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

All right. Good morning, everyone. Thanks for joining us at the Morgan Stanley Global Healthcare Conference. I'm Mike Ulz, we're the biotech analyst here. And it's my pleasure to introduce Doug Ingram, CEO from Sarepta Therapeutics. 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, Doug, thanks for joining us today. And maybe I'll just hand it over to you to kick things off with a couple of opening comments.

Sure. And I'll be quick. First, Mike, thank you for having us today. With me today is our CFO, Ian Estepan. So briefly, let me say, 2024 has been an extraordinarily important year. I mean, it is important for Sarepta. This was a long journey to get where we are. Today, I mean, we had a big ambition started really in 2017, but it actually stands on the shoulders of the work of Louise Rodino-Klapac and Jerry Mendell and that goes back 20 years to get to this place. And the combination of all that work, of course, is in June of this year, we were able to obtain a very broad label for the use of elevates to bring a better life to boys and young men with Duchenne Muscular Dystrophy and some girls and women as well. It's extraordinarily important for the Duchenne community. This is the most, in my view, at least, the most impactful thing that has happened so far in Duchenne Muscular Dystrophy sense, the cause of Duchenne Muscular Dystrophy, the lack of dystrophin was discovered in, I think, 1986 by Dr. Kunkel, it is extraordinarily important, of course, for Sarepta and all those who have committed themselves to supporting Sarepta. But it's really important as well, in my view, for the future of selling gene therapy. This is a bellwether moment with the success that we're going to have with ELEVIDYS. We're going to bring a better life to patients, we are also going to prove the thesis that gene therapy is here and that we are at the beginning of a revolution, and I truly believe that. We will have shown that you can develop therapies that are life enhancing. We have shown that you can, in fact, work with the FDA and get them approved and then we're going to show that we can serve the community and make them commercially successful. And on that basis, we're going to have an extraordinary '25 and beyond with this launch, we're going to continue to support our PMOs. We have three approved PMOs as well, as you know which are doing very well and bringing a better life to patients as well. We're going to advance our pipeline, which is very significant as well. And as you know as well, we are in a different place than a lot of other biotechs. And then, that we were for a long part of our history, we are now a profitable organization. We will be sustainably cash flow positive in the next couple of quarters. And so things are very exciting for us right now, and we've got a lot to do as well as a people.

Yes. Great, thanks for that introduction. And Doug, as you mentioned, it's been quite a successful year for you with the broader label for ELEVIDYS. So maybe just talk about, since that label expansion, what you're sort of seeing in trends?

Well, look, first of all, things are going very, very well. The launch is going brilliantly as we would have expected. We had the opportunity, not an opportunity that we chose, but an opportunity that we took advantage of to essentially beta test the launch by launching a much narrower label in June of last year. And I think for those who are watching, you will be able to see that we made a brilliant go of that launch. In fact, we more than doubled all of the recent gene therapy revenue over that period of time and for the last few years, combined which was very -- which was not entirely surprising to us, but it was really comforting to us. It showed that all of the work, the obsessive focus and attention to detail that we've had really since kind of early to mid-2018 paid off. We did a lot of work with that access and reimbursement, we're talking to payers, with working our distribution channel up by getting sites ready to go, having them well educated. We were in a great place for that launch to essentially beta test this larger launch that's going very, very well right now. And it should come as no surprise to folks that things are going well. This is, in essence, our 5th launch. We have been very successful in serving the Duchenne community. I am quite confident that there is no one that can come close to us in the service of the Duchenne community with therapies. We are battle hardened and very execution focused. I would also argue that there are a few companies that are as sophisticated in their approach to the launch of rare diseases more generally than us as everyone will recall, back in late 2016, EXONDYS was approved. That was, in many ways, really one of the first opportunities that payers had taken to challenge rare disease therapies, and this organization really grew up with that, got very sophisticated at dealing with access and reimbursement and working with payers as a result of which that EXONDYS launch was very, very successful, as was VYONDYS, as was AMONDYS. So I think we're in great shape to serve the community, and that's why we're seeing all the signals we're seeing right now with the launch of ELEVIDYS are very positive.

In the past, you've mentioned there's a couple of key factors that might influence the launch. You've touched on one or a few already, just in terms of infusion centers. Maybe talk about the status of that, your thoughts about further expanding that or not?

