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Edited Transcript of SRPT earnings conference call or presentation 8-Aug-18 8:30pm GMT

Q2 2018 Sarepta Therapeutics Inc Earnings Call

BOTHELL Aug 22, 2018 (Thomson StreetEvents) -- Edited Transcript of Sarepta Therapeutics Inc earnings conference call or presentation Wednesday, August 8, 2018 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

* Gilmore Neil O'Neill

Sarepta Therapeutics, Inc. - Chief Medical Officer

* Ian M. Estepan

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

* Louise Rodino-Klapac

Sarepta Therapeutics, Inc. - VP of Gene Therapy

* Sandesh Mahatme

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

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Conference Call Participants

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* Brian Corey Abrahams

RBC Capital Markets, LLC, Research Division - Senior Analyst

* Brian Peter Skorney

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

* Christopher N. Marai

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

* Dae Gon Ha

Leerink Partners LLC, Research Division - Associate

* Debjit D. Chattopadhyay

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

* Gena Wang

Barclays Bank PLC, Research Division - Research Analyst

* Hartaj Singh

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

* Jonathan Patrick Wolleben

JMP Securities LLC, Research Division - Associate

* Matthew Kelsey Harrison

Morgan Stanley, Research Division - Executive Director

* Myles Robert Minter

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

* Ritu Subhalaksmi Baral

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

* Ross Howard Weinreb

Goldman Sachs Group Inc., Research Division - Research Analyst

* Timothy Chiang

BTIG, LLC, Research Division - MD and Specialty Pharmaceutical Research Analyst

* Yun Zhong

Janney Montgomery Scott LLC, Research Division - Equity Research Analyst & Director of Biotechnology Research

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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 2018 Earnings Conference Call. (Operator Instructions) As a reminder, this call is being recorded.

I would now like to turn the conference over to Ian Estepan, Vice President, Chief of Staff and Corporate Affairs. You may begin.

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

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Thank you, Sonia, and thank you all for joining today's call. Earlier today, we released our financial results for the second quarter of 2018. The press release is available on our website at www.sarepta.com. Joining us on the call today are CEO, Doug Ingram; our CFO, Sandy Mahatme; our Chief Commercial Officer, Bo Cumbo; Dr. Gilmore O'Neill, our new Chief Medical Officer; and Dr. Louise Rodino-Klapac; our new Vice President of Gene Therapy. 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 uncertainty, any of which are beyond Sarepta's control. Actual results could materially different from these forward-looking statements as any and such risks could materially and adversely affect the business, the results of operations and the trading prices of Sarepta's common stock. For a detailed description of applicable risks and uncertainty, we encourage you to review the company's most recent quarterly report on Form 10-Q filed with the Securities and Exchange Commission as well as the company's other SEC filings. We filed our 10-Q this afternoon, August 8, 2018, for the second quarter of 2018 by the SEC required filing deadline. 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 Doug Ingram, who'll provide an overview of our recent progress. Doug?

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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 Second Quarter 2018 Results and Corporate Update Conference Call.

In the second quarter, we took very significant steps, perhaps leaps, in the direction of achieving our strategic vision of becoming one of the most meaningful global genetic medicine companies, while continuing to remain focused on executing on our plans and fulfilling our commitments. We indeed have much to discuss this afternoon, including our newest gene therapy partnership, which will give us 3 new programs and move us into CNS-targeted therapies; our recent and very productive meeting with the FDA to advance casimersen to a potential near-term Accelerated Approval in the United States; and our progress in responding to the FDA's clinical hold for our microdystrophin program. But as Sir Winston Churchill famously observed, "However beautiful the strategy, you should occasionally look at the results." So let's begin with our second quarter results.

We were pleased to announce earlier today, another very strong quarter. Sales of EXONDYS 51 -- revenue reached $73.5 million, an increase of 110% over the same quarter last year. With strong first half sales of approximately $138 million, we do remain on track to achieve our 2018 guidance of $295 million to $305 million. If you will indulge me, I would like to give special credit to Bo Cumbo and his commercial organization as well as our very strong medical affairs team for a fabulous first half of 2018. Sarepta is that rare breed of fully integrated biotech company that can take a therapy from conception, development and approval and then support it in the community with strong commercial execution.

