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Edited Transcript of SRPT earnings conference call or presentation 19-Jul-17 8:30pm GMT

Q2 2017 Sarepta Therapeutics Inc Earnings Call

BOTHELL Jun 19, 2018 (Thomson StreetEvents) -- Edited Transcript of Sarepta Therapeutics Inc earnings conference call or presentation Wednesday, July 19, 2017 at 8:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Alexander Bo Cumbo

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

* Douglas S. Ingram

Sarepta Therapeutics, Inc. - President, CEO & Director

* Edward M. Kaye

Sarepta Therapeutics, Inc. - Advisor

* Ian Estepan

* Sandesh Mahatme

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

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Conference Call Participants

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* Alethia Rene Young

Crédit Suisse AG, Research Division - Former Research Analyst

* Anupam Rama

JP Morgan Chase & Co, Research Division - VP and Analyst

* Ashiq Alim Mubarack

William Blair & Company L.L.C., Research Division - Associate

* Brian Peter Skorney

Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst

* Chad Jason Messer

Needham & Company, LLC, Research Division - Senior Analyst

* Christopher N. Marai

Nomura Securities Co. Ltd., Research Division - MD and Senior Analyst

* Dae Gon Ha

Leerink Partners LLC, Research Division - Associate

* David Neil Lebowitz

Morgan Stanley, Research Division - VP

* Hartaj Singh

Oppenheimer & Co. Inc., Research Division - Research Analyst

* Liisa Ann Bayko

JMP Securities LLC, Research Division - MD and Senior Research Analyst

* Matthew Joseph Eckler

RBC Capital Markets, LLC, Research Division - Former Analyst

* Ritu Subhalaksmi Baral

Cowen and Company, LLC, Research Division - MD and Senior Biotechnology Analyst

* Stephen Gilbertpaul Brozak

WBB Securities, LLC - Managing Partner, President & CEO

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Presentation

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Operator [1]

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Good day, ladies and gentlemen, and welcome to the Sarepta Therapeutics Second Quarter 2017 Earnings Conference Call. (Operator Instructions) As a reminder, this conference is being recorded. I would now like to hand the floor over to Ian Estepan, Executive Director of Corporate Affairs. Please go ahead, sir.

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Ian Estepan, [2]

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Thank you, Karen, and thank you all for joining today's call. Earlier today, we released our financial results for the second quarter of 2017. The press release is available on our website at www.sarepta.com and our earnings 8-K was filed earlier this afternoon.

Joining me on the call today are Doug Ingram, Ed Kaye, Sandy Mahatme and Bo Cumbo. After our formal remarks, we will open up the call for Q&A.

I'd like to note that during this call, we'll 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 Therapeutics' control. Actual results could materially differ from these forward-looking statements as any and such risks can materially and adversely affect the business, results of operations and the trading price of Sarepta Therapeutics' common stock. For a detailed description of applicable risks and uncertainties, we encourage you to review the company's most frequent (sic) [recent] quarterly report on Form 10-Q and annual report on Form 10-K filed with the Securities and Exchange Commission as well as the company's other SEC filings. We plan to file the 10-Q for the second quarter of 2017 by the SEC required filing deadline in August. 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, let me turn the call over to Ed who will provide an overview of our recent progress. Ed?

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Edward M. Kaye, Sarepta Therapeutics, Inc. - Advisor [3]

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Thank you, Ian. Good afternoon, everyone. We appreciate you joining us for Sarepta Therapeutics' second quarter 2017 financial results and the corporate update call. Before we begin our formal remarks, I would like to introduce Doug Ingram, Sarepta Therapeutics' new President and Chief Executive Officer. The Board of Directors searched for a CEO who could help transform Sarepta into a leading global biotechnology company. As a member of the executive search committee, I'm confident that we have selected the right leader in Doug to build upon our success and to drive value for the company going forward. I look forward to working with Doug as he leads Sarepta through the next phase of development, doing my part to support a seamless transition and continuing to serve as a member of the Board of Directors. With that, I'd like to turn the call over to Doug. Doug?

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Douglas S. Ingram, Sarepta Therapeutics, Inc. - President, CEO & Director [4]

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Thanks, Ed. Before I comment, I'd like to take a moment to thank Ed on behalf of Sarepta and on behalf of its board. We would not be in a position to announce what I believe are very positive results today without Ed's tireless commitment to Sarepta and to providing hope to children with DMD and their families. So with that, good afternoon, and I'm very excited to have my first earnings call, as you know, as the new CEO of Sarepta. I am particularly excited to join Sarepta at this compelling strategic inflection point. As our collection of recent announcements show, we have clearly established ourselves as the leader in DMD with the continuing successful U.S. launch of EXONDYS 51, a first of its kind therapy, a deep pipeline of candidates to treat patients with DMD and ongoing execution of our strategic vision, upon which we are building a global biopharmaceutical company dedicated to improving the lives of those suffering from rare neuromuscular disorders.

As we announced yesterday, we have secured a worldwide settlement with BioMarin, resolving our intellectual property disputes on favorable terms. This settlement and license grants us broad global freedom to operate for our exon skipping compounds. It gives us access to 2 patent estates. It permits us to confidently execute our worldwide strategic plans, and it allows us to focus our time and our resources not on legal issues and legal disputes but rather on launching our therapies worldwide and continuing to develop our deep pipeline to best serve patients around the world.

To that very point, following the resolution of the patent dispute, this morning, we announced the launch of our Managed Access program, through which eligible patients in certain countries outside of the United States gain access to eteplirsen through their physician. A Managed Access program or MAP provides access to medicines to named patients at the request of their physicians before those medicines are commercially available. This program is available for patients with DMD who are amenable to exon 51 skipping and who also meet other predefined eligible -- eligibility criteria. We will execute our MAP in a measured way to ensure a smooth and successful rollout of the program. We plan to expand the program to include more countries over time, and we anticipate that it will begin to generate modest revenue late in Q4 2017. Bo will provide additional details about our MAP later on this call.

Finally, coming back to the United States. Our launch of EXONDYS 51 continues to progress extremely well. As you have seen from our earnings release, second quarter net revenue for EXONDYS 51 was approximately $35 million, significantly above analyst expectations. As physicians gain experience with EXONDYS 51, we anticipate continued progress over the remainder of the year. Accordingly, as you've seen on the release, we are, once again, raising our guidance for the full year from our prior guidance of exceeding $95 million to our updated guidance range of $125 million to $130 million. Sandy will provide additional color on our financial performance in a moment.

Now the great work that has been accomplished in this quarter has set a foundation on which we -- which our strategic plan can, with operational excellence, be aggressively built. Our goals are ambitious. We intend to extend our global leadership in DMD, and we intend to become a substantial global leader in rare neuromuscular disorders. Toward that goal, I and the rest of my colleagues at Sarepta are fully committed to supporting the success of EXONDYS 51 across the globe and rapidly advancing our clinical pipeline and, in particular, the potential for our next-generation PPMO platform, about which I am very excited. Although we have made tremendous progress this quarter, we recognize as a group that the development of our pipeline with urgency is critical because we are well aware, as you are, there are many patients still waiting for treatment options. With that, I'd like to turn the call back to Ed for a clinical and regulatory update. Ed?

