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

All right. Let's go ahead and get started. Welcome, everyone, to the 41st Annual JPMorgan Healthcare Conference. My name is Anupam Rama. I'm one of the senior biotech analysts here at JPMorgan. I'm joined by [ Malcolm Cuneo ] and Priyanka Grover from the team. Our next presenting company is Sarepta. And presenting on behalf of the company, we have CEO, Doug Ingram. Doug?

Thank you, Anupam. Thanks, everyone, for joining us today, and thanks for those joining us online as well. We'll go 2 slides forward. I'll try my best to -- for those online, to remember try to reference slide numbers as I know that the slides don't automatically go forward. So for the last many years, we've been building, and we've been building frenetically. We gathered together the pipeline and the people. We built a balance sheet. We gained multiple approvals. We've served the Duchenne community. We've been advancing our pipeline. And in a very real sense, all of that was in anticipation of this moment because '23 will be a bellwether. Not merely for Sarepta but for families with Duchenne muscular dystrophy. And I think also in a very real sense, for the promise of gene therapy. And that's a promise to translate brilliant science to life-altering, life-changing therapies, not at some distant vanishing points in the future. But as close to right now as is possible so that patients can actually benefit from this science now. And that bellwether, of course, from our perspective, is our biologics license application for SRP-9001. As you know, last year, we submitted a BLA for 9001 to treat the ambulatory patient population of Duchenne. And as you might also know, we did it on the basis of accelerated approval. And the standard for accelerated approval is that the 9001 dystrophin protein is reasonably likely to predict clinical benefit. So what I'd like to do with you today, if possible, is to sort of walk through the evidence set that we believe makes that conclusion compelling that the dystrophin protein is reasonably likely to predict clinical benefit. It goes -- it has everything to do with the design of this gene cassette, which was done over 10 years of work. It has everything to do with the preclinical animal models and biomarkers and functional data and then a wealth of patient data both on biomarkers and functional data. So if you'll indulge me, I'm going to spend some time talking about that evidence. But to do that, I need to linger for a moment on what Duchenne muscular dystrophy is so we can put this all in some context. Duchenne muscle dystrophy, as many of you know, is characterized by a mutation on the gene that codes for this protein called dystrophin. Dystrophin is a shock absorber for our muscle. So when we move our muscles and we contract our muscles, dystrophin protects them and keeps them from getting harmed. Kids with Duchenne muscular dystrophy, as a result of their mutation, don't make this dystrophin. And as a result of that, every time they move their muscles, every time they contract, they damage their muscles. They do irreparable damage to themselves. And the consequences of that are as brutal as they are inevitable. And that is these kids begin to suffer from this disease very early in life. They will end up in a power wheelchair usually by their early teens. And then they'll struggle to move their upper limbs. They'll struggle to feed themselves and bathe themselves, and maintain any semblance of independence as young men. Then they'll struggle to breathe, and then they'll die. And they'll die usually in their late teens or in their 20s. Now the goal for us is not to magically go back in time and arrest the very existence of Duchenne. It's a wonderful, comforting idea, but it's not scientifically plausible. The goal, therefore, is to intervene as rapidly as possible to stop the damage that these muscles are having, and therefore, to arrest or significantly slow the decline of this disease. And so let's talk about how a therapy like 9001 can achieve that. This slide here, and I'm on the slide on dystrophin. This is a schematic of the dystrophin protein. So it's inside of a muscle, what you'll see is it attaches to this thing called the F-actin binding site than it attaches to the muscle membrane itself. And eventually, it attaches on the far right, to this collection of proteins called the dystrophin-associated protein complex or DAPC. I'm going to ask you to remember that because I'm going to come back to that in a bit, it's going to become important. Just so we're clear, the lack of this dystrophin protein in Duchenne kids is the sole and exclusive reason is that these kids have Duchenne muscular dystrophy and that they are dying. So the obvious goal then is to use a gene therapy that will deliver a gene cassette that codes for dystrophin. Now there are a lot of challenges we're doing that. But one of the challenges is that the gene that codes for dystrophin is larger than the carrying capacity of any known AAV, which would be a problem, but the good news is nature has given us that solution already because natural history is replete with evidence that truncated or shortened versions or edited-down versions of dystrophin remain brilliantly functional so long as they retain the right features. Becker muscular dystrophy, like Duchenne, is a disease characterized by a mutation of the dystrophin gene itself. But those mutations are in frame, and so those patients actually make dystrophin. They make edited versions of dystrophin, they make smaller versions of dystrophin but they often make very functional forms of