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

All right. Good morning, everyone. I'm Joe Schwartz from the biopharma research team at Leerink Partners. It's my pleasure to host this fireside chat with Doug Ingram, President and CEO at Sarepta. Thank you for coming.

Thank you. Thanks for having us.

So a lot of exciting things going on at the company. Maybe we could start by having you bring us up to speed with the recent accomplishments and your key priorities for '24, And then we'll jump into some more questions.

Okay. I'll try to be brief because I know we want to get to Q&A. Just -- in the broadest of strokes, 2023 was the most consequential year in Sarepta's history. And that's a history with a lot of consequential years. And 2024 is going to be even more so interestingly enough. We ended 2023, we did $1.14 billion in revenue, all serving the community with our 4 approved therapies. We grew at 30-something percent over the prior year, 55% in the last quarter, did a brilliant job with our 3 PMOs, 2 of which, VYONDYS and AMONDYS, continue to grow at double digits. And then, of course, focusing on our gene therapy, which we launched in late June of last year, we did $200 million for the year, serving the community, and that's with a very limited label line that we'll talk about that in a moment. But in my opinion, that was a really brilliant execution and really took a village, not only within Sarepta, but the patient community, the physician community, the amount of demand that was there, frankly, payers did a brilliant job of participating. We were profitable. We were profitable on a non-GAAP basis in the third quarter of last year, and we were profitable even on a GAAP basis at the end of the year. And we imagine that we will remain that way, at least on a non-GAAP basis going forward and will be cash flow positive by the end of this year. So things are going very well. This year is even more consequential for us. The -- in addition to having to serve the -- or continuing to serve the community with our 4 approved therapies, and we will do that, we have a label expansion coming on our gene therapy ELEVIDYS, that will be June 21 of this year. We're going to meet with the agency on our next-generation PMO, which is the PPMO SRP-5051. We're excited about that and we can chat about that as well. And we're advancing the rest of our pipeline even as we mature as an organization. And then one final thing I'll say, it's really interesting. We have this thing that we call Sarepta 2030. I joined the company in June of 2017. We started 2017 with $5 million in sales, one approved therapy, a very limited pipeline, very little in the bank, a lot of ambition, a lot of grit. And if we're successful this year, we will have transformed this organization and really met the vision that we all came together with -- in late 2017 at Sarepta. And then we need to go to the next level. And so with the success that we have this year, I'm really excited about the next part of our journey, which will be advancing our pipeline and looking for external innovation as well to continue to drive our future to become -- if we're successful, one of the most important and durable biotech organizations focusing on bringing a better life to patients with rare genetic disease.

Okay. Thank you for that excellent intro. So despite the very limited label for ELEVIDYS, the launch has exceeded all expectations so far. Can you characterize the -- any patterns that you've seen in terms of adoption to date? And how much do you think that what you've seen so far presages what you might see if and hopefully when the label is expanded.

Yes. I think what we've seen so far does presage an enormous amount of demand for this, in my view, extraordinarily necessary therapy. Think about the label that we had, really to contextualize this. The current label we have is limited to 4- and 5-year-old boys. So it seems very limited, but it's more limited than that still, because a significant percentage of that population is not even diagnosed yet in the 4- to 5-year-old range. And then when you are diagnosed, remember, if you're diagnosed in the 4- to 5-year-old range, you're not diagnosed on 4 years in 1 day, you're diagnosed somewhere in that -- those 2 years. And when you are, this is likely the first time you and your family have ever heard of Duchenne muscular dystrophy. You need to absorb what has -- will be probably the worst moment in your family's history, then start the journey of figuring out what to do about this, then eventually getting to the point where you can go through what is an administrative process to eventually get dosed with our gene therapy. And in the context of that, we saw $200 million last year in our therapy for that very limited label, which speaks certainly to -- in my view, execution. I think the team on the ground at Sarepta in all areas, commercial, medical affairs, our distribution chain, tech ops did a brilliant job. We were really well prepared for this launch. It also speaks enormously to demand. Let's be very clear. I mean it speaks to the demand in the patient community and in the physician community. There was just an enormous demand for this therapy. And so I think this is going to speak -- this speaks reams when we get a broader label if we are so successful in June of this year.

