Sarepta Therapeutics, Inc. (SRPT) Earnings Call Transcript

I'm Matthew Harrison, one of the biopharma analysts here at Morgan Stanley. Very pleased to have Sarepta with us for the next session. Before we get started, I need to read a disclosure statement. Please note that all important disclosures, including personal holdings disclosures and Morgan Stanley disclosures appear on the Morgan Stanley public website at morganstanley.com/research disclosures. And so with that, very pleased to have Doug Ingram, I'm the CEO; and Ian Estepan, the CFO from Sarepta. Doug, I'm going to turn it over to you to make some opening comments, and then we can get into Q&A.

Thank you.

Thank you very much, Matthew, and thanks for having us today. I think I made a promise in advance of the call that I will filibuster. So I'll be short. 2021 has been a very interesting year for us. While I will not lie and see I remain somewhat frustrated as many do at what I see as an extremely undervalued stock price right now. I am, at the same time, very proud of the execution that this company has had this year. Things are going, from an execution perspective, very well, right? So let's start. We had an approval for our third therapy, which is AMONDYS in February. And we've been performing and serving the market and the community carry well over the course of this year, with all 3 of our therapies EXONDYS, AMONDYS and VYONDYS, as a result of which, most recently in our earnings call, we had to increase the guidance for the year. So we'll do somewhere between $560 million and $570 million. That means that our CAGR, I think I've always talked about our CAGR before in the past. From full year 2017, our CAGR in revenue has been over 40%. So this company is really performing well. We've never taken a price increase. So that is all directly relating not only to the sale of units, but to the service of the community, the patients that have Duchenne muscular dystrophy. As well, we had some great results earlier this year with respect to our next-generation RNA, the PPMO, 5051 in this case. And our goal is to have that next study, which will be a pivotal study started before the end of this year, and we're on track to do that. In gene therapy, with respect to SRP-9001, we have announced very recently that we had a very positive discussion with the agency, and our goal is to initiate that study in the very, very near term. What we'll do with respect to that, one of the things we want to do is provide some detail about the study design, time lines and the like. We also want to package that with a broader discussion of 9001. We're going to hopefully do a good job of explaining with some additional functional data. Why we're so excited about where we are and where we're going with 9001, and why we're very confident in it. So they'll not only be with our next discussion of 9001 an update on the initiation of the trial and the study design itself and some of the whys behind the study design, but we're also going to provide some additional functional data at the same time to have a more broad and thorough discussion of 9001. And when we do that, it won't simply be a press release, we'll call a meeting and have that main discussions. And then finally, with respect to our limb-girdles, we had some signals from the agency in writing, both from the FDA and EMA, about the possibility of using protein expression as a biomarker to get an accelerated approval as a pathway, we have more work to do there before we can discuss that in more depth, but that is a very positive signal in the right direction. We'll get that work done and have another discussion probably early next year about the development time lines, regulatory pathway for not only 2E but the rest of our limb-girdles. And maybe with that, we can open up to your questions.

Okay, perfect. No, great. Thank you for that, Doug. I think that was a good overview of most of the topics people want to talk about. So I guess let's start with Phase III. And just -- I mean, I know there's sort of a limit on how much you can tell us, but just for everybody's, I guess, benefit, let's talk about what needs to happen to start that study. And what, if any, sort of remaining things that you need to check with regulators on to get that study started?

There are -- let me just say this, the broadest stroke to then frustrate you by probably not giving you enough specificity. I mean there's just a lot of logistics left. So that's one of the reasons that if I go through things that we need to do on miss things that we have to do that I haven't thought of I will tell you that we remain on track to initiate that trial. I think we said we'd like to get it done aspirationally by September. It's still our goal to have the trial initiated in September. So we're on track to do that. And then we'll come back with with everybody and have a discussion about the trial, the trial design, what we've learned from the data that we've had today. And then additionally, importantly, we'll provide some additional functional information that kind of frames out where we are from a 9001 perspective, we do all of that in the near term.

Okay. And then, I guess, second question, we're all -- and I'm sure once you have a better idea of enrollment curve and things like that, you'll be able to give people a better sense for the time lines for that. But just if we look across -- we've seen other people -- we see new enrolled studies. We've seen other people enrolled studies. Like is there anything out there to suggest that COVID or other impacts are going to have any impact on your ability to enroll people or changed the enrollment time frame versus what we've seen previously?