dystrophin. In fact, Becker muscular dystrophy tends to be much milder than Duchenne, and then there are many cases of asymptomatic or nearly asymptomatic Becker patients. As an example, you'll see here on the right side of this slide -- I'm on the next slide in the deck from the full dystrophin protein slide. On the right side here is a schematic of a Becker patient. This patient was 61 years old when he was biopsied. He has Becker muscular dystrophy, and he was walking at 61 years old. That's not a Duchenne patient. I mean, that is brilliant proof that the protein that is -- that he was making with his gene was brilliantly functional and keeping him protected. And when you look on the slide, and you'll immediately realize that the protein there is significantly smaller than full length dystrophin and yet is brilliantly functional, and this person was continuing to walk well into his 60s. So that's going to be our goal, of course. Our goal is going to be to code for a Becker-like dystrophin that creates a lot of protection. And just so you know, there is an enormous amount of precedent already at the FDA in being able to do this and using the accelerated approval pathway for the approval of therapies like that. There are today, for oligonucleotides that make better like shortened versions of dystrophin that were concluded to be reasonably likely to predict clinical benefit and got approved, 3 of them are ours, EXONDYS, VYONDYS and AMONDYS. And one of the other ones that's from another company called Viltepso. And let me correct the misunderstanding or potential mythology around this. I think there's some view that those probably aren't like significantly edited Becker proteins that are made, they're probably just 1 exon, so they're almost full length. Such is not the case. The oligos make very shortened, but functional forms of dystrophin depending on the a particular mutation, those that could be shortened by as much as 40%. So that's exactly the concept that we're dealing with right now with respect to 9001. Now on the next slide, I'm reshowing you on the left, that schematic of that 61-year-old patient. And there's a reason for that, and that's because it was his protein that formed the template that Dr. Louise Rodino-Klapac and Jerry Mendell used to begin to develop something that would eventually be called 9001. It took them over 10 years. They did an enormous amount of work. They built constructs. They tested constructs, they figured out over time, what areas of the protein were necessary and functional and protective and what could be dispensed with. And after all of that long work they eventually came to the ideal gene cassette. And that ideal gene cassette is ideal for 2 reasons. One, it retains all of the functional elements that empirically were shown to be protective and would help these children; and number two, it could package comfortably inside an AAV and therefore, could be delivered. And that's, as I said, on the right side of this slide is the schematic for the 9001 protein made by this gene cassette. And if you look at the left and you look at the right, you will notice that they are remarkably similar to one another and that, of course, is by design. From there, Dr. Mendell and Rodino-Klapac packaged that gene cassette in an AAV, they used rh74, which explains why we're getting superior tropism and a differentiated safety profile. And they used a very powerful gene promoter, something called MHCK7. And all of that work, that decades-long work of experimentation paid off. This is the results of the work on a Duchenne mouse model. You can see on the left side that at the clinical target dose, we get really robust expression across skeletal muscle and diaphragm muscle and cardiac muscle. And what does all that mean? If you look on the right side of the slide, you'll see that as a result of that expression and as a result of the dystrophin protein being functional and protective, you get a significant restoration of function at the clinical target dose. Remember, I talked a bit about that DAPC. Well, I'm coming back to that now for this reason. So the DAPC is a collection of proteins that the dystrophin attaches into. And the interesting thing about those proteins is they're not associated with any mutations. But in the absence of dystrophin, they disassemble, they're not there. Duchenne kids essentially don't have a dystrophin-associated protein complex. So you would surmise that if you could actually insert a functioning protective dystrophin protein, you might see some upregulation of the DAPC. And that is exactly what you saw in the animal models, and that's on the left side of this case. You see almost a one-for-one upregulation of the DAPC, the dystrophin-associated protein complex when you get expression for the 9001 dystrophin, which I think is a very compelling proof that Louise Rodino-Klapac and Dr. Mendell were successful in their effort to make a protective protein and gene cassette. On the right side, that's CK. What you get is when you get expression of 9001, you get a significant reduction in CK, which is an enzyme associated with muscle damage, again, additional proof that the 9001 protein is reasonably likely to predict clinical benefit. From all of that work, we moved to patients. We dosed our first patient in January of 2018. We have by now dosed patients across multiple studies, well over 100 patients. We've dosed more patients in a broader population of patients than all of the other gene therapies focused on Duchenne muscular dystrophy combined together. And the results on biomarkers have been really impressive. We get very, very