Do you think that a broader label could maybe reduce any of the urgency that exists because there'll be less likelihood to age out if age restrictions are removed.

Well, I think that with Duchenne muscular dystrophy, you never get very far away from the concept of urgency, right? These people are in a battle on a daily basis against the disease that's stealing their muscle from them daily. But I don't think we're going to have the issue that we had on June 21. So remember, our first boy that was dosed, he was going to age out. Like we got from the -- as soon as the distribution channel was in place, we got him dosed in about a week. And frankly, the payers participated in that, which was brilliant. I think that level of sort of crisis management for a patient won't exist in the future. So the same demand will exist, the same urgency will exist, but I think the time for infusion will be a little different. So I envision that steady state with a broad label, you're imagining kind of a 2- to 3-month process from start from to infusion. And that will be sort of more steady state once we have a broader label.

Okay. And how has infusion capacity been evolving?

So it's been -- it's really -- I mean, again, I feel like I'm going to spend the entire time here bragging -- but please at least understand that I'm not bragging on behalf of myself, I didn't do any of this, the team did. But we sat back some years ago and began to plan for this launch. And we said -- we got to learn from others and then do better than others and have more infusion centers available than anyone has ever done yet. And we said, okay, we're going to try to do by the end of 2023, we're going to try to have 50 infusion sites, which was far more that would be ready than any other gene therapy had ever launched with before. I can tell you our Head of Commercial and our Chief Customer Officer, Dallan Murray was nervous about that. And then we were going to have this aspirational goal of maybe even having as many as 70 sites in the United States. Well, as we sit here right now, we ended that 2023 with over 70 sites. I think we have probably 76 or so sites. Over half of those sites are infusing right now, not simply ready or referring. So we're in just great shape to serve the community right now.

That's excellent. And how much capacity can a particular site handle?

So that's -- it's a difficult question because every site could have one or more physicians, and it really depends on the physician. And it also depends on their -- the number -- the amount of staff they have behind them. Remember, it's not simply an infusion moment, right? That's a really important one, to have the suite and be able to infuse, but that doesn't describe the ongoing issue. After an infusion, there's a lot of monitoring that has to happen. If you're going to do this thoughtfully and safely with good outcomes. So you can't -- you could -- a physician might be able to do 5 infusions in a week, but he or she very likely wouldn't be willing to do that nor should they nor would we ever encourage them. Because very likely they don't have the capacity to do the right kind of follow-up. So we're kind of envisioning on a per physician basis, 1, maybe with folks with a lot of staff, 2, infusions per week.

Okay. Great. And shifting to the regulatory situation, it's great that you have this PDUFA upcoming and it seems like senior leadership at the FDA is all in on your gene therapy. And I don't think you're expecting Ad Comm, although you weren't last time either, and there were some dissenting opinions within the ranks at the FDA. How do you feel currently? And how have your conversations been going? Have you been having ongoing conversations? And do you feel like there is adequate buy-in to get the label expanded?

