BOTHELL Mar 21, 2020 (Thomson StreetEvents) -- Edited Transcript of Sarepta Therapeutics Inc earnings conference call or presentation Wednesday, February 26, 2020 at 9:30:00pm GMT

* Alexander G. Cumbo

Sarepta Therapeutics, Inc. - Executive VP & Chief Commercial Officer

* Douglas S. Ingram

Sarepta Therapeutics, Inc. - President, CEO & Director

Sarepta Therapeutics, Inc. - Executive VP of R&D and Chief Medical Officer

* Ian M. Estepan

Sarepta Therapeutics, Inc. - Senior VP of Corporate Affairs & Chief of Staff

Sarepta Therapeutics, Inc. - SVP of Gene Therapy

Sarepta Therapeutics, Inc. - Executive VP, CFO & Chief Business Officer

* Christopher N. Marai

Nomura Securities Co. Ltd., Research Division - MD & Senior Analyst of Biotechnology

* Debjit D. Chattopadhyay

H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst

* Peter B. Kim

Sanford C. Bernstein & Co., LLC., Research Division - VP

Ladies and gentlemen, thank you for standing by, and welcome to the Sarepta Therapeutics Fourth Quarter 2019 Earnings Call. (Operator Instructions) As a reminder, today's program may be recorded.

I would now like to introduce your host for today's program, Ian Estepan, Senior Vice President, Chief of Staff and Corporate Affairs. Please go ahead, sir.

Ian M. Estepan, Sarepta Therapeutics, Inc. - Senior VP of Corporate Affairs & Chief of Staff [2]

Thank you so much, John, and thank you all for joining today's call. Earlier today, we released our financial results for the fourth quarter and full year 2019. The press release is available on our website at http://www.sarepta.com, and our 10-K was filed with the SEC earlier this afternoon. Joining us on the call today are Doug Ingram, Sandy Mahatme, Bo Cumbo, Dr. Gilmore O'Neill and Dr. Louise Rodino-Klapac. After our formal remarks, we'll open up the call for Q&A.

I'd like to note that during this call, we will be making a number of forward-looking statements. Please take a moment to review our slide on the webcast, which contains our forward-looking statements. These forward-looking statements involve risks and uncertainties, any of which are beyond Sarepta's control. Actual results could materially differ from these forward-looking statements, and any and such risks can materially and adversely affect the business, the results of operations and trading prices for Sarepta's common stock. For a detailed description of applicable risks and uncertainties, we encourage you to review the company's most recent annual report on Form 10-K filed with the Securities and Exchange Commission as well as the company's other SEC filings. The company does not undertake any obligation to publicly update its forward-looking statements, including any financial projections provided today based on subsequent events or circumstances.

And with that, I'd like to turn the call over to Doug Ingram for our corporate update.

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Douglas S. Ingram, Sarepta Therapeutics, Inc. - President, CEO & Director [3]

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Thank you, Ian. Good afternoon, and thank you all for joining Sarepta Therapeutics Fourth Quarter 2019 Conference Call.

In 2018, we defined our vision to become one of the world's leaders in precision genetic medicine to treat rare disease, founded both on our precise and efficient RNA platform and on the build of a gene therapy engine capable of rapidly advancing multiple constructs through development into the patient community. In 2019, we executed, further matured and brought that vision into greater focus. And in 2020 -- through 2020 we will, if successful, realize much of that vision.

We have an enormous number of milestones in 2020. But before we discuss them, let us review the progress that we have made in 2019. I will begin with our RNA platform.

As we announced at the JPMorgan conference in January, our fourth quarter 2019 revenue stands at $100 million. In our third full year since launch, our 2019 revenue was $381 million, a 26% increase over prior year. I will remind you that we have never taken a price increase since launch, so our growth comes from continuing to serve the Duchenne community.

Our 2020 guidance for EXONDYS is $420 million to $430 million. As we are just launching VYONDYS, we will wait until later this year before providing revenue guidance, but you can expect the launch curve similar to that of EXONDYS.

In the fourth quarter, we obtained FDA approval for our second RNA therapy, VYONDYS 53. The approval of VYONDYS was a win for objective evidence-based decision-making. It was a win for hard-working professionals at the FDA neurology division that was responsible for this review, and most importantly, it was a win for exon 53 amenable patients.