robust expression of dystrophin. We get far above what literature would suggest is necessary to be protective of the muscle. Number two, all of it is properly localized at the muscle membrane or sarcolemma where can actually do its job and b, a shock absorber. We've developed a cell-based potency assay that shows that 9001 is active and functional and protective at the muscle membrane. Just like in animal models, when you get expression of 9001, you get a significant reduction in CK that enzyme associated with muscle damage. And finally, on the bottom of this slide, yet again, when you get expression of 9001 in patients, you get an upregulation of the dystrophin-associated protein complex. So if we just stop here, I would pause it that the data for 9001 being reasonably likely to predict clinical benefit is compelling to say the least. In fact, as good as the data was for all of those oligos, the amount -- robustness of this data is even greater. What's interesting and what we're excited about, of course, is that we've gone beyond that. And I think this is a bit unusual perhaps for some accelerated approvals. But we have functional results as well. So as I've said, we've dosed across multiple studies, multiple time points, multiple functional endpoints, and we've seen a very significant benefit versus natural history. So you can see, using NSAA, which is our primary functional endpoint, the North Star Ambulatory Assessment, a 34-point scale, in just 52 weeks, in just the first year, you get somewhere between a 2 and a 3.5 point benefit versus natural history. But what's interesting, of course, is that if you think about what 9001 is intended to be, it's not a symptomatic therapy. This is not an anti-inflammatory or a steroid. The goal here is to actually deal with the root cause of Duchenne muscular dystrophy by literally reinserting in these patients, that missing shock absorber that will protect their muscles. And if we're successful in doing that, what you would imagine is that over time, as these kids were on therapy, their benefit would begin to really compound versus the ferocious decline of natural history. And that is exactly the signal that we see here. And you can look at across here, you see it 1 year versus 2 years versus 4 years, you see just that. Let me just focus on the 4 years. So I mentioned that first kid was dosed in January of 2018. These are the results from the first cohort of kids out at 4 years, right? There are 9.4 points different than natural history on the North Star Ambulatory Assessment, which is, frankly, pretty remarkable. And remember what I said earlier, the goal of all this, if at all possible, is to slow or arrest decline in these patients with Duchenne muscular dystrophy. Well, you need to know these kids are over 9 years old, okay? They're over 9 years old at the time of their last assessment for this data right here. After 9 years old, you are in the most ferocious decline curve on the Duchenne. You will go from 9 to being in a power wheelchair in a matter of 1 or a few years from there. These kids, in addition to being this well off versus natural history, are 7 points above their own baselines taken some years previous, and they've been rock solid steady for years. So from our perspective, we looked at the data in 2022, and we saw that as really compelling. And compelling because of the natural history and Becker muscular dystrophy and the way we've designed this therapy using Dr. Louise Rodino-Klapac and Dr. Mendell over a decade to be protective in all of the animal models that prove that it was working, and then really robust patient data, not just on these biomarkers, but also on function. And we decided it was worth a discussion about the potential for accelerated approval. So we approach the FDA in 2022 to talk about the possibility of an accelerated approval on the basis that 9001 was reasonably likely to predict clinical benefit. And as a result of those discussions by around the end of September of last year, we submitted our BLA for the ambulatory patient population, for accelerated approval. In late November of last year, as you know, the FDA accepted for filing and review that BLA and granted us priority review. And so the PDUFA date or the target action date for this 9001 is literally May 29 of this year, just a few months from now. So that's where we are. Now you'll notice I don't have an Adcom on this time line, we don't have official word today that we're having an Adcom. For planning purposes, we're assuming that we do, and we're preparing for an Adcom as if we're going to get one. Until you hear otherwise, you may want to assume the same thing. At the same time, we're doing a ton of work. So you know we've already not only started our confirmatory trial to support an accelerated approval, but we've actually fully enrolled and fully dosed that confirmatory trial, which one would assume would put us in a brilliant position to have a robust and productive discussion about accelerated approval. And at the same time, we're doing the work to expand this label and expand the number and percentage of the population that can benefit from this therapy. We'll be starting a nonambulatory study this year, with the goal of successful of expanding the label to the nonambulatory patient population just next year. We're already in a study to limit the excluded mutations in the label and we're exploring opportunities this year in patients with avenues that, if successful, would allow us to safely and effectively dose even NAb-positive patients. So we're getting all of that work done. At the same time, we're in a very good