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Edward M. Kaye, Sarepta Therapeutics, Inc. - Advisor [5]

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Thanks, Doug. Continuing with Doug's theme of global expansion, I will now provide an update on our marketing authorization application, the MAA, that's currently being reviewed by the European Medicines Agency. On our last quarterly conference call, we reported that we received additional feedback from the agency on our application and have requested a 6-month clock-stop. During this time, we've been collecting additional data from existing studies, completing additional analyses to support the application and remain on track to provide the results of the required ADME study to the agency. As previously reported, we anticipate that the review of the application by the CHMP should be complete by the first half of 2018.

We've also been in discussions with the FDA on 2 clinical post-marketing commitments: The first, a high-dose study of EXONDYS 51; and the second, a high-dose 2-year placebo-controlled study for patients amenable to skipping exon 45 and 53. These discussions have resulted in the agency releasing us from conducting the exon 45, 53 study. We are continuing to have discussions on the EXONDYS 51 study. We remain in compliance with the agency, and we'll provide an update when we finalize protocol for the EXONDYS 51 study.

Turning to the clinical development programs, we believe that many of the remaining catalysts for the year will involve our clinical pipeline. As Doug alluded to in his opening remarks, we're excited about the potential for our next-generation PPMO class of chemistry that we are developing. As a reminder, PPMO is a specifically designed cell-penetrating peptide added on to the PMO backbone, with the goal of increasing tissue penetration which leads to greater exon skipping efficiency and dystrophin production and could result in a better efficiency and less frequent dosing for patients. We have previously presented data in the mdx mouse model that revealed that a single-dose of PPMO produce 10 to 30-fold more dystrophin protein than a single dose of PMO in skeletal and cardiac muscle, respectively.

I would now like to focus your attention on the PMO exon skipping platform. We are currently analyzing dystrophin samples from our 4053-101 study, a European Phase II study for patients with DMD who are amenable to skipping exon 53. The analysis will include pre and post-treatment biopsies at week 48. We will be measuring exon skipping and dystrophin production via RT-PCR; immunofluorescence signal intensity; present dystrophin positive fibers; and finally, western blot. We believe this comprehensive approach will allow us to accurately measure the quantity and the location of the dystrophin produced by our exon skipping agents. We plan on presenting the results of the study in an upcoming medical meeting or scientific conference in the fourth quarter.

I will conclude the clinical pipeline overview by reviewing the ESSENCE study. ESSENCE is a global randomized, double-blind, placebo-controlled study evaluating patients amenable to skipping exon 45 and 53, which make up an additional 16% of boys with DMD. In May, the FDA allowed the use of indwelling central venous access devices in the ESSENCE study, which I believe will help with long-term compliance. The first patient at a European site was screened last quarter, and we are continuing to actively open new sites in this region. We plan to complete enrollment in our ESSENCE study by year-end 2017.

We continue to develop the most comprehensive approach to treating DMD by investing in external partnerships. When evaluating potential partnerships, we believe that it's critical from a development standpoint to find novel approaches that treat the underlying cause of the disease and to be first in the clinic. We are pleased that both of our Gene Therapy Programs partnered with Nationwide Children's Hospital meet these criteria. Jerry Mendell and Dr. Louise Rodino-Klapac are coinventors of the micro-dystrophin program. In preclinical studies, systemic delivery of the concert resulted in high levels of gene expression in skeletal and, most importantly, cardiac muscle. The program will enter the clinic as a Phase I/IIa trial in the fall and will be conducted at Nationwide Children's Hospital. More information about this study will become available over the coming months.

Sarepta and PPMD are co-funding the early development of this program. Upon obtaining Phase I results, Sarepta will have the exclusive option to enter into a Global Commercial Development license. Sarepta also has an exclusive license agreement with Nationwide Children's Hospital for Galgt2 gene therapy, which was developed by researcher Paul Martin. The program explores the potential surrogate gene therapy approach to treat DMD. This approach targets the dystroglycan complex to preserve muscle function. Galgt2 has the potential to treat patients of all ages, disease severity and to address several types of muscular dystrophies. Kevin Flanigan is the principal investigator leading the clinical trial, which is expected to begin this fall.

Our collaboration with Summit Therapeutics focuses on utrophin modulation. This technology has the potential to help all patients with DMD. PhaseOut DMD is a Phase II proof of concept clinical trial of the utrophin modulator, ezutromid. Summit recently announced that enrollment is complete and that the 24-week data from the study are expected in the first quarter of 2018, and the 48-week data are expected in the third quarter of 2018.

Lastly, in June, we signed a collaboration with Genethon, a nonprofit research and development organization dedicated to the development of biotherapies for orphan genetic diseases from research to clinical validation. Genethon employs one of the largest research and clinical groups in the world working to advance rare disease therapies and is affiliated with Europe's largest [TCMP] vector manufacturing facility. Under the terms of the research collaboration, Sarepta and Genethon will jointly develop treatments for DMD. Genethon's micro-dystrophin gene therapy approach, which can target the majority of patients with DMD, has demonstrated robust gene expression in large -- in a large animal model. Genethon will be responsible for the early development work, and Sarepta has the option to co-develop the program, which includes exclusive U.S. commercial rights. Our mission is to treat as many patients with DMD as possible, and I believe we have made a significant advancement toward the goal -- for this goal in the second quarter. We remain on track to have potentially 7 candidates in the clinic by year-end. Now I'd like to turn the call over to Sandy for an update on our financials for the second quarter of 2017. Sandy?

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Sandesh Mahatme, Sarepta Therapeutics, Inc. - Executive VP, CFO & Chief Business Officer [6]

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Thanks, Ed. Good afternoon, everyone. We are pleased to report that, based on continued progress with the launch, we have generated net revenues of $35 million of EXONDYS 51 sales in the second quarter of 2017. During the last week of the quarter, we observed the change in the ordering patterns, likely due to the Fourth of July holiday that pulled forward approximately $2 million of revenue from the third quarter into the second quarter. Based on the commercial trends during the quarter, we have more comfort in the launch curve. As a result, we are raising our net revenue guidance for the year to a range of $125 million to $130 million. Our guidance only includes sales generated in the U.S. and does not include any potential sales from our Managed Access program overseas. We expect to start generating a small amount of revenue from this program late in the fourth quarter. We are quite pleased with how the launch is progressing, our Q2 achievements and believe that we're well positioned for future growth.

Now moving to the financials. This afternoon's press release provided details for the second quarter of 2017 in both an adjusted or a non-GAAP basis as well as a GAAP basis. The press release is available on the SEC and company websites. The non-GAAP results we will discuss on this call provide a more accurate picture of ongoing operations and the impact of operations on our cash balance and they exclude restructuring and stock compensation expenses. Please refer to our press release for a full reconciliation of GAAP and non-GAAP.