We also announced in the second quarter that we received a negative opinion from the Committee for Medicinal Products for Human Use, the CHMP, regarding our Marketing Authorization Application, or MAA, for eteplirsen in Europe. We have commenced a reexamination of the CHMP opinion. The CHMP will hold a Scientific Advisory Group, or SAG, meeting of neuromuscular experts in the fall of 2018 to discuss our application and reexamination. While we believe we have a strong case for access to eteplirsen for patients with exon 51 amenable mutations in Europe, the reexamination process remains challenging. We expect a final decision by year-end.

Moving on to our next PMO candidates, we are very pleased with the accelerating progress we are making with our next 2 PMO candidates, golodirsen and casimersen. As you will recall, following a positive meeting and guidance from the FDA in the first quarter of 2018, we are in the process of submitting our rolling NDA for golodirsen, our PMO designed to treat patients with exon 53 amenable mutations, which will be complete by year-end with a target approval date in 2019. Last week, we held a type C meeting with the FDA to discuss, among other things, our proposal to conduct an analysis of muscle biopsies at week 48 of exon 45 amenable patients in our ESSENCE trial for the purpose of supporting a potential Accelerated Approval for casimersen, our PMO therapy designed to treat Duchenne patients with exon 45 amenable mutations. Our preclinical models suggest that casimersen as a sequence is as efficient at exon skipping and dystrophin expression as golodirsen. I am pleased to report that the FDA was supportive of our proposal to perform an analysis for dystrophin expression and agreed that it is possible to do so without compromising ESSENCE as the confirmatory trial for golodirsen and casimersen. We will be in a position to conduct that analysis before the end of this year, which means that if we have significant dystrophin expression with casimersen, we should be in a position to file for Accelerated Approval by mid-2019.

Golodirsen and casimersen combined serve an even larger population than EXONDYS 51, so the near-term opportunity to bring these therapies to the community is very significant. To put this into perspective, if successful, we will have 3 PMO candidates approved in the United States by 2020, serving nearly 30% of the Duchenne community. Our next-generation RNA technology, the PPMO is progressing, with a single-ascending dose study underway for our 51 candidate, where we will get dosing insight by the first quarter of next year and IND enabling tox work is being performed for the next 5 skip amenable mutations beyond 51.

Turning now to our gene therapy progress. The second quarter of 2018 has been an extraordinarily important one for our fight to bring a longer, brighter life for those with rare disease and, in particular, those with Duchenne muscular dystrophy. As you know, on our R&D Day on June 19, Dr. Jerry Mendell of Nationwide Children's Hospital presented the early results from the first 3 Duchenne patients who received our microdystrophin therapy. To remind you, our microdystrophin gene therapy construct has been very elegantly designed by Drs. Mendell and Rodino-Klapac. First, as a rhesus monkey-derived AAV vector, rh74 appears to show lower immunogenicity rates compared to other humanized AAV vectors, meaning it should be available to more patients. Second, the microdystrophin promoter was specifically chosen for its ability to robustly express in the heart, which is critically important for patients with Duchenne muscular dystrophy, who typically die from pulmonary or cardiac complications. In preclinical models, microdystrophin expression in the heart was observed to be up to 120% of the microdystrophin levels observed in skeletal muscles. And third, the transgene was designed to maintain spectrin repeats 2 and 3, which has been recently reconfirmed to be crucial in protecting the muscle from damage. As you no doubt are aware, Dr. Mendell reported that the 3-month biopsy results showed robust gene expression as measured by Western blot and immunohistochemistry, with all 3 patients showing an unprecedented drop in creatine kinase levels, the enzyme associated with ongoing muscle damage that is the hallmark of Duchenne muscular dystrophy.

