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

All right. Good morning, everyone, and thanks for joining us at the Morgan Stanley Global Healthcare Conference. I'm Mike Ulz, one of the biotech analyst here. And it's my pleasure to introduce the team from Sarepta Therapeutics including Doug Ingram, CEO; and Ian Estepan, CFO. Just a reminder, the format for today is a fireside chat. But before we get started, I just need to read a quick disclaimer. For important disclosures, please see the Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representatives. And with that, maybe, Doug, I can just turn it over to you to give us a sort of quick background.

Sure. I'll be -- I'll try my best to be brief. I know these are -- all of these are going to come up in Q&A. Look, I have been at Sarepta now about 6.5 years. Ian's been a few more years than me. We've had a very mild Sarepta milestone, driven period of time that Sarepta a lot of really important moments. But there are no more important moments than the moments we've had in 2023. It has been a very successful year for us thus far, and we have a lot to do in a very short period of time for the rest of the year. As you all know, we had an approval for what I believe will be the most significant in vivo gene therapy so far, which is ELEVIDYS with a limited label, and we've launched that. That launch is going exceptionally well right now. Our goal is to broaden that label as rapidly as possible. I am very happy to tell you that, of course, EMBARK is the basis for broadening that label. Our last patient, last visit in EMBARK will occur this week. So we are in great shape. We've said some time ago, we've not had a single dropout that remains the case. And so we're in great shape there, which means that we will have results from EMBARK top line sometime between the end of October into November, depending on, of course, the QC process. Our goal is to rapidly provide that to the external world, but also to provide that to the FDA so they can commence the review process even before we submit a BLA supplement with the goal in the first half of next year to have a broad label for all ages for Duchenne muscular dystrophy, including, of course, all ambulatory status. So that's where we are with ELEVIDYS. Of course, that is 1 of the 4 products that we have approved serving the Duchenne community. We are doing very well with respect to our PMOs, we continue to grow across all of those PMOs and we recently reconfirmed our guidance for the year for the PMOs alone, which is EXONDYS, VYONDYS and AMONDYS and that was $925 million with -- actually with a bias to exceeding that modestly as well. So a lot to do this year. We're very excited about the readouts for the rest of the year. And we're very, very excited about the potential benefit we can bring to the lives of families with Duchenne muscular dystrophy.

Great. Congratulations on last patient, last visit. Maybe -- you told us about time lines for the data. Maybe just tell us what data we should expect in that update? How detailed will it be?

Well, we're going to prioritize the top line. So it won't be everything. There'll probably be elements of expression and the like that will take longer than the functional top line. Obviously, the most important 2 metrics for us is the primary endpoint functionally, which is NSAA, change in NSAA and then, of course, the safety readout to confirm what we are very confident about, which is the safety profile for ELEVIDYS, as it has been for some time now. It's a laudable safety profile given its potential benefit. That -- those results will be released probably sometime between the very end of October into the first half of November, and then we will submit that to the agency at the same time so they can commence review. We'll actually submit the formal BLA supplement probably by about January. That takes some time administratively, but we have a commitment from FDA leadership that they will actually commence the review and advance the BLA supplement to work as fast as possible to expand the label to cover all age groups.

And let me [indiscernible] for a quick second. Embedded in that question, maybe are we going to break out the 4- to 5-year olds and 6- to 7-year olds specifically?

I was also going to ask you to share the p-value or just tell us whether it's that figure or not, that would be another...

Oh, I imagine, we'll tell you the p-value -- and then we have a pretty good history of being transparent.

But just to clarify, I think he was asking for the p-value of 4 to 5 versus the 6 to 7 versus the overall. And obviously, we're just planning on doing the overall.