With regulatory pathway reconfirmed, we submitted our rolling NDA for casimersen, having announced positive results earlier in 2019. Assuming casimersen is approved, we will have 3 therapies capable of treating approximately 30% of the Duchenne community in the United States. We will have doubled the number of patients who may benefit from our PMO technology versus EXONDYS alone, and we will be among the exceedingly small number of biotechnology companies who have internally discovered, developed and brought to the patient community 3 or more medicines.

In 2019, we commenced our multi-ascending dose study for our next-generation PMO technology, the peptide-conjugated PMO or PPMO for short.

Now let's move on to our gene therapy engine. There, we've made great progress in 2019 as well. Starting with SRP-9001, our gene therapy for the treatment of Duchenne muscular dystrophy using our microdystrophin construct. We have completed all dosing in what became a 41-patient, placebo-controlled trial, Study 102. Patients are now crossing over at the end of their 48-week period. By now, between our first proof-of-concept study, our main study for 102 and our crossover, we have dosed more than 30 Duchenne boys with active gene therapy. The study continues uninterrupted, and the last patient last visit should occur in December of this year.

We have designed our next placebo-controlled trial using our commercial process material, and we've taken initial feedback from the agency. This trial, which we call Study 301 is designed as a global placebo-controlled, multi-center trial. We have made significant progress on manufacturing. With our partners Thermo Fisher and Catalent, we have built significant capacity with a dedicated facility completed in Lexington, Massachusetts and even greater capacity than that built at Catalent. Our hybrid manufacturing approach is taking shape with ADPD expertise at our Columbus site and a dedicated ADPD site in Burlington, Massachusetts. This intellectual hub has been responsible for some of our most meaningful advances in 2019.

Consider that we have now achieved at scale, commercially viable yields for SRP-9001, we announced at JPMorgan that we had commenced engineering runs. By now, I can tell you that we have commenced our GMP runs for SRP-9001, and we're making great progress on assay development as well.

We've made great progress on our limb-girdle pipeline in 2019. To remind you, LGMD, or limb-girdle muscular dystrophy, is an umbrella name for a collection of serious, often fatal neuromuscular diseases. None of these diseases have available therapies, so the opportunity to bring a better life for these patients is compelling. In the first quarter of 2019, we exercised our option and acquired Myonexus, gaining access to its 5 LGMD programs. And then we later entered into a license option with NCH to gain access to Dr. Zarife Sahenk's LGMD candidate for LGMD2A. These 6 programs together have the potential of providing treatments for over 70% of patients with LGMD.

In the first quarter of 2019, we presented expression and safety data from our first 3 patient proof-of-concept cohort for LGMD2E, and it was impressive. Expression was 50% on IHC and 30% -- 37% abnormal on Western blot. We came back in the fourth quarter, and we updated with 9-month functional data, indicating that every child was improving on every functional end point.

We commenced 1 additional higher-dose, 3-patient cohort in 2019 at a 4x higher dose with the goal of making a dose selection in 2020 this year.

Moving on to the rest of our gene therapy engine. 2019 was equally consequential. With our partner, Lysogene, we commenced a gene therapy trial for MPS IIIA or Sanfilippo Syndrome Type A devastating neurological lysosomal storage disease. We built out our gene therapy center of excellence in Columbus, Ohio. Our center of excellence is already building new constructs and advancing the science of gene therapy.

We entered into 14 transactions in 2019, and we in-licensed or purchased 18 new constructs, bringing the total number of research and development programs to 42 across our 2 platforms. And we have employed a clever incubation strategy that allows us to build an enormously large pipeline while still permitting us to remain laser-focused on our near-term objectives and milestones.

And of course, we entered into a transformational alliance with Roche in the fourth quarter of 2019 where Roche will take SRP-9001 to patients outside the United States. This alliance, by far, the largest ex-U. S. single candidate, license and biopharmaceutical history, validates our approach, our progress and the value of our program, but it also serves our mission. If SRP-9001 proves successful, Roche, with its very impressive ex-U. S. resources and international expertise, will bring our therapy to far more patients far faster than we could have ever done on our own. And it places us in an enviable position with the resources to drive our vision and to execute our plans. With the close of our alliance this quarter, we have well over $2 billion of cash on our balance sheet today; add to that the fact that we have just entered into an agreement to sell our VYONDYS priority review voucher for $111 million; add again to that our revenue this year for EXONDYS and VYONDYS, and it should become clear that we are well positioned with the resources, the assets and the talent to drive our ambitious strategy to fruition.