What is particularly fortuitous is that on July 11, the FDA issued its innovative draft guidance on gene therapy for rare disease that aligns with our goal of rapid drug development, creating an efficient pathway to the market for new therapies. Specifically, FDA has encouraged sponsors to design first-in-patient studies as potential pivotal trials and to consider alternative trial designs. Encouraged by the guidance, but also mindful of its recommendation that early discussions with the agency are crucial, before executing our next study, we are preparing to submit for a type B FDA meeting to align on the clinical pathway for our registration trial. It is our goal to hold that meeting and to commence the next trial before the end of 2018.

Separately, we announced on July 25 that the FDA placed our microdystrophin program on clinical hold based on a third-party plasmid supply issue. As we noted previously, that third-party material was research grade as is the current standard for early clinical programs in the academic setting. We have committed to moving to GMP sourced plasmid material going forward and have already completed our audit of the third-party supplier. Pending the completion of Nationwide Children's Hospital's review, we will be in a position to fully respond to the FDA's clinical hold letter in the near future and certainly before the end of August. Given the nature of the hold, we anticipate it should be lifted in advance of our meeting with the agency to align on our clinical pathway.

Moving next to our Limb-girdle program. As you will recall, we announced in the second quarter, a transaction with Myonexus for 5 new Gene Therapy Programs, all under the broad umbrella of Limb-girdle muscular dystrophy also known as LGMD. The current plan is to dose the first patient in the so-called 2E program, which is a beta sarcoglycanopathy in August. We are working with Myonexus to map out the dosing of the next 4 LGMD diseases, and we'll have an update later this year on that. To remind you, the 5 LGMD programs represent about 70% of the opportunity of Duchenne and share much in common with our microdystrophin program.

Now consistent with our long-term vision, we continue to build upon the breadth of our gene therapy franchise. As you have seen in this afternoon's announcement, we have today entered into yet another gene therapy transaction, this time with Lacerta Therapeutics. Lacerta was founded as a spin-out from the University of Florida by a number of world-renowned gene therapy researchers. Like Nationwide Children's, University of Florida is one of the top centers of excellence in gene therapy research. Lacerta's founders have led numerous clinical-stage gene therapy programs and made significant advances in and contributions to the gene therapy field. Under the terms of the partnerships, Sarepta will make a $30 million equity investment in Lacerta. We have also received an exclusive license to Lacerta's CNS-targeted Pompe Gene Therapy Program and rights to 2 additional CNS-targeted programs. Lacerta will manage the majority of the preclinical development, while Sarepta will lead clinical development and commercialization. Sarepta will pay Lacerta development in sales-based milestones as well as single-digit royalties on net sales.

Our partnership with Lacerta accelerates our gene therapy strategy in a number of very discrete ways. First, access to world-class talent. As we have said, we're meeting our gene therapy ambition by associating with the world's best and brightest genetic medicine scientists. Lacerta's founders, 9 in all, who are widely published in leading peer-reviewed journals, over 500 papers among them, are highly regarded in gene therapy clinical research and hail from leading centers across the United States, including the University of Florida, Nationwide Children's Hospital, CHOP, University of Pennsylvania and Weill Medical College of Cornell. Second, of course, is the expansion of our gene therapy pipeline. To our pipeline of 8 Gene Therapy Program -- programs, Lacerta adds 3 new Gene Therapy Programs focused on a very close adjacency, CNS. Indeed, the first program addresses a CNS approach to a neuromuscular disease, Pompe. We also have rights to 2 additional CNS-specific therapies. Third is access to gene therapy tools. Lacerta's novel capsid library could potentially support next-generation therapies that are optimized for targeted delivery of drugs to treat these CNS diseases. Lacerta is developing an alternative approach to dose patients with antibodies to AAV, potentially enabling a broader and more robust application of the technology for a wider location population. And Lacerta's OneBac proprietary manufacturing platform allows for potentially a more reproducible, scalable, stable and potent AAV manufacturing process. While this will not be the approach we use for the commercial launch of our microdystrophin and LGMD programs, it provides an opportunity to explore new and potentially more efficient manufacturing avenues in the future as we build our gene therapy division.