Yes. So we're in great shape right now. One of our ambitions, which we thought was very ambitious was to be in a position to have as many as 50 sites up and running and trained at about launch and then moving to about 75 sites. Eventually, we're actually over -- a little bit over 75 sites today. That is great coverage across the United States, and we're confident with that. So our goal right now is not to be proactively going out and greatly increasing the number of sites. They may go up over time, but that will be mostly reactive at the site, for instance, really wants to be a treating site, we'll certainly consider that and train them and get them up. So it could drift up, but it's not part of our broader goal. We have sufficient sites trained and ready that we can serve the community over the long term. So we're doing very well right now with that.

And another factor you mentioned is just payer reimbursement. So maybe just walk us through what you're seeing there in the time frame to sort of getting payers on board?

Yes, a couple of thoughts. Just to talk a little bit about this sort of patient journey itself, which includes the access and reimbursement related issues. So if you went back and you saw our launch in June of '23, one of the things you should know is that we were basically all in crisis mode. We were in crisis mode, the physicians were in crisis mode payers, which I'm very heartened to buy saw themselves as crisis mode as well as did the physicians. And by that, I mean, this is a very narrow label the kids could easily could age out very easily. And everyone prioritized when I START form that came in, to prioritize to getting those kids dosed and sort of an access and reimbursement perspective, I am proud to say our payers really worked with us to accelerate that process. So as far as I know, not a single kid who put in a START form inside that range aged out during that period of time. That's wonderful. As we move to a broader label, we're out of crisis mode and we're more in sort of that traditional approach. That is -- and as we've said, that really puts us in kind of a 3 months to 5 months, maybe even 6 months at times right now only because in these early days, payers not only have to give an individual patient access, but they have to actually put policies in place the cadence of that is not immediate. Sometimes, there are meetings that are scheduled and we have to wait for those schedules. That can take a little bit of time. So it's going to be -- steady state, it's going to be somewhere in the 3 months to 5 months range from the moment a START form comes in, to a moment, a boy or a young man is dosed with an infusion. Very pleased with what we're seeing right now from payers. We have a wealth of data that supports this therapy. So I suppose I shouldn't be surprised. But we're getting -- we're having great interactions with payers. We've had interactions with payers that represent hundreds of millions of lives in the United States. So we've really had detailed conversations, and we're seeing some really good policies, a number of very big policies that are focused on granting access to all patients to label in the written policy, which is very positive. So I'd say relative to PMOs, things are going very well, and the PMOs went very well as well. So I think we're in good shape.

And just given the much broader patient population now, do you think that could change in the future and you might see more pushback? Or is that unlikely?

I think look, the great thing about the Sarepta team is that we're really good at working with payers and overcoming objections when they occur. Well does not surprise every kid is not going to immediately get on therapy without dialogue and debate and discussion. One of the things I'm very proud of is that we win even if -- even in those situations where they're really pushing back, kids tend to get on therapy either we work through the process and get them on therapy. Sometimes with commercial plans, they might have to go to an external appeal, we go to external appeal. We win those appeals, the vast majority of time -- times. And I think as a result of that, today, the more sophisticated plans are sort of acknowledging that and giving broad approval to label. So I think it's again, I think it's going to go very well. And there's no -- the risk of sounding a bit arrogant, but arrogant on behalf of others, the team. I just don't know if there's another organization is equipped to deal with those issues and work with payers and work through those issues, then the team that exists at Sarepta. One of the things that I'm really excited about, an interesting little factor way is that, that group that sort of core group of commercial medical affairs folks that were really kind of cut their teeth on and became expert in this area with the launch of EXONDYS and VYONDYS, 90% of them are still at Sarepta today. So that core group has really brought forward to this day that ability to execute and work with payers. And that's what it is, too, I should say. Like for the most part, it's not fighting with payers, it's working with them. I mean, that's one of the things we figured out early, if you can get to them, show them the data, have a medical affairs to medical affairs discussion, things tend to go well.

Makes sense. Another factor you talked about is just the supply and manufacturing. So maybe talk about the current status there and your plans for the future?