Yes, let's make sure. I mean, I apologize for -- if that's what was implied. I'm not catching it only because I don't agree that it's actually relevant. So let me be very clear about this. We are studying -- the goal of EMBARK is to prove in a placebo-controlled trial, the mechanism of action of ELEVIDYS. We believe that the prior studies have already shown strong evidence of its mechanism of action, but EMBARK is a well-controlled, placebo-controlled blinded study to do just that. We have narrowed that patient population down to 4- to 7-year olds, not because we believe it works in 4- to 7-year olds and not 3- and 8-year olds, but because you have to reduce the population to something that's more homogenous. So you can see an effect -- the idea that we -- that going to the subcategories, either 4s and 5s and 6s and 7s or 4 to 5s and 6 to 7s is, I think, both unreasonable and is just an artifact of the fact that with respect to Study 102 Part 1, we had a problem with the balance in the 4- to 5-year-old group of kids. And I think that's created a false impression that there's something about 4- to 5-year olds that would benefit from this therapy and that by the time you turn 6 years old, somehow this structural protein that acts like a shock absorber is aware that you've just had a sixth birthday and stops working on your behalf. And that, of course, is not something we believe. So the primary endpoint is 4- to 7-year olds. We'll obviously do sensitivity analyses on that to ensure that we understand where the benefits are coming from, but that's our plan.

Got you. And is there a particular delta in mind from physicians on NSAA or is just -- is this a situation where either it's stat sig or not? And there's no alternative. So physicians are going to use in all patients?

I earnestly believe that if you hit statistical significance in a delta in just 52 weeks in this degenerative disease, you will have proven out that we are changing the trajectory of this disease. Whether it's 1.5, 2 points, 2.25 or 2.5 points in my view, is entirely irrelevant and this is the point. This is a disease-modifying therapy. This therapy works, and we certainly believe it does. It's not -- This is not some helpful therapy. It literally changes the course of the disease. So I've used this silly analogy before, I'll use it again. If you were flying from Los Angeles to Japan and you were 1 degree off, it wouldn't be very meaningful in 20 miles. But by the time you got to Japan, you'd be hundreds of hundreds of hundreds of miles away because you change the course. And that's what we're doing, whether it's 1.2, 1.5, 2 or 2.5. And you see this in our data, by the way. This isn't merely logic, but it is logical. It's also in our data, look at the kids, the first 4 kids, those kids are now, they were the -- on average, the last time we result -- we presented the results, which is 4 years out. They were over 9 years old. If you've ever seen a kid with Duchenne muscular dystrophy, over 9 years old, that boy is struggling. He is in the steepest decline phase of the disease typically. He could even be in a wheelchair by 9.5 years old. These kids, 4 years after dosing, are defying gravity. They are -- they had a nice benefit at 1 year, now 4 years out versus natural history, they were almost 10 points on a 34-point scale. Better than natural history would have predicted. And there are 7 points over their own baselines, and they've been stable for years in a period of time in which Duchenne boys are not stable. So the point is we shouldn't look at this therapy and say, is this 1 point, or is this 1.3 points or is this 1.5 points or 2 points or 2.2 points. We should ask a simple question, does ELEVIDYS' structural protein that is intended to act like full-length dystrophin and protect the muscle when you contract? Does it indeed do what it's supposed to do? And is the future of these kids different than natural history will predict? Have we changed the course of the disease? And if the answer is statistically significantly, yes, this is a profound change in the treatment of Duchenne muscular dystrophy.

And to your point, which I think are all really well taken. If you look at the baseline characteristics of those first 4 patients, very indicative of what we're enrolling for in 301 II, right? So these aren't some very healthy patients that we enrolled in the first 4 patients, and now 5 years out are doing really, really well. These are patients exactly what we were predicted for 301 using our inclusion/exclusion criteria, and we're seeing these results. So it just really highlights that it's a disease modifying agent.

It's either 1 or 2 of the first 4 boys were exon 51 amenable. Exon 51 amenable boys are not known to be mild Duchenne patients. In fact, they're known to be typically more severe than the overall group, at least modestly more severe. So you would not have predicted that the patients that we chose would be where they are today. Naturally, as you would have predicted they'd be falling off a cliff, if not already in the wheelchair.

Got it. Maybe you can just talk about the EMBARK study design and differences between 102 in terms of eliminating the potential risk of an imbalance and also the variability in NSAA and endpoint?