In the second quarter of 2017, we reported an adjusted -- a non-GAAP net loss of $24.3 million or $0.46 per share compared to non-GAAP net loss of $54.8 million or $1.19 per share in the second quarter of 2016. The decrease is due to product sales of EXONDYS 51, lower manufacturing expenses due to the capitalization of inventory upon the approval of EXONDYS 51, offset by increased professional services primarily due to increased legal fees and commercial initiatives. Revenue for the second quarter of 2017 was $35 million. No revenue was recognized in the second quarter of 2016.

Adjusted non-GAAP research and development expenses were $34.6 million for the second quarter of 2017 compared to $41.4 million in the second quarter of 2016, a decrease of $6.8 million. The decrease is due to lower manufacturing expenses due to the capitalization of inventory upon the approval of EXONDYS 51, offset in part by increased patient enrollment in our ongoing clinical trials and preclinical expenses, the ramp-up of preclinical studies in PPMO and other follow-on exons.

Adjusted non-GAAP selling, general and administrative expenses were 24 -- $25.4 million for the second quarter of 2017 compared to $13.2 million in the second quarter of 2016, an increase of $12.2 million due to increased professional services, legal fees, commercial initiatives, compensation and other personnel expenses.

Turning to our quarter-over-quarter cash spend. We spent $89.5 million in the second quarter. Backing out the onetime milestone payment of Summit Therapeutics, the cash expense in the second quarter was $67.5 million compared to the first quarter's cash spend of $63.4 million. We had approximately $301.7 million in cash, cash equivalents, restricted cash and investments at the end of the second quarter. In addition, we have prepaid approximately $23.7 million towards the 2017 and 2018 manufacturing expenses.

Yesterday, we announced an expanded and extended credit facility with Mid-cap Financial. This provides us access to an additional source of funding and carries a low cost of capital. We are committed to maintaining a strong balance sheet in the near and long term as we continue to invest in R&D, manufacturing and global expansion.

To conclude, I would like to spend a moment discussing our cost of goods sold, or COGS, as it relates to the BioMarin patent settlement agreement. As a reminder, we indicated that we will be selling low-cost products that have been previously expensed through the first quarter of 2018. Once this low-cost period is over, we anticipate that our COGS as a percentage of revenue will be in the low teens. A potential royalty was already factored into this prior guidance. Therefore, our guidance in COGS remains unchanged after the BioMarin deal. We are pleased with the way the business is trending and that we are very well positioned going into the second half of next -- the second half of this year. With that, I'd like to turn the call over to Bo for a commercial update.

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Alexander Bo Cumbo, Sarepta Therapeutics, Inc. - Senior VP & Chief Commercial Officer [7]

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Thank you, Sandy. Good afternoon, everyone. We remain confident in our ability to execute a successful launch for EXONDYS 51 as evidenced by the strength of the second quarter earnings and our updated net revenue guidance for the first full year of launch. Our assumptions of the market size have not changed since launch. The team has done a good job ensuring physicians understand the importance of identifying and starting their patients on EXONDYS 51. This has resulted in increased market penetration, a continued flow of start forms and new patient adds every week. We expect this trend to continue as prescribers around the country identify additional patients through genetic testing and search their medical records in the clinic. Patient demographics have remained fairly consistent throughout the launch. The mix of patients on commercial and Medicaid plans remain approximately 60-40. We do not expect drastic changes in the mix of patients going forward. The average age of patients currently on therapy has held steady between 14 to 15 years of age, which indicates both ambulatory and nonambulatory patients are obtaining access to EXONDYS 51. However, we have seen a large percentage increase in start forms from the first quarter of the year for the 0 to 4 and 5 to 9 age groups, respectively, followed by the 10 to 14 age group, which could predict the average age of patients on therapy trending down over time. From a compliance and persistence perspective, we have previously reported that approximately 40% to 50% of patients opted to have ports placed prior to their first infusion. Based on discussion with physicians, we expect this trend to continue. Although port placements initially slow down the time to first infusion, we believe this leads to a better experience for the patient and better long-term compliance. Although we are still relatively early in the launch, we're seeing high compliance rates and minimal discontinuations at this point in time. From a managed care standpoint, reauthorizations are a standard part of the reimbursement process, and we have not observed a major impact on persistence rates to date. We believe our operational preparedness has supported this successful launch. Since approval, we've had over 4,500 health care provider interactions and over 280 institutional in-services for outpatient clinics. While 100% of tier 1 centers and 96% of tier 2 centers have submitted start forms, we continue to see an increase in the number of new prescribers from our tier 3 sites. At the end of the second quarter, more than 150 physicians have submitted the start form for EXONDYS 51. We believe that the increase in market penetration will contribute to the overall success of the U.S. launch. From a national account perspective, we had discussions with plans that represent greater than $260 million commercial and Medicaid covered lives. 77% of these accounts have requested additional medical discussions, and we continue to make progress with payers across the country. We believe payers have a much better understanding of the disease, the number of patients eligible for treatment under their plan and the patients who would most likely benefit from EXONDYS 51. We have previously highlighted that educating physicians, health care providers and DMD families about the importance of genetic testing would be critical for a successful launch. As discussed briefly before, we are continuing to see an increased rate of genetic testing and an urgency in many accounts to identify and test any patient who does not have one. As a result of this genetic testing, a greater number of physicians now know which patients have mutations that are amenable to skipping exon 51.

The Decode Duchenne partnership with PPMD and Emory continues to see an increase in genetic testing with more than 650 total applications submitted from approximately 250 providers since the beginning of the program. Our combined websites of [sarepta.com], duchenne.com and exondys51.com have generated over 38,000 visits since launch. Duchenne.com, our unbranded disease education website for patients, has generated over 18,000 visits, in which greater than 1,300 exon dilution tool searches were performed since December 2016. We have also had hundreds of genetic mutation worksheets downloaded as well. All of these efforts have led to newly diagnosed patients nationwide. We feel our educational efforts will continue to lead the way and increase genetic testing, diagnosis and treatment which will support the launch for the remainder of the year. We also believe these efforts will support enrollment in all our ongoing and future clinical trials.

One of our goals is to maximize the number of patients who can access EXONDYS 51 globally. And as Doug mentioned earlier, the settlement of our patent litigation with BioMarin has given us freedom to operate for our exon skipping compounds. Our Managed Access Program launched today, initially in select countries within Europe, North America and South America, for certain patients where EXONDYS 51 is not currently approved. We plan to expand the program to include more countries over the next few months.

We continue to build out our European footprint. As previously reported, we have hired our GM of Europe and now have started interviewing country managers for select country clusters throughout Europe, and we've also secured our country Manager in Canada. We are in the process of selecting our Latin America GM and distribution partners and have already selected partners in Israel, Saudi Arabia, Kuwait, Dubai and other countries in the Middle East. We will begin to launch access programs in these territories over the next few months.