Yes. So let's start with the current -- we're in a great shape from a supply perspective. This is, again, I feel like I'm spending a lot of time bragging about Sarepta today. I apologize for that. But it's something I'm very proud of. I'm very proud of where we've gotten from a supply and manufacturing perspective. We started with this ambition in early '18 at a standing start. Like we didn't know much about gene therapy manufacturing and from there, we're, to the best of my knowledge, making vastly more gene therapy material than anyone else on earth. And I know at some point, we were making more than everybody else combined. We're in great shape from a supply perspective right now, just to give you sort of a proof point on that, for those who may wonder about it, we have the ability to take additional suites at Catalent, we have options on additional suites. We just don't need them right now. We're in great shape. So that -- so in the near to midterm, we're in great shape. One of our goals from a manufacturing perspective is to move to suspension, right? We are doing really well with that. Why do we want to move to suspension? There's two big reasons. One, it's very efficient if you can make it happen. We're going to have multifold, better yields. The cost of goods are going to be fairly dramatically lower, the ability to scale and serve a broad ex-U.S. population is just at a different order if we can get to suspension. And the data that we're seeing so far, our suspension is really good. The product qualities look great, we've scaled. We've done 500-liter runs that are looking very good from an engineering perspective. We're doing a 2,000-liter run as well. We'll make some decisions around that. We really want to get to the place where we're making GMP material doing -- our PPQs making GMP material and starting a bridging study by next year with the goal of being able to bring suspension on probably by early '27, which is about when it would be really valuable to us to have suspension.

And I wanted to follow up on one of your earlier comments just about the patient journey somewhere between 3 to 6 months from start form to infusion over time, are there opportunities to sort of shorten that more to the 3 months time frame as opposed to the 6 months?

Well, it won't be 6 months over the long run. So that really is -- some of that longer time that can occur right now is just an artifact of the initial launch and policies to get in place and you can't get policies in place before you have a label. It's not like this is all work we could have done with payers in advance. In the long run, I think, it will get shorter, but it's not going to get shorter than 3 months. It's going to be kind of 3 months, 4 months time frame, even at steady stay at some point, because the journey is just a long administrative journey to ensure that kids are going from start form doing all the right physician appointments, eventually getting an antibody test. They need to be antibody negative to get the dosing and the like. And that's up to dosing, let's be clear, that's the first part of the journey. Then the second part of the journey is the monitoring and the like. So one thing we have to remember, people often think, well, how many kids can you dose? That's not the question. The question is on a site, how many kids can you thoughtfully dose and then do the appropriate monitoring and follow-up. I think one of the things I'm very proud of is that ELEVIDYS has had a very good safety profile relative to other programs, and I want to ensure that continues through being very thoughtful. We learned in talking to thought leaders over the last few years that they wanted to ensure that when we prioritize things, we always prioritize the outcomes before we prioritize revenue. And I think we've done a very good job of that. I think we've got a great support system for sites to ensure that the results that we saw clinically we're seeing commercially, and I think that should persist into the future given what we're doing.

And just given the patient journey. Talk about how that impacts for the trajectory of revenues going forward and sort of your level of confidence in hitting your 2025 guidance?

I wouldn't have -- I mean, I will just say I'm very confident, obviously, I would not have provided that update. As everyone may know, we gave broad guidance on -- well, we give sort of specific guidance actually, which is -- and this year, Q3 would be up about 30% over Q2 for ELEVIDYS. You can see this ramp starting, then we would actually double that in Q4 assuming that, that was at the 30% range. I want to be clear, if we overperformed in Q3, just don't start raising, that's not no crazy. But that shows you that this is going to be a very significant ramp. And then we led to 2025 and we've given a number that I think should be very impressive in both our ability to serve the community and our ability to show that we can launch these therapies well, which is we're going to do $3 billion in 2025, about 2/3 of which are going to come from ELEVIDYS approximately. So yes, we have a lot of conviction on our numbers.

Yes. And then just given your label has both ambulatory and non-ambulatory patients and I think the non-ambulatory was sort of a bit of a surprise for some people. How do you expect utilization, at least earlier in the launch? Are you seeing some of those patients on therapy?