So I don't think COVID is going to have an impact, surprisingly, actually. It has -- we were very cautious early days with respect to COVID, not only both commercially and with respective trials. And particularly with these -- with onetime therapies, we just have not had an enormously difficult time of it. I think one -- interestingly enough, we -- with respect to Study 103 and then, I mean, we were going to do an 11-patient study. We ended up doing 32 patients in Study 103 before we stopped enrollment of 103. So I am confident about not only the fact that I don't think COVID is going to stand in the way of enrollment, but that we are going to robustly enroll this study. I think there's a great demand for this study, both with investigators and of course, probably even more passionately from the families that have to deal with Duchenne. And so I think we're going to robustly enroll this. And we'll talk a bit about enrollment, enrollment curves and it'll play into like what's the size of the study at the end of the study and we'll [indiscernible] all of that when we all come together after we have the functional data.

Okay. Okay. And then last thing, and then I'll stop the torture on things you can't say about Phase III. Just when you talk about extra functional data, this is additional data that has been collected internally that hasn't been shared yet from patients from the existing study from the prior Phase II. Is that -- like where is this coming from, I guess, is the question?

We have 3 studies, right? So we have Study 101. We've provided data on the first 2 years for those kids. Those kids now have gone out for 3 years, and that's getting to be pretty important. These kids now are -- a couple of these kids are now 9 years old. And I think. well, we all who have been around Duchenne muscular dystrophy know what's supposed to happen in sort of the 7-, 8-, 9-year time frame. These kids start just going off a cliff. Many of them in wheelchairs by the time they're not. So updating the data on the 3-year data. We have it available. And I'm going to be clear, I'm not promising any particular piece of data because we have to get it, get it internally, and then we have to QC it. And then if it's ready in time, we'll present it. But there's that data, we can do potentially additional analytics on 102. I think people have asked for additional, some additional analytics on 102. And then we've got the 103 data. And we've dosed a number of kids. The original 11 kid cohort is right now passing the 6-month mark. And so there's an opportunity to provide some additional insight on the therapy out of that as well. So some combination of those will help us really -- what I really want to do is when we're initiating the next study, we're talking about the study design, we need to really put in context why we're so excited about 9001. Why we are so confident, not only in the trial design itself, but in the potentially transformative nature of this therapy to kids. And I think some of this additional functional data probably would if we're able to present it, provide additional context in that regard.

Okay. Okay. Good. I guess sort of second thing on people's minds after this is going to be Phase II crossover data, which obviously won't come for a little bit of time. But maybe just first, I start by saying what is your goal to learn from that crossover cohort?

So the crossover -- just to remind everybody, there's going to be a lot of data that comes out of that crossover. Readout. There is more data than I think anyone has ever had in a well-controlled trial like this in Duchenne muscular dystrophy. Half of those kids will have been on therapy for 2 full years. The other half of those kids will have been tracked off of therapy for a year and then track a year on therapy, really interesting. One of the things we've got to do is build, in advance of unblinding, build rigorous potential historical controls that we can use to begin to frame out what we're seeing. But there is going to be a lot of insight that comes out of the trial. -- and hopefully very positive insight that comes out of the trial. I would say on the crossover kids, remember, all of those kids were properly titered. So the original kids, as we know, there was a titering issue nationwide, children's hospital used a clinical titering process, supercoiled that when we went back and used our titer, a linear process was -- had under-dosed about 60% of the case. That didn't occur on the crossover, the crossover kits all were titered using our new method. So it will be very insightful, I think, when we get that data.

And I mean -- I guess the question is, given the change -- let's just assume that the dose was a key component of what happened with the prior results. Would you expect that we might see not -- or we may not see some of the diversity that you had across age groups and other things that led to the result because of dosing arm? I'm just trying to make sure I understand what you think that could have an impact on?