position from a manufacturing perspective. You should know we have about 400 technical operations employees at Sarepta dedicated to this. And along with our external partners, putting us in a position where we're going to be able to launch this therapy very successfully. And in fact, all of our assays for commercial release of this therapy are completed, and we're building launch inventory as we speak right now. At the same time, we've been spending the last few years really looking objectively at the value proposition of SRP-9001. And in fact, we'll be publishing later this year, our perspective on the way one ought to objectively and holistically think about the value proposition of a transformative onetime therapy like 9001, particularly in rare disease and maybe even more importantly, in diseases of such extraordinary unmet need like Duchenne. And while it would be premature of me today to discuss price, I'm not going to do that today, I can at least assure you of this, the cost of the health care system of 9001 is going to be far less than the objective value that 9001 is going to bring to the Duchenne patient population. All of which is to say, in addition to great data, we have an enormous amount of work to do in a very short period of time. But before people would worry about that, I would remind you, at least in my opinion, there is no team better prepared to launch a Duchenne therapy and to serve the Duchenne community than Sarepta. We maybe modestly, I will say, I think we know the Duchenne community. We know the Duchenne treating physician. And as it relates to Duchenne, we know the payer community better than anyone. We've been serving this community for years now, and we're very committed to them. If you want to put numbers to that commitment, for -- over the last 6 years with our 3 approved oligonucleotides, which is EXONDYS, VYONDYS and AMONDYS, we've been growing sales at about 40% compounded annual growth rate for the last 6 years. I will also remind everybody, this is surprising perhaps in biopharma, that's with 0 price increase. We've never considered a price increase thus far even in this inflationary environment, we have that focus. And I would also say our cumulative sales for these 3 oligos are approaching about $3 billion right now. So we do know how to make a success of our therapies and to serve the community. 2022 was no different for us. You remember at the beginning of 2022, we set guidance for the year. In the middle of 2022, we were overperforming so significantly to that guidance that we had to up our guidance, and we significantly increased it. And I can now tell you that the fourth quarter stands at about $235.5 million. That means our full year 2022 net product revenue stands at $843.3 million. And that number is above the top end of our upwardly revised guidance from 2022. So we really started 2023 in a strong position in 2023 is going to be a strong year as well. If we just focus on our 3 approved therapies today, we'll do better than $925 million with respect to our 3 approved therapies and then if and when 9001 approved this year, if that happens, we'll come back and I'll update the guidance and will include the impact of 9001 on the full year guidance. I've spent a lot of time talking about 9001 today, of course, we have a very significant mission ahead of us, not simply with 9001, which is itself enormous, but also to build what I think can be one of the most significant and meaningful biotechs focused on bringing a better life to rare disease patients with genetic medicine. If our plans come to fruition and we're successful, if 9001 is approved, given our revenue projections and our cash on hand, we'll be cash positive and profitable just next year, in 2024. If 9001 is approved, peak year sales for 9001, based on our forecast, would be just about $4 billion. And if you want to put a number to the near to midterm opportunity, if you get out to sort of '26, '27, our yearly sales will be about $5 billion across our 4 approved therapies. And of course, we have an enormous pipeline and platforms to drive far beyond '26, '27. As you may know, we have 40 programs in some stage of research and development as we speak across 3 platforms, RNA, gene therapy, gene editing, and currently across 3 therapeutic areas, neuromuscular, neurology and cardiomyopathy. This year alone, we're going to start limb-girdle trials. We're going to complete our trial for SRP-5051, which is our next-generation RNA called the PPMO, or peptide conjugated PMO. And if we're successful with that trial, we will commence the process of compiling an NDA for its approval as well. Now I said at the beginning of this slide, that we're going to be -- if we're successful, we'll be profitable next year and cash positive next year, I do want to make the point that, that profitability and cash positivity does not come through skimping on our investment in our pipeline. We are going to continue to aggressively focus on this platform. In fact, you'll see on this slide, by the end of this year, we estimate we'll be in approximately 30, 3-0, clinical trials. So clearly, we are fully committed to this platform. And the reason we're committed to this platform is very straightforward. Our corporate goals and our corporate ambitions are very important to us but they are in a real sense in service of, in subordinate to our broader mission. That's our North Star. And our broader mission can be easily explained. It's to translate brilliant science to life-changing, life-extending therapies for greater and greater patients that need us and to continue to do that frenetically. Thanks.