To recap, the commercial team has been focused and successful at continuing to obtain exon 51 eligible start forms, supporting broad access for patients, retaining patients on therapy, increasing genetic testing and diagnosis through education and building a global infrastructure to bring EXONDYS 51 to additional countries leveraging the U.S. FDA approval.

To conclude, this is an exciting time for us at Sarepta. We have made progress on multiple fronts; have additional visibility into the launch of EXONDYS 51; and, most importantly, looked forward to serving DMD patients around the world. And with that, I'll turn the call back over to Ed for closing remarks.

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Edward M. Kaye, Sarepta Therapeutics, Inc. - Advisor [8]

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Thanks, Bo. To conclude, I'd like to offer a few personal remarks. I'm very proud to have witnessed Sarepta's transportation -- transformation over the past several years. We've built a robust clinical pipeline; struck several strategically important partnerships that serve to strengthen our leadership position in DMD; listened to patients; educated payers; engaged key opinion leaders and physicians in constructive and science-based dialogue; expanded our footprint beyond the United States; and most importantly, forever changed the landscape, not only for DMD therapies, but for all rare diseases. It's been my privilege and honor to serve this company alongside some of the brightest minds and most dedicated people in our industry. It's been one of the joys of my professional life to be a part of the DMD community. I look forward to continuing to be an active member of this community and do my part to continue to change progression of the disease. And with that, operator, please open up the call for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) And our first question for today comes from the line of Alethia Young with Credit Suisse.

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Alethia Rene Young, Crédit Suisse AG, Research Division - Former Research Analyst [2]

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Congrats on the launch. It looks like you're going very well. But one, I just wanted get some of Doug's impressions, like around kind of what enticed you to join Sarepta? Maybe talk from the commercial, scientific potential. And then just what are your impressions of the company so far? And then I have one more.

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

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Thanks for that question. I'm really actually excited to answer it. There's a number of specific reasons that I got excited to come to Sarepta and to leave the sunny confines of Newport Beach, California, to what I understand to be a place of some inclement weather in the next couple of months. The first issue is this. Look, the mission that Sarepta has, serving a population that, until recently, had very little hope excited me tremendously. This is a perfect place to do something significant for people. The second thing is that I had the opportunity to talk to the entire board, to all senior management, now to the employees, and to a person, this is a group of human beings committed to that mission and committed passionately, which tells me that we're going to be very successful. And then let's look at the company itself. There may be a biotech or pharma company that has as much opportunity as Sarepta, but I don't know which one would that be, and I've looked around. There is a unique opportunity at Sarepta to play an enormous part in the lives of these children and then to be a significant player in rare diseases. First and foremost, we have EXONDYS 51, the first-of-its-kind therapy helping patients in the United States and eventually helping patients around the world. And we have an extraordinary pipeline. I won't go into all of the details, but just look alone at the PPMO. We're already making a big difference in patients' lives, and I think PPMO, if successful, has an opportunity to be a real life-altering therapy for people suffering from DMD. And so based on all of that, if you ask me what my impression of Sarepta is, it's a company with a ton of opportunity that is among the most undervalued and underappreciated companies for the pipeline and the opportunity that it has. And that alone was the reason that I was excited to come here. And I think we have a real opportunity to make a big difference in people's lives and build a really big company at the same time.

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Alethia Rene Young, Crédit Suisse AG, Research Division - Former Research Analyst [4]

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Great, and then maybe just one for Bo. I know you talked about the prescriber base and tier 3. I think last quarter you said it had grown, like -- or it was up 30%. Maybe can you give a similar comparable number this quarter? And what's the biggest challenge in this group from here?

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

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Yes, actually at JPMorgan, the conference, it was greater than 100; and the last quarter, it was greater than 130; and this quarter, it's greater than 150. Quarter-over-quarter, we're seeing growth, and it's really coming from -- our focus at first, at the very beginning of the launch, was the low-hanging fruit, tier 1, tier 2, which made up at that time, 75% to 80% of the business that was known. We've seen really substantial growth in tier 3 centers. And across now all tier 1, tier 2, tier 3 centers, 93% of all the centers have actually submitted a start form. So we're very excited. These tier 3 centers are really doing a great job of -- when we're talking about the genetic testing, they're really doing a great job of going through their charts. They're doing a lot of the searches on the duchenne.com on the genetic testing tool and finding patients left and right, and we're very excited.

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Operator [6]

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And our next question comes from the line of Brian Skorney with Robert Baird.

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Brian Peter Skorney, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [7]

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I've got a couple, too. I guess to start, maybe if you could just walk us through the rationale for the settlement of BioMarin, particularly in the U.S. I think some of us were surprised, given the suit, that you would settle for royalty with BioMarin in the U.S. And then just some thoughts on the MAP announcement, and maybe you can just give us some context in terms of how many patients you think you'll be able to access through here, how much you'll be able to charge. Will this be something or just that manufacturing cost or if you can actually turn a gross profit on these? And then in terms of the exon 53 biopsy protocol for the western bloc, I was wondering, is there a difference in that protocol and the protocol that was used for the eteplirsen analysis for the NDA? And if there are any differences, what impact would you anticipate those differences having on the results?

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Douglas S. Ingram, Sarepta Therapeutics, Inc. - President, CEO & Director [8]

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Okay. Thanks a lot for that as well. I'll touch on the BioMarin license and settlement, and then I'll pass it over to Bo for the MAP, and then Ed can touch on the last question for you. So I have the luxury, being new to this company, to be somewhat immodest for a moment about this license because I believe that the license and the settlement with BioMarin, which we must understand is a global transaction and a global agreement, is of extraordinary strategic importance to this company. And I actually think, frankly, it's kudos and [billiots] to those who have negotiated it, and there's a number of reasons for that. First, as we've said before, this global transaction gives the broad freedom to operate across the globe and gives us access to 2 patent estates to bolster the intellectual property that we already had. That means that, in addition to allowing us to confidently pursue our global plans, it also means that it removes uncertainty and allows us to focus. So rather than spending our time and our energy litigating over issues, we actually get access to a patent estate. It's very valuable to us. It allows us to confidently develop new therapies and new sequences without compromising ourselves and allows us to focus our time on patients, our pipeline and our EXONDYS 51. So from my perspective, this global settlement and license is a perfect platform for us to pursue our strategy going forward. And of course, remember, this is an exclusive license for us. So we don't just get access. We get exclusive access to the patent estates. So with that, Bo?

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Alexander Bo Cumbo, Sarepta Therapeutics, Inc. - Senior VP & Chief Commercial Officer [9]

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Yes, Brian, this is Bo. Yes, for the MAP, it's probably launched today, 13 countries. It's going to be wave 1. We do plan on adding to these countries over time. We also launched distributor partnerships in Israel and the Middle East, and that's going to take a couple of months. We don't expect a lot of revenue in 2017. It'll be -- some revenue will come in late 2017 because it does take a couple of months for the physicians trying to identify patients and then secure funding. And the pricing is confidential. It's -- we just provide it to the health care provider post submission once they have requested access for an individual patient.