So there were 2 things that happened. So let's remind ourselves 2 things that happened in Part 1 that were frustrating to all of us, right? One of the 2 things was that we had this titering issue. So 60% of the kids had a lower-than-expected dose. And I want to be clear, when I say lower-than-expected dose, I don't mean 3% or 4% or 5%. They had a really significantly lower expected dose. And that was obviously frustrating and likely played some role in the results. Although I will note that, that alone couldn't have explained the niche because the 5-year-olds had that same issue. But when their baselines were properly matched, even in 16 kids, pretty small study, we had very robust statistical significance in this, 0.017. So really nice stats on a big functional improvement. But then that goes through the second issue. The other thing is, of course, the 6- to 7-year-olds were just wildly off from baseline characteristic. I mean just shockingly different. [indiscernible] seeing the graph on those 2 groups [indiscernible]. I mean those kids were almost 5 points different, the treated kids being the severe kids and the placebo kids being the much more moderate kids. So now we can track over to Part 2. A couple of things are going to be -- are going to help us, right, that at least help us to correct some of those issues. One is all the crossover kids properly titered. So that won't be an issue. You're not going to have any issue with the crossover kids. All the kids on crossover are going to have the right titers. The second issue that hopefully will help us on this issue is that there are -- we're not going to be using it. The problem was the control. Well, we have a different control for the next group. We're going to age match, baseline match, the historical control that we'll use before we unblind, and that should go a long way in correcting some of the problems that occurred with respect to the -- particularly the 6- and 7-year old in Part 1. And that's why we're pretty excited about what we might see in Part 2 of Study 102, even as we are obviously going to be executing Study 301 at the same time.

Yes. okay, okay, good. And then I guess last question here is anything from those results that you think would inform or change anything you're doing in Phase III because obviously, you're going to start Phase III before you have that data. And have you -- are you building in any mechanisms to adjust for things if you see something there that might cause you to want to make some modifications either on baseline criteria or other factors?

There really -- I don't think there will be anything that would be dramatic in that regard for us. I have to tell -- say -- and that's again, I'm going to frustrate you, I'm not giving you the details of the trial design, but I will tell you that we are being conservative in our approach with respect to that trial. I mean, that trial is -- 301 is built to succeed. -- from a powering perspective, from a thoughtful approach on baselines and ages. We're going into 301 with a lot confidence about this trial design. And frankly, from our perspective, with a lot of wind in our sales about how 301 is going to perform. So I think we're in good shape. Something weird came out of 102 that maybe in the 301 yet. We'll still be executing 301. We could probably make changes if we needed to. But we feel really good about where Study 301 is right now.

Okay, good. Good. Why don't we sort of shift focus a little bit and move on to PPMO. And I guess sort of the top of mind question I have there is I think internally, you guys feel pretty strongly about that you've got activity, you've got a molecule you can move ahead, et cetera. And yet, I would just say from the kinds of questions I get about the company and the investor focus. There's -- I don't know if you want to call it skepticism, but there's not a high degree of focus there. And so what do you think people are missing in terms of the data set that you have, the path forward that you maybe have there and just basically the outlook for that program?

Well, let me say this, a little starky. Firstly, I think people seem to be missing everything at times. That's my frustrating statement. We're a company that's tracking to $600 million in sales with a consistent CAGR of over 40%, and I can't even get people to ask me about sales. So I'm always a little surprised. I don't know how people do their sum of the par or missing them, why they're not as excited about it. I think, in part, it may just be that the 9001 plays such an outsized role in people's world view that it's hard to see past to the PPMOs. I believe there will be a world in which both the RNA technology, the gene therapy will actually coexist. I think at a minimum, there are going to be a ton of kids who, for instance, about 15% to 17% of our kids who are excluded for [indiscernible], preexisting neutralizing antibodies, they'll have an opportunity. There will be places around the world that will have 1 of the 2 therapies available from a regulatory and approval perspective, but not both at the same time, and there will be opportunities. And I think there is obviously, if we get the pharmacoeconomic models done, get some additional science behind it, I think there's a real opportunity potentially for a combination therapy, which we see at least anecdotally already in Zolgensma and Spinraza and the live. And then, of course, on top of all of that, there's this enormous derisking aspect to the RNA franchise generally and for the next-generation PPMO as well. And I don't think people, in their models, consider that, right? So I don't know. I mean look, I don't want to oversell the PPMO, but we're excited about what we're seeing. I mean to your very good point we, at the 30 mg per kg dose, we're seeing -- we saw it 12 weeks over 6%. And we're saying we're going to see 10% in the year. That's a pretty modest prediction given that we already saw 6% at 12 weeks. We saw 18x better exon skipping versus EXONDYS. Versus EXONDYS is 24 weeks versus this therapy at 12 weeks and that 20% of the drug exposure, we're seeing 18x more exon skipping and almost an order of magnitude more dystrophin. So long as -- and this is a chronic therapy, so you got to think about the safety issues and the safety has to bear out. But so long as this therapy is safe, we feel very, very confident that it could play an enormous role in the lives of kids with Duchenne muscular dystrophy.