Yes. So to remind you of a couple of things. So in Study 102 Part 1, we had this enormous imbalance. We're using age as the predictor for the prognostic for decline. And the horrible bad luck, frankly, because the p-value was 0.004, if I'm remembering correctly. The 4- to 5-year-old boys were enormously imbalanced between the active arm and the placebo arm by 5 points on a 34-point scale. It was really just crazy where -- and of course, in a way that would make it impossible to see a benefit. The kids on active therapy were all severe and the kids on placebo were much milder I think the -- I think all but 1 of the kids, if I'm not mistaken, in the active group had rise times over 5 seconds to some of them really, really slow rise times, like predictive of being in a wheelchair in the next 18 months and none of the placebo kids had it, as a result of which those kids should have been falling off a cliff. The kids on active, they weren't. They were actually stable, which would have been genius, except that the placebo arm would have been predicted to be stable when they were. So you couldn't see a delta. So when we go to EMBARK, we installed for a lot of those things. First thing to know EMBARK is a much larger study. It was intended to be 120 patients. We actually overenrolled to 125 patients. We have assumed a certain level of dropout. I think about 17 potential dropouts, we could have still had power. We've had 0 dropouts, as I mentioned earlier, in our last patient, last visit is a few days from now. When we stratified on baseline characteristics, both for age, we're still stratifying for age. We don't want to lose sight of that, but we also stratify for NSAA baselines. So that we will not have that problem a second time. We've also put in more stringent requirements to ensure less heterogeneity. We put in hard floor, a hard ceiling on those kids. And then we all across all of the ages, 4, 5, 6 and 7, we've put in a requirement that they have rise times of under 5 seconds, so that they're more similar to one another. So that should significantly reduce the standard deviation. Interestingly enough, when we powered the study, we assume the standard deviation that we were seeing in other studies, so about 3.5 points. And that would -- and we would have -- we powered it to see a 2.1 -- 2.2 point delta with a standard deviation of 3.5. But given the larger enrollment that we have, there are no dropouts. We've actually looked to see what number we would need and still have power. And we would still see stat sig at 1.3 points and with a 3.5 point delta. So we didn't play with the standard deviation even though one could surmise that we would have a better standard deviation given the rigor of the study, which I am quite confident is the most rigorous study ever done in Duchenne muscular dystrophy so far.

Maybe 1 just quick thing to add to all that you said was just that we did when we apply the 301 criteria retrospectively to the 101, 102, 103 data, we did see, in fact, what we would expect, which is a decrease in standard deviation and variability overall. So it was clearly a much more homogeneous patient population, and that's why you're seeing the decrease in variability. So we do feel really good tracking in to EMBARK based on the adjustments we've made.

Got you. When you share the data with the regulators, what gives you confidence that you can -- assuming it's positive that you can expand into not only all age groups, but also non-ambulatory patients as well.

We were -- because we were told that. So I want to be very clear. Shortly after we were in -- no, that's not actually -- actually, at the time we were informed that the label would be limited initially to 4- to 5-year olds. We were given a firm commitment by FDA leadership in the presence of the broader division and concurred by the broader division. That in the event that EMBARK was successful, that the age limitations associated with the current label would be removed.

In the clinical review ourselves because sometimes there's some disconnect between what Peter Marks and CBER says versus what the division actually feels. It was in that conversation, which Doug was referencing the clinical review [ ourselves ] that they would prioritize the review of that application once we got the data to them. So it was really encouraging to hear that directly from the review team.

Well, I will also -- so 1 other thing on that topic. That there's nothing about that, that should be precedented breaking. In fact, it is entirely consistent with precedents, that is what the law would suggest, regulation would suggest, science would suggest and all of the precedent with -- from the agency broadly. There are 4 PMOs currently approved, 3 Rs, 1 NS Pharma. All of them have studied a smaller population. And then even on an accelerated basis, obtained a broad label that covers all age groups, obviously, for the reason that dystrophin should be broadly applicable. It is the single reason that these kids are degenerating and dying, unfortunately. And even our confirmatory trials in all of our other PMOs do not require that we study broad deltas of age group. We're studying a narrower age group with the understanding that, of course, if we've proven out the mechanism of action, it's applicable to all children and children shouldn't have to wait for this therapy. So it's good to know that our regulators are being patient-centric and science-based and agree with this methodology.