Next, I will discuss the infrastructure and talent-related achievements we've made this quarter. So first on people. We started 2018 with 255 dedicated, passionate employees. As people see the value of our mission, the breadth of our goals and opportunities and our operational commitment to achieve our goals, over the last year, Sarepta has become one of the top places to work if one is creative, ambition and wants to make a positive impact on the world. We've been hiring at nearly 1.5 employees a business day at Sarepta, that's chemist, biologist, developers, manufacturing experts and the like. And we will exit 2018 with nearly double the number of employees at the beginning of this year.

And next on leadership. I entered 2018 with a strong, committed executive team that shares a common vision and great pedigrees. I was pleased in the second quarter to welcome to that already strong team 2 first class scientists and biotech leaders, Dr. Gilmore O'Neill and Dr. Louise Rodino-Klapac, both of whom are present on this call with me today. It speaks reams to the opportunities we have at Sarepta to improve lives that we were able to attract these talents to our senior team.

Next on infrastructure and manufacturing. In the corner -- in this quarter, we commenced our hybrid manufacturing gene therapy strategy, starting with our partnership with Brammer Biosciences, which we anticipate will provide us with sufficient commercial supply for our microdystrophin gene therapy launch, even under the most aggressive development assumptions. On infrastructure, even as we have taken additional space in Cambridge and built out our facility in Andover, we're also building an 85,000 square-foot gene therapy center of excellence in Columbus, Ohio, with the goal of strengthening and deepening our commitment to gene therapy to Columbus and to our relationship with Nationwide Children's Hospital.

Finally, there's one thing that will drive our success above all of these others. When we achieve our vision of becoming among the most meaningful genetic medicine companies the world over in the coming few years, and I am asked what was the greatest predictor of our success, I will say one thing, purpose. For us, there is no ambiguity. We know why we get up every day and work as hard as we do. We know that those living with life-robbing rare disease, and their families, are relying upon us for their futures. This is what fuels our culture and this is what makes me so confident in our continuing success.

And with that, I will now turn the call over to Sandy for an update on our financial performance. 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 past year, we've built a strong foundation that uniquely positions us to execute on our strategic vision. Namely, EXONDYS 51 continues to perform well and is a fuel source that has driven and continues to drive the expansion of our pipeline in DMD and new therapeutic areas. Our healthy balance sheet supports the expansion of our geographic footprint and our investment in manufacturing capabilities, which are necessary to deliver innovative therapies to patients around the world. To support these initiatives, we will be growing to over 500 employees by the end of 2018. Despite this rapid expansion, we will continue to thoughtfully manage our expenses by only taking programs in-house when the probability of success justifies the full dedication and support of our internal resources. This model allows us to continue to economically move multiple programs forward in parallel. Although the company will continue to dramatically transform, as it did last year, in the years to come, our approach to managing our finances and building shareholder value will remain much the same.

Now moving to the financials. This afternoon's press release provided details for the second quarter of 2018 on a non-GAAP basis as well as a GAAP basis. The press release is available on the SEC as well as Sarepta's websites. Please refer to our press release for a full reconciliation of GAAP to non-GAAP. I'd like to add a quick reminder here that our 2018 non-GAAP financials exclude net interest expense, depreciation and amortization expenses, onetime extraordinary expenses and stock-based compensation.

Net product revenue for the second quarter of 2018 was $73.5 million compared to $35 million for the same period of 2017. The increase primarily reflects high demand for EXONDYS 51 in the U.S.

We reported a non-GAAP net loss of $28 million or $0.43 per share compared to non-GAAP net loss of $26.5 million or $0.48 per share in the second quarter of 2017. In the second quarter of 2018, we recorded approximately $6.7 million in cost of sales compared to $0.5 million in the same period of 2017. The increase was driven by higher inventory costs relating to increasing demand for EXONDYS 51 during 2018, accrued royalties and payments of $3.7 million to BioMarin, which were a result of the settlement and license agreement we entered into with BioMarin in July of last year. We expect our cost of sales to modestly increase in Q4 of 2018 due to depletion of materials that were expensed prior to approval.