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Edward M. Kaye, Sarepta Therapeutics, Inc. - Advisor [10]

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And finally, Brian, just in regards to the dystrophin analyses, yes, they are very different. And I think we spent a great deal of time really trying to develop these assays. I think the first aspect is the immunohistochemistry. So now it's a completely automated system. We've worked with [Acero], a flagship based in Colorado. We've taken really 4 different neuropathologists' input into how to develop the algorithm. It reads it automatically. We have whole flight scanners, which reads up to about 6,000 fibers. It's very reproducible. There's no potential for operator error or bias. In addition, we've improved the RT-PCR, made it more robust and reliable. And I think, finally, probably the most work we've spent is on the western. We've been able to do more samples per gel. We have a very reproducible, reliable system. Before, we would have -- because we had a highly sensitive assay, we would have a number of gel failures. Now that we were -- we've been able to reduce that dramatically, we have a -- and not only is a very sensitive assay, but it's a very reproducible assay. So I think we don't expect, obviously, that the numbers will necessarily change as far as the values, but I think what we'll have is really the potential to have a very reliable, reproducible system that I think will probably accurately reflect the amount of dystrophin that's there.

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Operator [11]

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And our next question comes from the line of Ritu Baral with Cowen & Company.

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Ritu Subhalaksmi Baral, Cowen and Company, LLC, Research Division - MD and Senior Biotechnology Analyst [12]

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I mean, the number that you guys put up, obviously, opens a lot of questions as to where all the growth is coming from. Can you talk to any sort of shifting demographics in your patient base other than sheer patient numbers? I mean, you mentioned that the average age is similar to -- from 2Q to 1Q. But have you seen average weight shift at all? Is the coverage public to private, has that shifted? You mentioned 60 to 40, but I didn't know if that was just the overall population or your actual commercial payments. And you did mention shifts in the start forms. But as you look at your second quarter patients versus your first quarter patients, what sort of demographic shifts have you seen? And then a quick follow-up. Ed, can you speak a little bit about your role going forward in the clinical strategy or overall strategy of the company?

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Edward M. Kaye, Sarepta Therapeutics, Inc. - Advisor [13]

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Yes, Ritu. Thanks for the question. First of all, on the demographics. Actually, the demographics have held pretty steady. I mean, the age has held pretty steady. The weights have held steady. Really, it's just about conversions. We've had a lot of success and we feel good about where we're going in the future and it's really about that. As I mentioned, we have seen a large percentage increase in the younger age groups come in, and so maybe the demographics will change over time. But currently, it was really just about execution.

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Douglas S. Ingram, Sarepta Therapeutics, Inc. - President, CEO & Director [14]

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This is Doug. I'll comment briefly on Ed's continuing role, and if I've missed something, let me know. So obviously, Ed remains a board member of Sarepta, but beyond that, it won't come as a surprise to you that Ed has been committed to Sarepta and to these patients for a long time, and that doesn't change. He, in addition to transitioning, which we're doing right now, Ed will remain an adviser to me personally for some time to come and will be an adviser to us on our clinical development programs as well, including things like our Gene Therapy Program, our European filing, transitioning with KOLs and the like. So there will be a continuing support for the company consistent with the commitment that Ed has had to this area for some time.

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Edward M. Kaye, Sarepta Therapeutics, Inc. - Advisor [15]

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Yes. No, I think that covers it, Doug.

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Operator [16]

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And our next question comes from the line of Anupam Rama with JPMorgan.

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Anupam Rama, JP Morgan Chase & Co, Research Division - VP and Analyst [17]

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As you guys are working with payers, have any trends emerged on how payers are monitoring clinical benefit with EXONDYS 51?

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Douglas S. Ingram, Sarepta Therapeutics, Inc. - President, CEO & Director [18]

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Thoughts on that, Bo?

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Alexander Bo Cumbo, Sarepta Therapeutics, Inc. - Senior VP & Chief Commercial Officer [19]

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For monitoring clinical benefit from EXONDYS 51, I have not heard of any trends. I know that some of the plans are reaching out to the physicians. That's been ongoing since launch and talking to the local experts and getting feedback. And I think that, that's a very positive thing because the physicians have firsthand knowledge. They're treating these patients. They're also hearing the anecdotal reports from the families about how the children are getting better or sleeping better at night, and this is being conveyed back to the managed care plans as they reach out to the KOLs. So as far as the plans go, I haven't heard anything, but I know that they're actively speaking with key opinion leaders that are treating.

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Douglas S. Ingram, Sarepta Therapeutics, Inc. - President, CEO & Director [20]

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Yes, and I think a lot of what is occurring is that they're becoming educated about DMD and there hasn't been any specific test that they've required. And I think, again, it's really trying to get the impression of the treating physicians is what they're using is whether or not the drug is having some effect.

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Operator [21]

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Our next question comes from the line of Chad Messer with Needham & Company.

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Chad Jason Messer, Needham & Company, LLC, Research Division - Senior Analyst [22]

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Clearly, we're getting -- seeing an acceleration in the number of patients that are getting on therapy, which is fantastic. In fact, that acceleration was so strong in second quarter that it's kind of leading me to a question about the new guidance that you bumped up. In the past, you've always given a lower bound guidance. This is actually a range and a pretty tight range, and it looks like you had to decelerate some of these accelerated patients coming on therapy. Just wondering, other than the $2 million that you mentioned sort of got pulled [forth] in the third quarter, is there any other sort of trends in the way this curve is going that would indicate that or am I perhaps just coming to incorrect conclusion?

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Douglas S. Ingram, Sarepta Therapeutics, Inc. - President, CEO & Director [23]

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Look, this is Doug. The trends are positive, obviously, and that's why we've raised our guidance and we raised the bottom of our guidance by $30 million. I will say that we are having a very successful launch, but we're still in the middle of a launch, and one of the things we don't want to do is get out ahead of our skis and disappoint people. So certainly, we want to be thoughtful and, frankly, modest in the way we look at things. Nevertheless, we're in a position where we feel confident that we can provide a range of guidance and raise the guidance substantially over the last quarter's guidance.

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Chad Jason Messer, Needham & Company, LLC, Research Division - Senior Analyst [24]

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Okay. And then maybe just as we look to Europe and bring the EXONDYS to patients over there, I guess initially, with the MAP but then hopefully sometime next year, approval and rollout, are there any lessons from what you've been going through in the U.S. that are kind of transferable to what you have to get done out there? Or is just the reimbursement environment so different that perhaps there aren't? And then maybe more related but more specifically, what do we know about the state of genetic testing overseas versus the U.S.?

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Douglas S. Ingram, Sarepta Therapeutics, Inc. - President, CEO & Director [25]

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Yes, from a genetic testing standpoint, actually, there is more genetic testing that's done in Europe than there was in the United States. We are still taking every precaution to make sure that everything that we've learned in the United States that we provide to our colleagues in Europe to ensure that genetic testing is already being talked about and thought about so we can get ahead of it from that standpoint.