And just in terms of the timing of the review, you said filing January lack the response in the first half. Is there any risk that, that could slip or...

No. I wrestle the thought of it. No, we're not going to let that slip. Families are waiting for us. So we're not going to let slip. And I think our colleagues, the FDA will be equally motivated. I think they'll understand the patient community.

Makes sense. Maybe we can shift a little bit just to ELEVIDYS launched, I think, a little over 2 months ago. But maybe just talk about how early trends are going versus what your original expectations were?

Yes. So I'm not -- I'm going to apologize, I'm not going to give numbers of patients or net sales. We'll talk about that, obviously, later over the course of next earnings call and the next earnings call after of that. But the launch is going very well. It is in a number of ways. So one of the goals, we had an aspirational goal, and that was to have as many as 50 sites activated and able to infuse patients. By the end of the year. And that would be enormous because there has not been a gene therapy that's been launched with that sort of capacity, site capacity. We're not there. We're actually -- I mean, probably by the day 60, 59 or 60 sites already activated, which speaks reams to the team to those who may wonder how we were able to do that, Frankly, it's been hard work for years leading up to this moment, probably a nice healthy paranoia to get us in a place and then an enormous excitement and work from sites. I mean it's not just us -- that gets to the next issue. The level of interest and demand from physicians and patients has been extraordinary. I mean people are very, very excited about this potential therapy. And then interestingly enough, the payer response has been generally very positive thus far. In a number of ways. I mean, first of all, I think the way we looked at the value proposition for ELEVIDYS ought to set the standard for the way that folks do it in the future. We did a pharmacoeconomic analysis to justify the value proposition for ELEVIDYS. We then showed our math. So this wasn't some black box exercise. We actually in May had published in a very highly respected peer-reviewed journal, the pharmacoeconomic analysis that justified ELEVIDYS. We then price that therapy at a price that was commercially viable and very acceptable to investors but was actually below that pharmacoeconomic analysis and payers could see all of that and then we did a budget analysis. Finding that at steady state, it's less than $0.10 a month -- per patient per a month for a commercial payer. So I think all of that went well in the discussions. I think payers generally, certainly the more sophisticated players payers have become more sophisticated about Duchenne. So as an example, for those who are around back then, you may recall when EXONDYS was first approved Anthem, one of the 2 largest health care organizations in the world, came out and had a policy that said that they weren't going to give any kids access to that therapy. Now the good news is, by the end of '17, to the best of my knowledge, every kid that was amenable, that was an Anthem kid, was on therapy. So we have a team that knows how to execute. But that was certainly an uphill battle. Today, Anthem has issued its policy to label. So they are going to rapidly give kids access consistent with the label. And United, which is the largest managed health care organization in the world has done exactly the same as well. And then a little bit more specifically, I can tell you that when we're working with physicians, given the narrow label that we have right now, 1 of the big issues are kids that are going to age out of this therapy. And that is a big issue. And so you'll see, generally speaking, the kids that are getting dosed right now are kids that are very close to their sixth birthday because physicians and the like are really prioritizing, making sure those kids have access before it's too late. It would be very easy for a disingenuous -- I might argue [indiscernible] payer to simply delay things and have the age out of the label. But generally speaking, that isn't what payers are doing. They're working with physicians to give these kids access. So I give enormous kudos to the payer community for seeing the importance of getting these kids dosed and ensuring that they're not an impediment to that. So generally, I don't want to pretend that there aren't tons of issues we have to work through. This is a battle-hardened team that knows how to work through issues and work with payers and others and the like. But as we sit here right now, the launch is going very well. The distribution channel is going very well. That may seem a weird thing to talk about, but this is a brand-new distribution channel to have this high valued single dose transported, and I think negative 80 degrees has all -- has a number of interesting issues with it, but that's all going very, very well, which probably speaks to the team and speaks enormously to the organization's work that we've done really in the -- probably a couple of years leading up to this launch.