Looking forward, you will see that 2020 is dense with milestones. So starting with our gene therapy portfolio for 2020, with respect to SRP-9001, we will continue to execute Study 102 with our 48-week last patient last visit in December of this year. We will unblind, evaluate and release those results, which should occur in the first quarter of 2021.

We are preparing to commence our commercial supply trial, Study 301. Broadly, we have 3 work streams for Study 301. We must complete site initiation and training. We must complete our assay work, our engineering work and our GMP runs. And if all goes well, we should have GMP material released this July. We need to work with the division to obtain their concurrence on the commencement of Study 301. So of course, there's a lot to do here, but the team is making exceptional progress to date.

With respect to our LGMD pipeline, we have dosed all 3 patients now in our high-dose cohort for LGMD2E. We will have expression and safety results available in the second quarter, and we anticipate announcing that data at an appropriate medical meeting in the second quarter. We will make a formal dose selection decision in the third quarter. We will complete the assay and process development work for LGMD2E with the goal of having GMP material available in time to commence a trial in early 2021. We will also begin the ADPD work for other of our LGMD constructs as well.

We will continue our dialogue with the FDA and come to a view on the development and regulatory pathway for LGMD2E and then the remainder of the LGMD pipeline. Our goal is to have all of that completed by year-end, so we could commence a trial with commercial process material early next year.

We've also dosed 17 patients on our MPS IIIA gene therapy program and intend to complete all the dosing by the middle of the year. Our collaborator on CMT, otherwise known as Charcot-Marie-Tooth, Dr. Zarife Sahenk at Nationwide Children's Hospital, had intended to commence our proof-of-concept study for CMT last year but did not have NCH released material, enabling her to do that. That material should be available this year, and Dr. Sahenk intends to commence that study in 2020.

In addition to our gene therapy center of excellence in Columbus, Ohio, we are also building a separate gene-editing innovation center under the guidance of Dr. Charlie Gersbach of Duke University in Durham, North Carolina and should have that largely complete this year.

We have also significant milestones for our RNA platform this year. We should complete our rolling submission for casimersen in the second quarter of 2020. We plan to result -- to release the results from our PROMOVI study at the MDA Scientific Conference in March. These results from patients that met the enrollment criteria for 201/202, that's the study, which formed the basis for the eteplirsen approval, are consistent with the 201/202 data set. And we will have dosing and safety insight on our next-generation RNA platform, the PPMO, this year as well. If the PPMO is successful, it could be a significant advancement in our RNA technology and platform.

In summary, we have an enormous amount of work to do this year. But that work will be profoundly consequential for Sarepta and, of course, more importantly, for the patients that we serve. To those who may say our plans are ambitious, I would agree. But they are not driven by hubris. They are formed instead by the binding conviction founded on objective evidence that the science of genetic medicine has come of age, that a revolution in health care is upon us now, and that Sarepta is playing a leading role in translating that science to practical therapies that improve countless lives otherwise stolen by serious, rare genetic diseases. And it is in that spirit that I would invite you to join Sarepta and rare disease patients in the U.S. and around the world in recognizing Rare Disease Day this Saturday, February 29, as we continue to bring awareness about rare diseases and the work that remains to bring therapies to patients fighting those diseases every day.

And with that, I will turn the call over to Sandy to provide an update on the financials. Sandy?

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Sandesh Mahatme, Sarepta Therapeutics, Inc. - Executive VP, CFO & Chief Business Officer [4]

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Thanks, Doug. Good afternoon, everyone. Over the course of 2019, we advanced the business in several significant ways: we beat revenue guidance for EXONDYS 51; launched another of our RNA medicines, VYONDYS 53; significantly bolstered our financial position; and struck several new licensing deals, bringing our total number of development programs up to 42. We also started a partnership with Roche that closed earlier this month and that brought in $1.15 billion into the company. This collaboration brings significant capital to fully fund our pipeline, including our sharing payments, and it provides us access to Roche's significant expertise and greatly expand the global opportunity for our lead gene therapy program, SRP-9001.

Now moving to the financials. This afternoon's press release provided details for the fourth quarter of 2019 on a non-GAAP basis as well as a GAAP basis. The press release is available on Sarepta's website. Please refer to it for full reconciliation of GAAP to non-GAAP.