Yes. I will say, if you don't mind me saying, Mike, there was -- there were dose that were surprised that we were able to get this broad label. Obviously, we weren't surprised. As everyone may recall, in the fall of last year, I had suggested that, that is what we would get. I know that people generally thought, I was alone at that point of time, but there was great reason to believe that the mechanism of action justified the data justified it, and I'm very pleased that the FDA leadership, scientific leadership saw that, and you can see that in their decisional memo. It's early days to know what the mix is when that is something we'll kind of know over time. There's a lot -- internally, we speculate what -- who are they going to -- who are physicians going to choose to dose. First, there's a lot of different interesting arguments that people can make about that. We're going to sort of see that as we track into '25. The one thing I'm very pleased with is that we're seeing a significant number of start forms for the non-ambulatory population right now. It's not an inconsequential percentage of the start forms that we're getting are non-ambulatory. So it's very positive.

Can you also talk about the ages of the patients you're seeing come on to therapy? Is it a broad range?

Yes. It's a very, very broad range. I mean, we have dosed kids. Obviously, we -- commercially, we can't dose kids below 4 years right now. We want to work and gather additional data and then go back to the agency and discuss the opportunity to bring that age down, we've already dosed kids significantly younger in clinical, significantly younger than 4 years and we've done so with great results with good safety. So that's an opportunity for us in the future. It's not an enormous near-term opportunity, because what we really need to empower that is newborn screening to really make that value to patients. We're making great progress there, we have, I think, 4 states, if I'm not mistaken, by now, that have adopted newborn screening. So it's kind of a state-by-state process to work there. But we want to be in a position where when we have broad newborn screening, we can dose and bring this treatment to even younger patients as well. We've also dosed very -- dosed adults. I mean, we've dosed kids. I'm not sure how high we've gone in the commercial setting. But in the clinical setting, we've gone, I think, higher, I think, 26 years old, and we've seen some fairly advanced non-ambulatory kids in the commercial setting as well with start forms. I'm not sure if they've yet been dosed.

Yes. Makes sense. And can you talk about just the ENVISION study in terms of the current status, when that data readout and it's important?

So that study will be continuing. So it's going well as everyone may know. So just to remind everyone, ENVISION is our late ambulatory, non-ambulatory study, it is a post-marketing requirement for the approval the non-ambulatory patients, and that was one of the goals we had in -- we had a number of goals for it, but that was one of the goals in connection with starting it. So one of the things we did in advance of the approval is we stopped recruiting in the United States and recruited outside of the United States. And the reason for that, of course, is we didn't want to be in a position where we had so loaded up the study with U.S. patients that there was a risk the study wouldn't complete. And if you think about it, it's a placebo-controlled study. So if we got an approval, as we imagined we would for non-ambulatory patients, there might be a motivation for patients who are early in the process and weren't sure if they had gotten active or placebo to drop out of the study and try to get commercial therapy. So we're dosing outside of the United States. We're in a number of countries right now. I'd say recruitment is going very well. That will be recruiting through next year. And I believe it's 72 -- all right -- month endpoint and placebo control.

Okay. Great. And you're also doing some work to further expand or the addressable patient population. Maybe you can talk about that a little bit?

Yes. So on the face of it, we're doing fantastic right now, right? We are able with this broad label to serve 80% of Duchenne boys and men and women in the United States. There is an opportunity to expand that. There are two -- the 20% broadly, the 20% is made up of two categories. About 15% of those that screen out is for screening out, because you have positive neutralizing antibodies. You've had some environmental exposure with something that looks like an rh74 capsid, even probably, likely isn't it looks like it. And therefore, you -- your body wouldn't have a reaction, you can't be dosed. And then there's another approximately 5% of kids that are in this range covering exons 8 and 9 where there is a risk, at least a theoretical and probably also a real risk of an innate immune response if you dose in that range. That latter part is going to be challenging to get to. We're doing work on that right now, trying to find ways that we could narrow that population of exclusion, but that's going to be some real work, because there's real safety issues. You have to keep in mind there. On the 15%, we have a number of approaches to knocking down or clearing, neutralizing antibodies. The most advanced approaches are the use of imlifidase to cleave antibodies or the use of apheresis to clear antibodies. We're dosing with imlifidase now, we're going to start our apheresis study this year. And I'd say again, in advance of having data, take what I say and my team says with a grain of salt, but we have a lot of conviction that we can solve this issue. Knocking down preexisting antibodies is important, but it's not a monstrous task. If you have preexisting antibodies, you're not having like one in a million or one and two million, the sort of antibodies you get post dosing. They tend to be larger than what we need -- greater than what we need, which is under 100 and 400, but I think there is a real opportunity in the not very distant future to knock down those antibodies and to bring that other 15% into play. And that means we would expand the addressable population in the United States, I think in the next few years, to 95% or so of kids with Duchenne Muscular Dystrophy and adults with Duchenne Muscular Dystrophy.