So there are a couple of thoughts there. First, let's talk about the Ad Comm. I've said before that there would -- I didn't think there'd be an Ad Comm. People said, your ability to predict the future on Ad Comms is pretty poor. I stand by the fact that we're not going to have an Ad Comm. We've gotten it in writing from the agency. And I think the dynamics right now don't require an advisory committee. At least that's my perspective. So I don't think we're having an Ad Comm and I will stand by that. And of course, stand corrected after the fact if I'm wrong, but I believe that's the case. We still have a long way to go for the approval. This is June 21. I think things have gone very well with the division right now. I can't tell you with precision what their view is going to be on what level of expansion is possible. I can tell you what we've asked for and what we think the science supports. We've asked for removal of age-related limitations and ambulation restrictions in the label. That's what we've asked for. We've also asked that the approval be transmitted from accelerated to traditional. Let's really focus. If you want to prioritize, our biggest priority is the breadth of the label and being able to treat a lot of patients. I feel strongly convicted around the idea that age as a limiter in the label is not consistent with the science nor the regulations, nor frankly, the FDA owns guidance on dystrophinopathies nor many of the statements that senior leadership have made about these issues. And so I feel strongly that we shouldn't have age-related limitations. On the ambulation to nonambulation-related issue, while we feel very strongly about this issue, I do think that there is going to be a dialogue around accelerated versus traditional, from the ambulatory to the nonambulatory side. Now I'm not -- I'm just reading tea leaves from the outside in on this issue. So I don't want to suggest that there have been an enormous amount of discussions on this topic. But you can see where the agency could fairly easily provide us with an accelerated approval for the nonambulatory patients by using our ongoing study right now ENVISION, which is a nonambulatory study as the confirmatory trial for that accelerated approval. All of which is to say, we are very confident that the science supports our perspective that this therapy should be offered to the broadest number of patients available given its safety and efficacy profile. And we're working with the agency right now. And as it stands right now, we're very pleased with the progress that we're making.

Okay. Great. That's very helpful perspective. And then given there's no additional manufacturing information to review, I think, do you think it will actually take the full 6 months for the review period? Or when do you think we could hear?

Yes. So we had envisioned that it would be late August. And now it's June 21. So that's great. 2 months earlier than we had envisioned. And you could imagine a world in which it might be earlier. I will just tell you what I'm telling the folks internally what I believe, which is, it's going to be June 21. We're not going to see a label update significantly in advance of that. I'd love it if it was the case, but I'm just being realistic. Administratively, a lot to do on behalf of OTP and I'm imagining it's going to take the full amount of time.

Okay. And then it seems like you should have a mid-cycle review meeting pretty soon.

Yes.

Later this month?

I believe that to be the case. I'm embarrassed to say, I don't have the exact date in front of me.

It seems like late March. What topics do you think might arise there? And will you communicate to the Street any of the topics that we're discussing?

I think all the -- so you raised a good point. I'll tell you what ought not to be in there -- I'm fairly confident there won't be. There won't be CMC-related issues in that mid-cycle. CMC hasn't been a part of this dialogue. And that's very different. The original BLA was by, frankly, both content and really dialogue was about 80% of the BLA. So this is -- so I think this will just be any open review, questions on the clinical data, clinical views and views on -- our views and their views on both the breadth of label expansion and to what extent that label expansion would relate to a traditional versus an accelerated approval. Unless there was something monumental that changed, don't intend to update people along the way. There are lots of gives and takes that occur during a review. The risk of misstating them or over-interpreting things is too high. So I think -- you'll probably hear substantively from us when we actually have the letter in hand giving us the answer, okay. We do the same thing that investors do. When in possession only of limited information on what's going on the other side, we often over-interpret. And so I want to be very careful not to over interpret in a way that ends up being inaccurate and doing a disservice to our investors.

Okay. Excellent. So you mentioned manufacturing. It seems like that's obviously pretty important, if and when the label has broadened, potentially very significantly. So how do you feel about your manufacturing capacity and thinking through various label scenarios? Are any of them likely to create a manufacturing bottleneck?

So I think -- let's assume we get the broadest possible label this year. That's the way I'd like to go to bed at night, imagining. We're in good shape from a manufacturing perspective and a lot perspective and that won't be a defining issue for us in 2024. Now in the longer run, let's go to 2025 and beyond, there will be a limit to how much you can infuse. And it's both -- it's the infusion site capacity, it's lot release, because the release part is really significant -- lot release part is a part of this. And then, of course, payer dialogue and payer cadence. All of which is to say, we're going to go through a period of -- if we're successful, we're going to go through a period of significant and very robust growth, but there is going to be a cadence to this over time, but that really will begin in '25. In '24, that shouldn't be a limiter for us.

Okay. And I think you've been doing some work to ultimately transition to suspension or supplement with suspension-based manufacturing system. When we met in December, it sounded like you were going to do a run -- suspension run. How did that go? And what's the latest there?