Net product revenue for the fourth quarter of 2019 was $100.1 million compared to $84.4 million for the same period of 2018. The increase primarily reflects higher demand for EXONDYS 51. On a GAAP basis, the company reported a net loss of $235.7 million and $140.9 million or $3.16 and $2.05 for basic and diluted shares for the fourth quarter of 2019 and '18, respectively.

We reported a non-GAAP net loss of $116.9 million or $1.57 per basic and diluted share in the fourth quarter of 2019 compared to a non-GAAP net loss of $58.7 million or $0.85 per basic and diluted shares in the fourth quarter of 2018.

In the last quarter of 2019, we recorded approximately $15.6 million in cost of sales compared to $13.1 million in the same period of last year. The increase was driven by royalties due to BioMarin Pharmaceuticals and University of Western Australia as well as higher production costs as a result of increasing demand for EXONDYS 51.

On a GAAP basis, we recorded $223.1 million and $146.2 million in R&D expenses for the fourth quarters of 2019 and 2018, respectively, which is a year-over-year increase of $76.9 million. This increase is primarily related to $40 million of increasing expenses in clinical and manufacturing, a $10.8 million increase in compensation and other personnel expenses as well as a $10.4 million increase in milestone cadence.

On a non-GAAP basis, R&D expenses were $135.4 million for the fourth quarter of 2019 compared to $77 million for the same period in 2018, an increase of $58.4 million. The year-over-year growth in non-GAAP R&D expenses was driven primarily due to a continuing ramp-up of our micro-dystrophin distribution program, our ESSENCE program and initiation of certain post-market studies for EXONDYS 51.

Turning to SG&A. On a GAAP basis, we recorded $81.4 million and $64.2 million of expenses in the fourth quarters of 2019 and 2018, respectively, a year-over-year increase of $17.2 million. On a non-GAAP basis, the SG&A expenses were $65.8 million for the fourth quarter of last year compared to $52.9 million for the same period of 2018, an increase of $12.9 million. The year-over-year increase was driven by significant organizational growth and expansion, supporting our commercial launch as well as 40 therapies in various stages of development across several therapeutic modalities.

On a GAAP basis, we recorded $4.8 million in other expenses for the fourth quarter of 2019 compared to $2.3 million of expenses for the same period of 2018. The unfavorable change is primarily driven by increase in interest expense, which is recognized for our new term loans that was received by the company in December of 2019.

We had approximately $1.1 billion in cash, cash equivalents and investments as of the end of last year. In addition to the closing of our alliance with Roche this quarter, we have well over $2 billion in cash on our balance sheet today.

With that, I would like to turn the call over to Bo for a commercial update. Bo?

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Alexander G. Cumbo, Sarepta Therapeutics, Inc. - Executive VP & Chief Commercial Officer [5]

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Thank you, Sandy. Good afternoon, everyone. Toward our 2019 objectives around execution and our commitment to deliver on our stated goals, I am pleased to report the following on behalf of the organization. We exceeded revenue consensus expectations for both the fourth quarter and the full year of 2019, totaling $100.1 million and $380.8 million, respectively. As Doug mentioned, our 2020 guidance for EXONDYS 51 is $420 million to $430 million. In terms of continuing to serve the community, we know that there are additional patients who may benefit from EXONDYS 51, and we will continue to overcome access and reimbursement challenges to get patients on therapy.

golodirsen, or VYONDYS 53, received accelerated approval by the FDA on December 12, 2019. VYONDYS 53 treats Duchenne muscular dystrophy patients who are amenable to skipping exon 53. Acting with urgency and the knowledge that patients were waiting, we launched VYONDYS 53 within 24 hours of FDA approval, just as we did with EXONDYS 51. We submitted all of our compendia, contracting and reporting requirements, and vyondys53.com, a critically important resource for families, went live. While we are leveraging our deep knowledge and expertise for the EXONDYS 51 launch, it is important to understand that there will be standard procedures and required reimbursement policies associated with launching a new drug with a unique NDC or National Drug Code. Our team is prepared to work through these requirements as we have in the past, and we anticipate a measured and steady launch trajectory for VYONDYS 53, resembling the launch curve for EXONDYS 51. The only difference is that we are preparing and planning for the amenable exon 53 space to be competitive.