On a GAAP basis, we recorded $122.8 million or (sic) [and] $58.9 million of R&D expenses for the second quarter of 2018 and 2017, respectively, a year-over-year increase of $63.9 million. This increase is primarily related to a $60 million payment we made to Myonexus. On a non-GAAP basis, the R&D expenses were $57 million for the second quarter of 2018 compared to $34.1 million for the same period of 2017, an increase of $22.9 million. The year-over-year growth in non-GAAP R&D expenses was driven by increased patient enrollment in our late-stage clinical trials, a ramp-up of manufacturing activities for our PPMO platform and an expansion of our research and development pipeline and collaboration costs with Summit Therapeutics.

As of January 1, 2018, we started to share 45% of the costs related to Summit's research and development expenses for the utrophin program. Due to the termination of Summit's utrophin program during the second quarter of 2018, we expect this expense to significantly decline over the upcoming quarters.

Turning to SG&A. On a GAAP basis, we recorded $47.2 million and $36.1 million of expenses for the second quarter of 2018 and 2019, respectively, a year-over-year increase of $11.1 million. On a non-GAAP basis, the SG&A expenses were $37.3 million for the second quarter of 2018 compared to $24.2 million for the same period of 2017, which is an increase of $13.1 million. The year-over-year increase was primarily driven by continued build outs supporting our research and development and commercial expansion.

On a GAAP basis, we recorded $4.7 million in net interest and other expenses for the second quarter of 2018 compared to $100,000 of net interest income for the same period of 2017. The unfavorable change is driven by higher interest expense in Q2 of 2018 resulting from a debt instruments that we entered into the latter half of 2017. We had approximately $950 million in cash, cash equivalents and investments as of June 30, 2018. In addition, we have prepaid approximately $33.7 million towards future manufacturing expenses in connection with our gene therapy and RNA programs.

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

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

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Thank you, Sandy. Good afternoon, everyone. As we head into the eighth quarter of an ultrarare disease launch, we are very proud of the progress and accomplishments the team has made. We had a strong quarter and remain on track to achieve our full year guidance of $295 million to $305 million. The team has also -- has been able to successfully navigate challenges this year and maintain patients on therapy without significant disruptions. The measurable progress over the last few years is due to the motivation and commitment of the patient community and the team here at Sarepta.

Our U.S. commercial efforts are still focused on identifying patients amenable to exon 51 skipping and driving prescriptions, continuing active dialogue with payers to support broad coverage and reimbursement decisions and ensuring all patients with DMD have a current genetic test, know their [mutation] and are appropriately identified not only for EXONDYS 51 but for clinical trials and future therapies. Until newborn screening is a reality, we will need to continue to work with key offices to help educate around the importance of patient identification, early diagnosis and potential treatment options.

We continue to be pleased that we're seeing adoption across all age groups. The average age of patients on therapy is 13 years of age. We do not expect the average age of patients to dramatically change until newborn screening for Duchenne becomes standard medical practice, which would identify hundreds of new patients with DMD. From an adherence and persistency perspective, we continue to see high compliance rates and minimal discontinuation. We also do not expect to see a change in the percentage of patients who are opting for ports at this time. Patient demographics have remained fairly consistent throughout the launch. The mix of patients on commercial and government payers has slightly changed in 2018 as mentioned on the last earnings call. The mix was approximately 55% commercial, 45% government in Q1 and Q2 in 2018 compared to 60%-40% in 2017. Our national accounts team and medical affairs organization continued to have ongoing engagement with both commercial and government level payers. As a result, payers have a better understanding of the disease and the number of patients who will benefit from EXONDYS 51 with their plan. Tier 1 and Tier 2 centers continue to receive referrals or identify new patients amenable to exon 51 skipping and submit START Forms as appropriate. We continue to call on top-tier centers but have purposely expanded our efforts. A portion of our educational endeavors has shifted to large pediatric offices within key states, where we are helping to educate on the importance of early identification for children who have not been diagnosed with Duchenne. These efforts are now focused on supporting early testing and diagnosis and ultimately, shortening the time frame from pediatrician offices to the neuromuscular specialist.