And maybe just 1 thing to add to that really quickly and puts in what you said, but all the patients who have been dosed right now, it's been a nice distribution between the payers in the commercial setting and state Medicaid and the like. There isn't 1 plan, which is dominating, like if an Anthem came on and all the patients are getting dosed there, it's distributed across many different payers in state Medicaid.

That's a good point, too. You state -- I mean I shouldn't leave State Medicaid behind. Generally speaking, we've seen very good response from state Medicaid. Again, not to suggest there aren't going to be issues, the team is going to continue to earn their keep. But so far, things are going well.

In terms of the sales ramp, can you remind us sort of your expectations there in terms of timing? And is it -- is the hurdle really the insurers? And if so, what sort of percentage of payers have policies in place?

So look, the hurdles are -- the hurdles to getting dosed are many. There are a lot of different steps that one goes through. So 1 thing -- let me answer the question and then come back. The broad answer is, of course, we're going to see significant ramp towards the back half of the year. We're getting close to that now, but sort of the back half of the year. And that's faster than most gene therapies. I mean there are many of the few gene therapies that are approved. Many of them didn't dose for 4 months, 6 months. So the idea that we were able to dose within a month or so of approval is actually quite impressive. But really to see the ramp, there are lot of policies, there are codes that have to get put in place. The site readiness is going very well, but the release process is very long. So remember, there are 2 issues: we make the material, and that's great, then it has to get released. That release process itself takes a lot of time from us. And then we have, as all gene therapies have had so far, we have a process where the agency actually has to independently release the therapy. They've been doing their job as well, but that adds some number of weeks on top of it. But generally speaking, things are going well and we'll get to steady state toward -- not steady state, but we'll get some real ramp towards the back half of this year.

Do you anticipate any capacity issues, particularly if EMBARK is successful when you rapidly expand the label -- could that potentially be a hurdle?

Well, we're working hard to create material. So there are a number of different things that have to come together for the launch ramp. One is site readiness. And that's not just site readiness. It's also the number of infusions each site can do every week. Remember, you can't just do as many infusions as you have, rooms in availability and, let's say, the hospital because you have lots of follow ups. So how much follow-up you have relates to how much staff you have, so there's a lot of issues associated with that. Payer discussions play a role and the like and the release process for manufacturing certainly plays a role. So all of that together will define the ramp probably into next year, we'll define the ramp. I'm quite confident that it will be robust. But that's the multitude of issues that come together that will define that launch ramp over 2023 into 2024.

Can you talk about just manufacturing sort of where you are in expanding that and maybe some time frames around that?

Yes, I'll give you -- so the near term is that we're at Catalent right now. Catalent is being a good partner. We've made a lot of material with our colleagues at Catalent, and we're going through the process of releasing material, now to add additional capacity at Catalent. We've actually taken out an additional suite with them. So that's going well. We are working independent of that, we're working on a site -- we have a single-use site with Thermo Fisher for adherent material, and we had made the strategic decision not to have that licensed at the time of launch because the concern we had if we were trying to get 2 sites license at the same time, it would potentially slow down the approval process. Remember, we had 4 -- we had GLP in 3 manufacturing site inspections just with using Catalent. So now we're focusing on Thermo and getting thermo license. That's going to be an issue that we're going to work on over 2024. So that's great from an adherence perspective. And then we're really excited about the future. We've got a suspension process. We've already run 3 runs at 250 liters. We're running another run at 250 liters this -- back half of this year, we're going to be running 500,000 liters early next year -- starting next year. And the results we're seeing at least so far look tremendous. The product qualities are tremendous and the yields are multiples greater than we get from adherent. So that's going to be a really exciting part of the future of this therapy as we think about expanding out into other regions around the world significantly.

Okay. Great. So it looks like we're out of time. It looks like a good place to wrap up. looking forward to the data coming up and thanks, Doug and Ian, for spending time with us.

Thank you very much.

Thank you for having time with us today. Appreciate.