In support of our goal to increase access for VYONDYS 53, we are pursuing a multi-pronged strategy. Although commercial and state Medicaid plans now have a much better understanding of Duchenne, we are continuing to educate about disease progression and the benefits of treatment. Our goal is to work towards coverage to be all-inclusive regardless of ambulation status, age or gender. We do expect commercial payers to have medical policies in place faster than Medicaid. We also understand that from our previous launch that the mix of commercial to Medicaid patients will adjust over time, and we believe it will eventually move towards a 50-50 mix or higher for Medicaid.

Further, we are continuing to engage with state Medicaid plans regarding the CMS guidance letter on the obligation of state Medicaid to make accelerated approval treatments available to patients. As you know, this is critically important for Duchenne based on the percent of patients covered under Medicaid plans.

While the launch over Christmas holiday did delay some physician and patients seeking treatment during that period of time, we have been receiving START Forms from top-tier centers across the U.S. and are working with health care providers to ensure they are educated around amendability for skipping exon 53, as this population is different from exon 51 with some exceptions. Epidemiology suggests that VYONDYS 53 can serve approximately 8% of the Duchenne community. But we will have to take into consideration that there are a number of patients already enrolled in or being recruited for clinical trials, or have a deletion that would be amenable to exon 51 and, therefore, could already be on EXONDYS 51.

With that said, we continue to have conversations with health care providers about the number of patients within their clinics and with payers about the number of patients eligible for treatment under their plan. We are working with both health care providers and payers to get all amenable patients on VYONDYS 53 as soon as possible. Our mission to be the global leader in precision-genetic medicine started with EXONDYS 51 and have continued with the approval and launch of VYONDYS 53. We are now preparing for the potential launch of casimersen for patients amenable to skipping exon 45. Behind these important medicines is an industry-leading pipeline of programs, 42 in all, driven by new modalities designed to treat complex rare diseases, including MPS IIIA and neuromuscular dystrophy. Sarepta is working with urgency and is focused on understanding the epidemiology and global prevalence of these diseases.

We are continuing to refine our analysis and uncover additional insights while collaborating with top neuromuscular specialists. Each day, we are learning more about these diseases. And with each piece of evidence that we gather, we are able to apply these insights to our disease awareness and patient identification efforts that are already underway.

2019 was a great -- was a year of great accomplishments, not only for the commercial organization but the company overall. Looking to the future, patient care will continue to be our driving force as we translate scientific innovations into medicines designed to improve the lives of patients around the world.

And with that, I'll turn the call back over to Doug.

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Douglas S. Ingram, Sarepta Therapeutics, Inc. - President, CEO & Director [6]

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Thank you, Bo, and thank you, Bo and Sandy. With that, let's open the call for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from the line of Ritu Baral from Cowen.

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Ritu Subhalaksmi Baral, Cowen and Company, LLC, Research Division - MD & Senior Biotechnology Analyst [2]

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Doug, can you let us know when the last patients for gene therapy was dosed? Basically, what is the shortest follow-up period, both for microdystrophin as well as limb-girdle? And can you talk about the safety profile, especially liver, especially platelets, that you've seen in that time period for both programs?

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Douglas S. Ingram, Sarepta Therapeutics, Inc. - President, CEO & Director [3]

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Well, I can just tell you very broadly that as I sort of backward engineer, we're going to have the -- for the 41-patient study, 102, the last patient last visit will be in December. So if you work backwards, you'll see that the last patient was right at -- I think it actually might have been the very first weekend in 2020. So that was the first 41 patients dosed. We're continuing on an ongoing basis to those patients on crossover as well. There's a significant number, as I've mentioned to you now. But in the Study 102, between the proof-of-concept 101, between the main 41-patient study and between the crossovers, we've dosed over 30 patients with active therapy. We have now dosed 6 patients with limb-girdle, both the previous dose and now the higher dose in limb-girdle. And of course, a lot of that's blinded, so that we'll all see together both the safety and -- the full safety and efficacy. But broadly speaking, I will say, again, consistent with our preclinical models, we have never seen anything that looks like a complement or reductions in platelet counts below the normal level. So things continue as they were. Study 102 continues, completely uninterrupted, making great progress there. The exciting thing about 102 is that we'll have last patient in December, and we'll have a readout in the first quarter of 2021. And I will remind you that is a readout, not merely on expression and on safety but also on function using NSAA. Thank you for that question.

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Operator [4]

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Our next question comes from the line of Tazeen Ahmad from Bank of America.

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Edited Transcript of SRPT earnings conference call or presentation 26-Feb-20 9:30pm GMT - Yahoo Finance