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Edward M. Kaye, Sarepta Therapeutics, Inc. - Advisor [26]

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Yes. And so -- and I think maybe what we've learned certainly from the U.S., it really comes down to -- it's all about clinical data. And what we are really working very hard for is to try to get as much clinical data as possible to provide to all the regulatory authorities and the payers. So that is an emphasis that is going to continue that's necessary for the U.S. but is also going to be very necessary for Europe.

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Operator [27]

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(Operator Instructions) Our next question comes from the line of Hartaj Singh with Oppenheimer.

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Hartaj Singh, Oppenheimer & Co. Inc., Research Division - Research Analyst [28]

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Can you hear me?

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Douglas S. Ingram, Sarepta Therapeutics, Inc. - President, CEO & Director [29]

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Yes.

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Edward M. Kaye, Sarepta Therapeutics, Inc. - Advisor [30]

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Yes.

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Hartaj Singh, Oppenheimer & Co. Inc., Research Division - Research Analyst [31]

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Congrats, Ed, to you and also, Doug. Just be great to be seeing the story going forward. Just had a quick question. As you bring in your PPMO candidates to -- into the clinic, what are the conversations with regulators, your IND? You've already gone through the PMO process. How has the conversations changed? I assume probably they're different maybe for the better. Just how have those conversations changed? And then what are the sort of -- generally if you can give some idea of these 7 candidates that we could be seeing in the clinic next year?

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Douglas S. Ingram, Sarepta Therapeutics, Inc. - President, CEO & Director [32]

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Sure. So I think, obviously, we're very excited about the peptide-based PMO chemistry or PPMO. It is a new molecular entity. And so I think, obviously, a full [tox] package has been developed and will be presented to the agency. We'll be submitting the IND in the early fall and we're committed to having these discussions. So it's a little preliminary to -- because they haven't seen the IND package, so we'll see what the agency has to say. I think one of the things, of course, that we hope that they will appreciate is the potential to have really a more potent compound and for the patient's perspective to be able to dose less frequently gives a huge advantage. But I think we'll have more to talk about later when we've really heard back from the agency when they review the entire document. So I think what we're looking at, as far as the number of drugs, obviously, we have EXONDYS 51 that is currently in clinical development but approved in the United States. 45 and 53 is advancing very quickly in ESSENCE. We will have our PPMO in the clinic. We will have 2 gene therapy programs in the clinic. So -- and obviously, we have our collaborations with our external companies with Summit and which is certainly in the clinic right now. So I think we have the potential for a lot of activity from a clinical development program that we're excited about. It gives us many shots on goal. And it approaches not only from dystrophin restoration but from other areas. So I think it's a pretty -- for a small company, it's a pretty aggressive pipeline, and we're committed to make sure that we get this done.

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Operator [33]

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And our next question comes from the line of Matthew Eckler with RBC Capital Markets.

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Matthew Joseph Eckler, RBC Capital Markets, LLC, Research Division - Former Analyst [34]

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So I wondered if you could talk a little bit about how soon you could potentially launch in Europe following approval of EXONDYS 51, and specifically about how the MAP program may lay the groundwork for commercial launch. And then separately, if the MAP would have any impact on the FDA required postmarketing requirements?

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Douglas S. Ingram, Sarepta Therapeutics, Inc. - President, CEO & Director [35]

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Yes, from a reimbursement standpoint, what's post approval in Europe, every country acts a little bit differently from a health technology assessment standpoint, looking at reimbursement so they can -- for paid drug. And you can go back and look at all the other launches. Some of the assessments take 12 to 15 months post EMA approval before reimbursement has had depending on the country. But the MAP program is extremely important because it actually gives the providers the opportunity to find additional patients early preapproval, pre-EMA approval and get access to drug, get used to the drug, see the benefits of the drug. This really -- these programs, while wonderful for the patient to get early access, it really gives a lot of the providers confidence and understanding how to prescribe it, so when the drug does get reimbursed through the health technology assessment groups, then you have -- you typically have a much faster launch and it's great. And we also have distributors in the Latin America as well as the Middle East that are currently active as well, and this is going to be ongoing. So we should have patients in South America as well as the Middle East and Israel having the opportunity to access drug early as well.

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Edward M. Kaye, Sarepta Therapeutics, Inc. - Advisor [36]

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Yes. And I can just comment on the one part of your question in regards to would the MAP interfere at all with any required postmarketing studies. And obviously, we know that we're -- our marketing application in Europe is really focused on a conditional approval. So we would have a Phase III study that would be a requirement. We're very cognizant, as we open up our MAP, into what some of those potential requirements would be. So I think we're very confident that we'll be able to do a study and make sure that we meet all the requirements of the EMA and the FDA while still being able to provide access to many patients in Europe and elsewhere.

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Operator [37]

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And our next question comes from the line of Christopher Marai with Nomura Instinet.

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Christopher N. Marai, Nomura Securities Co. Ltd., Research Division - MD and Senior Analyst [38]

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I wanted to just touch base on those worldwide rights for EXONDYS under the agreement. Does that cover Japan as well? I know PMO had some potentially -- some protections over there? And then secondarily, maybe could you potentially talk about the renal toxicity with the PPMO-plus. Is that something you think you can overcome with potentially less frequent dosing? And then just finally, on the gene therapy programs. When you run into the clinic with these, could you perhaps comment on the manufacturing process, how far along you would be there? Obviously, there may be some capacity constraints just to get that level of doses you need in some of these patients. And just wondering if you've had that all prepared at the front end rather than kind of changing it midway?

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Douglas S. Ingram, Sarepta Therapeutics, Inc. - President, CEO & Director [39]

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I'll let Ed talk about the other two issues. But on the licensing, the answer is yes, on Japan.

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Christopher N. Marai, Nomura Securities Co. Ltd., Research Division - MD and Senior Analyst [40]

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Including the PPMO technology?

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Douglas S. Ingram, Sarepta Therapeutics, Inc. - President, CEO & Director [41]

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Yes.

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Edward M. Kaye, Sarepta Therapeutics, Inc. - Advisor [42]

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Yes. So Chris, in regards to the PPMO, I just want to remind you that we've changed the peptide. So if you recall, going back to 2011, when we saw with the B peptide, we saw the renal toxicity in the nonhuman primates. One of the things that have been done really over the last 5 years that the team here at Sarepta and the chemistry and biology group have done is to reconfigure really the peptide, and part of that was done to make sure that we have the cell penetration but we were able to get a much larger therapeutic window. So I think based on what we're seeing in the animal work, and obviously we don't have all of the preclinical toxicology in the nonhuman primate, but that will be available by the end of the summer, we have a much larger therapeutic window than what we saw before. And I think you're right. By the -- having the ability, we're estimating that we could probably give this once a month instead of weekly. That should also give the potential to get better renal clearance and reduce any potential toxicity. So until we, obviously, dose in humans and we understand what really the toxicological profile will be, we don't -- won't know for sure. But based on the animal work, we feel that we have a very good therapeutic window that we should be able to get good dosing. And certainly, the dose will be less even than we expect to that we're giving now. And then instead of weekly, it will be monthly. So we think it's a very reasonable opportunity to avoid toxicity. In regards to the gene therapy, I think you bring up a very good point. We will be dosing at a level of 2x10^14 vector genome product. That is a large dose. Obviously, the group at Nationwide Children's Hospital has been able to produce enough material for the clinical programs, and we're confident that we'll be able to do the clinical programs. We are in active discussions about commercialization for developing a commercial manufacturing system. So we're in active discussions by that. But obviously, it's a little early to make a huge investment in commercialization of gene therapy until we know what the clinical results are. But we have a number of commercial manufacturing organizations that have a lot of experience in producing vector, and those discussions are ongoing.