You have a big opportunity in front of you in Duchenne, but there's obviously also some competitors looking at other gene therapies as well. Maybe just share your thoughts there and any potential impacts.

I'm going to be careful not to sound competitive. And I'll be honest, we just don't get up thinking much about competitors right now. I don't think there's any one near us from a gene therapy perspective. There are some interesting longer-term technologies, but I don't think there's anything that's a near-term issue. I think the greatest hope that families with Duchenne Muscular Dystrophy have right now is ELEVIDYS to live a better life and slower, arrest the decline that is inevitable with Duchenne Muscular Dystrophy. So I just don't believe there's anything -- any significant competitor right now.

Got it. And if you could touch just quickly on Europe and the progress you're making there with your partner?

Yes. I'm going to leave -- I'll obviously leave the bulk of it to Roche to talk about. For those who don't know, I'm sure you do, Roche is our partner bringing this therapy outside of the United States to patients they announced right at the same time is that we obtained our approval that they had submitted for and the EMA had accepted their submission for an approval in Europe. So that's very exciting, and then we should get an answer to that next year. And they've gotten a number of approvals as well. They've already had -- I'm not sure if they've listed the exact number, but they have a number of approvals outside of the United States already in those countries that can rely upon, primarily rely upon the U.S. approval as their basis. And they're doing a very nice job of serving the communities in those countries as well. So we were very pleased with the ability to have a partner like Roche outside of the United States, and we remain very pleased with our partner.

Okay. Great. Maybe we can shift to some of your work you're doing in the pipeline and maybe 5051, your PPMO, maybe remind us next steps for that program?

Yes. Again, just quickly to remind everybody, the PMOs are in many ways, brilliant therapies that are bringing a better life to kids, they're delaying loss of ambulation, delaying mortality, delaying time to ventilation, and a number of other things, hospital stays and the like. The opportunity, of course, is to enhance the penetration of a PMO so that you can get even more therapy in the right place that can create more excellent skipping and therefore, more dystrophin. And a number of organizations are attempting to do this. We're in the lead from both a timing perspective, and I think we're -- our data looks generally great right now with what's called 5051, which is essentially the same backbone of EXONDYS, but conjugated to a cell-penetrating peptide that's unique to us. So and we've had very good results, we're getting -- we are -- we did just what it was supposed to do, increased exon skipping, increased dystrophin production. Now we have a go/no-go based on some interactions with the FDA that will occur later this year. There really are two big issues that have to be yes, to bring this therapy forward. One is the accelerated approval pathway has to be available to us. So there was -- there's great precedent for the fact that with respect to our PMOs and the FDA has repeatedly confirmed this with us in the past that the accelerated approval pathway is open for other PMO. So if we wanted to go to another exon with a PMO today, I feel an enormous amount of confidence that if we saw the dystrophin production and exon skipping that we see in our other programs that we would be able to use accelerated approval. Whether we can use that accelerated approval with a peptide conjugated PMO is a different discussion. It has a different safety profile and the like. We need to get a yes answer to that, and we'll know that later this year. The second issue is that we need a development pathway that is fit for purpose from our perspective. And that means that we really don't believe that one can use a placebo-controlled trial right now with 5051 or these PPMOs. One can see, we've been working hard both with our MISSION Study and our ESSENCE study. And you can see with these placebo-controlled trials, it is very difficult to recruit them and they take a very, very long time. And we've spent hundreds of millions of dollars. We're doing very well with MISSION and ESSENCE, but you can see how long it takes. We think at this point in time, it's going to be even more difficult, particularly with the existence of ELEVIDYS and the like and other competing therapies to recruit and execute a placebo-controlled trial. On top of that, there's just -- there is a real -- you're on the boundaries of good ethics, I think, if you're going to put it -- to generating child on a placebo arm. So we need a line on that issue. And if we get a yes to both of those answers then we have a viable approach. And if we don't, we have a no-go decision to make there, we'll know that by the end of this year.

