways before we start generating data, but we're moving it forward. So we're pleased around that.

Great. Well, thank you very much, Ian.

It's a pleasure.