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Operator [43]

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And our next question comes from the line of Joseph Schwartz with Leerink Partners.

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Dae Gon Ha, Leerink Partners LLC, Research Division - Associate [44]

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This is Dae Gon dialing in for Joe. Just a couple from me. So just tagging on the question earlier from Ritu. Bo, could you comment on what is the current conversion rates between the start form number and to the reimbursement patient? Also, secondly, what proportion of patients are relying on port usage? I think you said 40% to 50%. But how long of a delay is there between installing the port to getting the first drug administration? And lastly, for the MAPs going forward, what kind of a pricing are you assuming? I know it's not really going to be recognized until later in 4Q, but just wanted to get your thoughts on it.

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Douglas S. Ingram, Sarepta Therapeutics, Inc. - President, CEO & Director [45]

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Yes, I'll start with the last question on the pricing. The pricing actually is confidential through the Clinigen program. When the physician actually requests access, the physician gets the price quoted. And then -- so really from a pricing standpoint, we're not -- we won't get into this discussion on the pricing. From a port standpoint, you're correct. You heard 40% to 50%, and that's held pretty steady. It actually surprised us at the very beginning of the launch, but now, it's really been -- it's been very good for the children from health benefits standpoint of not having to get infused every week with needles in the arms. And then from a compliance standpoint, it's helped a great deal with the compliance. It's been holding steady 40%, 50%. Most of the patients do get that port prior. It takes about a month, so it does the delay about 4 to 6 weeks. Some are much quicker, but on average, it's about 4 to 6 weeks that tends to be the delay.

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Edward M. Kaye, Sarepta Therapeutics, Inc. - Advisor [46]

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Yes, and Bo, I think it's fair to say that based -- and certainly based on my experience and other diseases, once the site has identified a surgeon that is comfortable putting the ports in, typically that delay goes down significantly because they have a system in place, they know who to contact. So even though it's about a month now, it certainly could go down in the future.

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Alexander Bo Cumbo, Sarepta Therapeutics, Inc. - Senior VP & Chief Commercial Officer [47]

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Yes, and from a conversion standpoint, I mean, the conversions increased pretty dramatically. It's almost double the rate from Q2 to Q1. And that's really from the start forms that came into the system. It's mainly because we've been working very closely with the managed care plans. They've been putting their policies in place. And a lot of those policies start to take shape in Q1 and the early part of Q2. And those patients that were waiting started converting.

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Operator [48]

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And our next question comes from the line of Matthew Harrison with Morgan Stanley.

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David Neil Lebowitz, Morgan Stanley, Research Division - VP [49]

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This is Dave Lebowitz in for Matthew Harrison. I had a question on prescribing patterns. You had mentioned earlier that start forms for going forward were gearing towards younger patients 4 and under and then subsequently after that, the next oldest group. And I'm just curious as to how the trends might be shifting in the older patients, the 14 and over patients or 15 and over patients from first quarter to second quarter to third.

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Douglas S. Ingram, Sarepta Therapeutics, Inc. - President, CEO & Director [50]

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Yes, the trends across the board have gone up. When I was talking about the percentages, I was talking about the highest percentage increase, which has been seen in 0 to 4, then 5 to 9, then 10 to 14. But across the board, in every age group, it's gone up.

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David Neil Lebowitz, Morgan Stanley, Research Division - VP [51]

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Sure, sure. And has there been any -- I guess, shifting over towards -- to insurance and payers, has there been any shift in their approach towards evaluating patients for reimbursement? Or is it mostly still being done on a case-by-case basis?

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Douglas S. Ingram, Sarepta Therapeutics, Inc. - President, CEO & Director [52]

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Mostly case-by-case, and like I said, the insurance plans do reach out, and even the Medicaids, they reach out to the providers, the KOLs a great deal, and so, but it's mainly case-by-case.

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Operator [53]

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And our next question comes from the line of Tim Lugo with William Blair.

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Ashiq Alim Mubarack, William Blair & Company L.L.C., Research Division - Associate [54]

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This is Ashiq Mubarack on for Tim. Just quickly, can you guys maybe share your thoughts on Europe and the potential launch for EXONDYS 51 there? Could we see potential penetration or ramp rates compared with the U.S. there? Or is it possible they might be even faster on a country-by-country basis given the larger percentage of genotype patients in the managed access program? And then just quickly on the timing of the royalty to BioMarin, is that more or less immediate? Or any thoughts there?

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Alexander Bo Cumbo, Sarepta Therapeutics, Inc. - Senior VP & Chief Commercial Officer [55]

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As far as Europe, and I'll pass it over to Doug, but as far as Europe, it's too early to tell from uptick standpoint on how it's going to play out, but we'll provide more color on that. But I mean, it's definitely going to be a positive scenario if we get [EMA] approval, and Europe is actually going to be a larger opportunity overall with ambulatory and nonambulatory really comes down to reimbursement. It's too early to tell what it's going to be.

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Douglas S. Ingram, Sarepta Therapeutics, Inc. - President, CEO & Director [56]

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Yes, and the reimbursement is a country-by-country basis. It's not -- so it depends on how long it takes each country to get on board. So it's a little hard to make that comparison to the U.S. where basically it's a large group in one country. And I think it's a much more diverse reimbursement strategy.

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Edward M. Kaye, Sarepta Therapeutics, Inc. - Advisor [57]

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I agree.

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Sandesh Mahatme, Sarepta Therapeutics, Inc. - Executive VP, CFO & Chief Business Officer [58]

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And in terms of royalties, they do start immediately, as a matter of fact, about $2.8 million of royalties relate to the prior 3 quarters. So we are really talking about the balance of $32 million. What is worth mentioning, though, is that of that $35 million upfront payment for royalties, most of that gets written off as a one-timer because it was either a settlement or it's attributable to EU royalties. So it's really the remaining $8 million out of the total of $35 million that gets amortized over $8 million -- over 8 years or so. And as a result, the burn that we get from a financial perspective on an ongoing basis is de minimis.

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Operator [59]

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And our next question comes from the line of Liisa Bayko from JMP Securities.

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Liisa Ann Bayko, JMP Securities LLC, Research Division - MD and Senior Research Analyst [60]

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Can you tell us what the COGS are without the royalties? And then just also wondering what the number of patients that have tried the drug so for are gross to net adjustments and compliance rates?