You mentioned some competitors. Maybe just talk a little bit about how you feel your data stacks up?

And I'm going to slightly beg off that. There are a number of folks looking at alternative approaches. We've got PepGen and Dyne and Avidity, and they're all doing very interesting work. I think they've learned what we had learned a long time ago, which is its challenges with doing this stuff, and some of them have had the face challenges they didn't expect. All of them pretty interesting different approaches, but I think they've got a long road ahead of them to prove out their thesis.

Makes sense. And maybe now since you've got the broader label, you started to talk about business development. So maybe just share your initial thinking there.

Yes. So to sort of give you the shape of where we are as an organization, we're going to have a really brilliant 2020's okay? We have a really exciting pipeline as well. So we're going to be treating the prevalent population across the entire 2020's. Moving to incident population in the 2030's with Duchenne Muscular Dystrophy and ELEVIDYS, which by the way, is still more than $1 billion opportunity. We also have a very deep pipeline, limb-girdle and a number of other programs that we haven't really discussed or disclosed externally only because they're so early, it would seem unduly promotional to be chatting about things that haven't gone -- even gone into the clinic yet. What that means is there is this really interesting opportunity in the late 2020s to find the new areas from an external perspective both to bridge the gap between the success we're going to have over the 2020s and what's going to start really delivering in the late 2020s into the 2030s. And it just makes sense to do that. We're growing up biotech now. We're a profitable organization. We should deploy it to bring a better life to more and more patients and to take advantage of the expertise that we have, both in rare disease, genetic medicine, gene therapy, RNA and the like. So that's what we're going to look for in the next couple of years, which is essentially, we have a very broad aperture in what we're looking for, but we're going to look for opportunities that are later stage, so we're not looking for early research programs, but something that can really benefit us in that time line, that are very significant unmet need. We're an organization built on mission, and we're not going to lose sight of that. And then very likely, it would be -- continue to be rare and genetic which is what we are particularly good at. And we are looking at a lot of things that's a high bar to be able to do that. One of the things that is important for us to not do is get complacent. There's definitely a tendency for an organization that gets about where Sarepta is right now to say, man, we just had an amazing 7-year run. We've hit all of our goals, which we have, we created this ambition. Now let's just sit back and enjoy the fruits of our success and watch this growth over the next few years. And I think that if we did that, we would lose an opportunity to bring a better life to a lot of patients and I think reward investors. So nothing -- don't imagine anything is coming in the next month or so, but we are looking for opportunities that with our balance sheet and our cash flow that are coming that we can sort of augment our pipeline with sort of mid-stage, late-stage opportunities.

You mentioned your -- obviously, your experience in gene therapy, is that drive the decision making? Like do you have a preference for those types of assets or not necessarily?

We're kind of agnostic in a sense because there's an argument on both sides. Like one argument -- and by the way, I don't -- it's going to -- the arguments are going to sit out there and then the opportunity is going to tell us what we want to do but both concepts are exciting. One concept is we are, I think, by now, with very little, I think, debate, the leaders in gene therapy right now, at least I believe that we are, if not the leader, one of the big leaders in gene therapy. And we have a lot of expertise, building constructs, raging development, working the regulatory process, all of that, serving communities with the gene therapy. And so there's a real opportunity to sort of have additional gene therapy opportunities and exploit that. The other opportunity would be to have a diversifying concept of chronic therapies that would add to our gene therapy focus, and that's a really interesting opportunity as well. We have a lot of really exciting internal programs in gene therapy that will come in 2030. So which of those concepts or maybe both win the day will really depend on opportunistically, what's available, what makes sense, what works for us. And that's the issue with transactions. You've got to be in the right place at the right time with the right opportunity. And so we're going to continue to look.

Okay. Great. It looks like, unfortunately, we're out of time. But Doug, thanks so much for spending time with us today. We really appreciate it.

Thank you all. Thanks very much, everybody.