So while there is a lot of work still to be done, we're very excited about where we are with suspension. This is a potential significant game changer for us. So just to remind everybody where we are, we use iCELLis and a mammalian adherent process for the release of this product, and it's working very well and it's supporting this therapy very nicely, and we've got a good margin, et cetera. But if -- and I'll be -- let me be direct with you. The tech ops team some years ago came to me and said, we really want to think about evolving to suspension down the road. And I said, okay, you can do the work, but I'm skeptical, because people had been talking about lots of different ideas that just weren't coming to fruition, and I knew the iCELLis was working well, and it did and we launched with it. The results we're getting right now are really brilliant, they're brilliant. Like we -- if suspension can come online, and I'll talk about what the timing of that is -- if suspension can come online, it will give us far more capacity, much better yields. Product qualities are at least as good right now, at least as good. And they're good with iCELLis. And the margins, therefore, will be very different. The cost of goods will be very different. And then that will be very important to us, certainly for all of our -- the existing places we are, but as we think about other places around the world that could benefit from this gene therapy, I think hitting a lower cost of goods will be enormous. And our goal right now, aspirational though it may be, is to have suspension approved in 2026. So that's going to be a big part of our strategic plan at Sarepta.

Great. And does the recent acquisition of Catalent change anything for you? I think you have certain contracts, those expire? And do they need to be renegotiated with the new sponsor?

No, no. We're in great shape. That doesn't have any impact on us. Just to remind everybody, so Novo Holdings acquired Catalent. It appears to be primarily relating to the GLP-1 manufacturing. If I understand the process, they then sell the GLP-1-related facilities down to Novo Nordisk. And then Novo Holdings, which is a holding company and sort of a venture arm that -- if I understand correctly, owns a number of different CMOs -- will hold them. I would say -- Catalent is going to remain intact. Our agreements, we have long-term agreements with these folks. We are important to Catalent. We're as important to Catalent post this deal as we were beforehand, and we've had a very productive relationship with them. So I don't think there's going to be any change at all as a result of the acquisition, if it goes -- if and when it goes through.

Okay. All right. And there's a number of competitors developing microdystrophin gene therapies behind you, some of which have generated some intriguing data recently. How are you thinking about the competitive landscape and maintaining your lead?

Behind us? So here -- I'm going to resist -- I have a natural genetic trait, which is, I'm too competitive. So I'm not going to -- I'm trying not to be competitive here. And I will just say that we have -- we have one significant competitor as an organization, and that is with relation to ELEVIDYS, Duchenne muscular dystrophy. We are thrilled with the product quality of ELEVIDYS, the amount of expression, the functional results, the safety profile relative to other AAVs that have been used. So I'm thrilled where we are. I think it's great that others are focusing on Duchenne muscular dystrophy. Although it can be -- it's often a pain at times to have a competitor trying to nip at your heels, the fact is it makes us better, and it makes us move faster and not be complacent and remain humble. But we feel very good about where we are. We feel very good about where we are from a gene therapy perspective. We feel really good about where we are from a oligonucleotide perspective as well, certainly with the new PPMO data that we have with SRP-5051.

Great segue. So given ELEVIDYS is going to help patients for some time, but not work forever, how are you thinking that this market will evolve vis-a-vis re-treatment, combination therapy? What does your crystal ball say?