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Sandesh Mahatme, Sarepta Therapeutics, Inc. - Executive VP, CFO & Chief Business Officer [61]

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Yes, so we haven't announced the gross to net at this point. It's too early unless we have the trends -- once we have the trends under control, we'll be able to give some guidance on gross to net probably early next year. In terms of the royalties -- in terms of the COGS as we've had announced earlier, the COGS are somewhere between 0% to 2%. We expect you to have those low COGS going into some point between April to midyear of next year. Obviously, there's a 5% royalty on U.S. sales that will start kicking in now, and as result, we'll have low COGS going forward and they'll continue into, as I said, some point into Q1 or Q2 of next year, and thereafter, it will be in the low teens.

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Alexander Bo Cumbo, Sarepta Therapeutics, Inc. - Senior VP & Chief Commercial Officer [62]

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And from a compliance rate, Liisa, the compliance rates are very high, and we feel pretty good about where they're at right now. They were higher -- much higher than we anticipated pre-launch. And we believe that's really due to going back to the ports, while the ports, there's 40%, 50% of the ports and then other kids get ports as well and then home infusion. Going to home infusion helps compliance as well. So all of these factors have really pushed up the compliance rates.

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Liisa Ann Bayko, JMP Securities LLC, Research Division - MD and Senior Research Analyst [63]

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Okay. So the low teens includes the royalty?

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Sandesh Mahatme, Sarepta Therapeutics, Inc. - Executive VP, CFO & Chief Business Officer [64]

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The low teens includes the royalties. Liisa, also...

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Liisa Ann Bayko, JMP Securities LLC, Research Division - MD and Senior Research Analyst [65]

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Can you tell me what it will be without the royalty just so I understand? 8% or something, I guess?

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Sandesh Mahatme, Sarepta Therapeutics, Inc. - Executive VP, CFO & Chief Business Officer [66]

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Yes, it's 5% for U.S. and 8% for EU. What's worth repeating, though, Liisa, is from your modeling perspective, most of those royalties are written off as a one-timer. So from your model, not much really changes. We only have $8 million that's going to be allocated and amortized over the subsequent 8 years from now through 2024, 2025 that will hit the model. Beyond that, most of those royalties are just a cash burn.

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Liisa Ann Bayko, JMP Securities LLC, Research Division - MD and Senior Research Analyst [67]

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I'm not following. So the royalties don't come out -- are not part of COGS? They are part of this $35 million upfront?

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Sandesh Mahatme, Sarepta Therapeutics, Inc. - Executive VP, CFO & Chief Business Officer [68]

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Well, they're a part of the $35 million upfront but most of that upfront is amortized. Most of that upfront is written off and only $8 million gets amortized over the remaining 8 years.

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Douglas S. Ingram, Sarepta Therapeutics, Inc. - President, CEO & Director [69]

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I think what you're trying to understand, on a go-forward basis, the model doesn't change because the prior guidance included anticipated royalties. That's they're utilizing right now.

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Liisa Ann Bayko, JMP Securities LLC, Research Division - MD and Senior Research Analyst [70]

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So the low teens includes 8% on Europe and 5% in the U.S.?

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Sandesh Mahatme, Sarepta Therapeutics, Inc. - Executive VP, CFO & Chief Business Officer [71]

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That's correct.

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Douglas S. Ingram, Sarepta Therapeutics, Inc. - President, CEO & Director [72]

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That's right.

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Liisa Ann Bayko, JMP Securities LLC, Research Division - MD and Senior Research Analyst [73]

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And so I guess without -- if you had taken out those royalties, can you give us a sense of what the underlying royalties -- the underlying COGS are?

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Sandesh Mahatme, Sarepta Therapeutics, Inc. - Executive VP, CFO & Chief Business Officer [74]

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It would be in the low single digits, low to mid-single digits. There is a few moving parts as well, because remember, a lot of the inventory was written off. Some of the inventory, for example, subunits lasts us for very long time into 2019 or so. So it's really -- it's difficult to come up with an exact number but you could assume mid- to low single digits.

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Liisa Ann Bayko, JMP Securities LLC, Research Division - MD and Senior Research Analyst [75]

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Okay. And then just last question was if you could just give us some sense of how many boys have gotten on the therapy at this point, it would be great.

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Alexander Bo Cumbo, Sarepta Therapeutics, Inc. - Senior VP & Chief Commercial Officer [76]

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At this point, we would never guided on that. We're just focused on the revenues. The revenues are the best indicator of the launch.

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Operator [77]

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And our next question comes from the line of Steve Brozak with WBB Securities.

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Stephen Gilbertpaul Brozak, WBB Securities, LLC - Managing Partner, President & CEO [78]

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Obviously, this is a remarkably strong quarter and it reflects on how well the ground game is going with payers. Can you give us any kind of insight given -- as the EXONDYS studies start to wrap up how this would dovetail with going forward with the payers on the end of study and data that you presented them? Because obviously, you've got a good working relationship, and any color you can give on that would be terrific.

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Edward M. Kaye, Sarepta Therapeutics, Inc. - Advisor [79]

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Yes, I can start, and this is Ed, and Bo can comment. I think we're clearly committed to gathering data, especially in other populations that were treated outside of our primary study, and we're collecting data, for instance, on respiratory data and cardiac data and the nonambulatory and we're working on this for the remainder of the year. So that's the kind of clinical information that we're going to be supplying to the payers. And we continue to do that really throughout this year and want to make sure that we really increase the quality of the dossier and the number of patients, and that includes both younger and older patients, so we have more and more information. And we're gradually gathering that database.

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Alexander Bo Cumbo, Sarepta Therapeutics, Inc. - Senior VP & Chief Commercial Officer [80]

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Yes. And I think, it's going to continue to give confidence to not only the payers but the clinicians as the data is published and presented at conferences. And we have -- as Ed has mentioned, we have so many ongoing studies and data cuts that data should be continuing to flow over the next couple of years and it's going to continue to help with access and reimbursement.

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Stephen Gilbertpaul Brozak, WBB Securities, LLC - Managing Partner, President & CEO [81]

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Great. Well, again, I don't know how to say you guys could do it any better. So I look forward to hearing about it in the future.

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Operator [82]

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And that concludes our question-and-answer session for today. I would like to turn the conference back over to Doug Ingram for any closing comments.

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Douglas S. Ingram, Sarepta Therapeutics, Inc. - President, CEO & Director [83]

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Okay. Well, thank you, everyone, for joining today's call. Obviously, I'm going to look forward to meeting many of you in the coming months and also look forward to coming back and updating you on progress for the remainder of this year and into next year. I'll, once again, say that I'm very excited to join Sarepta. I think you can all see why now. It is a rare opportunity to have such an opportunity to make such an important difference in patients' lives. So thank you all very much. Have a good evening, and I look forward to meeting you in the near future.

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Operator [84]

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Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program, and you may now disconnect. Everyone, have a great day.