Thanks, Doug. Just a couple of reminders that if you wanted to submit a question in the ask a question feature through the digital conference book, that is an option. If you want to get bold and ask a question in person, there are microphones, please raise your hand and we can make sure you get your question answered. Maybe I'll just start out here. So to confirm, you have gotten no indication from the FDA for an Adcom? What are the time lines or periods between now and PDUFA that we should be thinking about where you could be notified?

Well, I would -- I mean, there are numbers of check-ins, you know. You've got mid-cycle reviews and early cycle reviews, late-cycle reviews. I would think until we affirmatively know one way or the other, we ought to all assume that we're going to get an Adcom. And the reason -- let me be very clear about the reason, we make that assumption. We make that assumption so that we're not caught off guard and have to prepare quickly. So we're treating it like we're getting an Adcom. I'm sure the team is working on their Adcom prep today, even as we speak.

Go ahead.

Could you speak to the technological hurdles and commercial implications of gene therapy redosing, selective biosciences, [indiscernible] and what that might mean for the company?

Yes. I mean, it's a really interesting issue. As it stands today, as you know, the current thesis is that gene therapy is one and done. Now the good news, let me -- before we talk about redosing, the good news is that muscle is an interesting place to go. And the reason it's interesting is it's really hard to get to. So if we were sitting here right now at the beginning of our journey, and we hadn't dosed patients, I think the #1 thing people should be worrying about -- well, the 2 things would -- safety, of course, is always top of mind. And the second would be, come on, can you really dose gene therapy through a full-body infusion and get the kind of genome copies to the right place that you imagine? And the good news is that, that has been fully answered because we can, we get multiple genome copies per nucleus, and we're making extraordinarily robust expression. The nice thing about muscle before we move on to redosing is that muscle is a privileged place to be from a gene therapy perspective because muscle doesn't turn over like something like the liver or something along those lines. So our animal models have suggested that we get as long as we've been able to look very strong durability. I mean we're not even out at a place where we can start thinking about durability. In the long run, we are very focused on the concept of the ability to redose for a host of reasons. And from our perspective, it is an engineering problem. It's not going to be a basic science problem. We do have a number of different approaches. We have imlifidase, there's plasmapheresis. There are a number of different possibilities, and we're going to consider all of them. We're confident that, that will eventually be a possibility. And if it's a possibility it may even change the way one goes about dosing gene therapy. You could start at smaller doses and then determine if you want to top up and the like, but we're not there yet. With respect to imlifidase, we're going to start a trial with our partner for imlifidase this year, but it's going to be for knocking down pre-existing neutralizing antibodies. That will put back into opportunity to dose probably 13% to 15% of kids, who would otherwise be screened out right now. And we're focusing on that first because it's a really significant near-term opportunity for these families, but also because it's technically easier than the redosing concept. The amount of titer you get from preexisting neutralizing antibodies is orders of magnitude less, then you'll get after you dose the kids. So it's the good relatively safe place to start this journey.

Over here.

If you do want to extend EMBARK, is that easy to do with your is that easy to do with your pre-dosing [indiscernible]? Or is it [indiscernible]?

The question is, can you extend EMBARK or is that a major protocol assessment?

Well, the short answer is -- so it's interesting. We're not going to. I suspect the question is essentially, would it make sense if you got an accelerated approval to just extend EMBARK, maybe increase your probability of success. There's a couple of different reasons why we're not going to do that. The first reason is that we don't need to. So from our perspective, the powering from EMBARK is well over 90%. It is informed by all of the studies that have come before it. We really understand the study well and I think it's being executed very rigorously. So I'm quite confident that we're going to get a positive result from EMBARK. And beyond that, we need to embark on its readout for ex U.S. And so it would be -- it would affect the delay around the rest of the world that would be not in the best interest of patients. And I don't think we need it.

Doug, as a clarification point on the guidance, if 9001 were to be approved in May, you would revise the guidance and give us some clarity of how you think 9001 should look in the back half of the year?

Yes, we'll do exactly that.

Okay. And then another clarification question. On the profitability in 2024, what kind of sort of leeway is there? If there's an extension, a 3-month extension or something like that to the PDUFA?

CFO?

Well, just to go back to your first question around the guidance also, we also -- one of the reasons why we set the guidance at greater than $925 million for the PMO is that we also don't know the impact that's going to necessarily -- 9001 will have on our PMO franchise, right? So once a patient gets a start form for 9001, how does that impact the patient who's on a PMO right now. So that's something we have to think about, too. So they're moving parts. We will also obviously have tremendous amount of growth with 9001 if it gets approved, but it's important to understand that there will be -- could be some level of impact on our PMO franchise. And so that's why we've given a fairly broad range. And then the second question?