Well, first, I do want to be clear. I don't -- we don't know how long ELEVIDYS will be durable. But I don't know that it won't be durable for a very, very long time. Let me be clear. We have the -- in patients so far we've dosed -- we've had patients that have been dosed out for 5 years, it's been durable. Animal models have shown its durability as long as we've been able to look at them. And that's like with the nonhuman primate out to 9 months -- 9 years -- sorry, 9 years and counting. So -- it is -- the muscle is a really interesting place, that is difficult to get to, but privilege when you're there, and we could get very long-term durability. On the other hand, I want to be very clear, Duchenne muscular dystrophy is a ferocious disease. These kids have been damaged from before they're born. And there probably is an opportunity for multiple therapeutic options over time. I believe that over time, there is going to be a significant place for both our gene therapy ELEVIDYS as well as future chronic therapies like our oligonucleotides. And that's why, for instance, I think SRP-5051 could be a really important part of the overall armamentarium that we have to bring a better life to Duchenne patients. Now that's all subject to what the FDA has to say. We're going to meet with the FDA this summer on the PPMO SRP-5051, this is our next-generation oligonucleotide for exon 51 amenable children, but the results look great. In January -- I believe it was January, hopefully not February, we announced the results of MOMENTUM Part B, which is for SRP-5051, and they're tremendous. I mean the -- we're trying to see if we could get better penetration. We had 12x over an order of magnitude greater dystrophin production than we get with the current gold standard, which is wonderful already and EXONDYS -- exon skipping was something like 24x greater. And that's on monthly dosing. One of the issues with the peptide conjugated PMO is that we get hypomagnesemia and hypokalemia, but it appears to be manageable and monitorable. And so we're going to meet with the agency this summer and talk to them about that and see if the agency agrees with us that the accelerated approval pathway is available. And if it is, then we're going to do an analysis, and if that all makes sense, we're going to submit an NDA. So we have a lot more work to do, but we're very excited about our PPMO SRP-5051.

What about the EMA for both ELEVIDYS and the PPMO? Where do we stand there?

So on ELEVIDYS, that's our partner, Roche, will be submitting in Europe. I know they're having dialogue and I believe their public statement is they want to submit -- make a submission to CHMP and EMA this year for ELEVIDYS. And then for PPMO SRP-5051, we got to sort of figure out where we are with the FDA, and then we'll think about what we do with Europe thereafter.

Okay.

Among your competitors, who do think -- who do you keep an eye on? Who is good?

We keep an eye on all of them. I think there's...

[indiscernible] competitors. List a competitor.

What's that?

List a competitor?

I can list a number of -- I mean the beauty -- I'll tell you what, EXONDYS deserves all the credit. EXONDYS, because of its success, has spawned an enormous amount of folks focusing on trying to bring a better life to the patients with Duchenne muscular dystrophy. On the oligonucleotide, we've got these really interesting -- the antibody conjugated approaches or fragment approaches like Dyne and Avidity. On the gene therapy side, of course, Pfizer is out there. I am resisting being snarky about any of this, Solid has dosed a patient or two apparently -- I mean Solid, I think, is not dosing patients right now and is looking to dose patients in the future. They had a big -- significant setback. REGENX has dosed a patient or two.

Who has got a shot at [indiscernible]. Where do you look at, let's keep an eye on?

We look at all of them, but we -- we don't think that -- we think that is significant. No, we think it's something that hasn't been developed yet, if you want to know the truth. What are the things that could be -- that could compete with ELEVIDYS, something that could make full-length dystrophin. I'm not sure that full length dystrophin is going to be monstrously more valuable than ELEVIDYS because the dystrophin we make with ELEVIDYS has been engineered -- sort of thoughtfully engineered. It's not accidental. But that would be an interesting concept. Redosing, if someone can figure out redosing, that's going to be enormously game-changing for gene therapy. If someone can come up with a nonviral approach, that would be brilliant. If you can come up with a nonviral muscle tropic approach, that would be brilliant.

[indiscernible]

It is [indiscernible]. I agree with you. I think another thing that people don't think enough about maybe but -- it's not just a construct issue, which is manufacturing. If we can come up with an even more efficient approach, the best one we know of right now is our suspension. But if you could come up with something, a stable cell line, that would be, again, holy grail like, but great.

[indiscernible]

I'm not going to stress Pfizer. I will say this about -- not about Pfizer, but about AAV9. I think many people chose AAV9 at a time when it made a lot of sense to choose AAV9. AAV9 is a muscle tropic AAV. And I think the animal modeling would have suggested it would be an acceptable approach. I think with the benefit of hindsight now, years after the fact, I think we now have learned empirically that AAV9 has significant issues from a safety perspective. So that's -- it's not a criticism for the choices made. But we are very pleased that we chose rh74 with the benefit of scientific hindsight.

I think that's all the time we have, but thank you so much.

Thank you.