As Doug highlighted, Sarepta's mission is to develop precision genetic medicine that improves the lives of all patients with DMD as well as other life-altering neuromuscular and CNS diseases. We're able to do this by collaborating with the most notable export -- experts worldwide, continuously striving to advance our multi-platform pipeline. We currently have 23 programs in development at Sarepta and with each new program comes the responsibility of ensuring treatment access for patients. This brings me to the commercial success of EXONDYS 51, which has provided the framework to support future launches. Building a global company requires complex coordination and flexibility that will work across diverse markets as well as highly skilled and motivated people. As we continue to build the infrastructure needed to be the worldwide leader in precision genetic medicine, we remain committed to execute upon one goal, which is to keep patients at the center of all conversations. We will also continue to review and refine our strategies to include a variety of innovative approaches to enhance patient access to these therapies.

During the reexamination period with the EMA, we have continued to strengthen our global presence in Europe by solidifying our relationships with key opinion leaders and advancing our distribution network. While we have already built the infrastructure needed for a potential European approval and a future launch of EXONDYS, we're also focusing our efforts to build out and support future launches in other countries. We recently hired our Country Manager, Medical Director, Head of Government Affairs and Patient Advocacy in Brazil. These recent new hires will begin to support the patient and medical community within this country. We know what our aspirations are and we know how to get there. We're putting all the framework in place from distribution networks, market access, sales, medical affairs and patient support, which will allow us to reach patients globally when new therapies are approved. Our focus and commitment of providing new treatment options which are so desperately needed to patients around the world has not wavered.

In summary, the U.S. commercial success of EXONDYS 51 has provided the framework and resources to support future rare disease launches. We are leveraging this knowledge to prepare ourselves for operational and executional success. Between our Gene Therapy Programs for both DMD and Limb-girdle as well as the in-licensed assets from Lacerta, our team is preparing for the potential launch of multiple gene therapy products over the coming years. This is in addition to our multiple PMO and PPMO-based programs for Duchenne, which, if successful, could be launching during the same period of time.

From a commercial aspect, we are very excited about the future at Sarepta. We continue to have one of the deepest rare disease pipelines in biotech and each day we are taking steps to strengthen our position as the global leader in precision genetic medicine. We will continue to pave the way to bring access to future therapies within rare neuromuscular and CNS diseases.

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

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

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Thanks, Bo. As we move into the latter half of 2018, we are pleased with the progress that we have made to date, advancing our ambitious vision married to a continuing focus on practical execution. For the remainder of 2018, we will be focused on key areas of the business and catalysts including the following: completing the rolling NDA submission for Golodirsen; evaluating dystrophin data for casimersen; completing the reexamination for eteplirsen in Europe; advancing SRP 5051 and the rest of our PPMO platform; removing the clinical hold on our microdystrophin program; meeting with and gaining insights from the FDA on the registration pathway for our microdystrophin program and commencing the enrollment of patients in a pivotal study for microdystrophin; dosing patients in our first Limb-girdle clinical trial; and continuing to build for the future, including hiring more colleagues, advancing our manufacturing capabilities and building out our gene therapy center of excellence. And with that, operator, can you please 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 Ritu Baral of Cowen.

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

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Maybe, I'll start with the Lacerta deal. Doug, can you talk about the difference between the Lacerta Pompe program and some of the others like Audentes and Spark? And just a quick follow-up question on Golodirsen and casimersen, how are you thinking about the pricing of those programs in relation to EXONDYS?

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

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Okay. Great. So first on our Pompe program, obviously, to say it's early days would be an understatement. I think we just announced it less than 60 minutes ago. So we will have a lot more to say about that, and we'll build out the thesis on our Pompe program or Pompe gene therapy program over time with Lacerta. The one thing I will say is that we have a unique approach to our gene therapy program with our Pompe program, which is, that it is a CNS-targeted approach to what is a disease that is, in many regards, CNS-driven but has neuromuscular manifestations. And I think in that regard, we will be differentiated from others, at least as the beginning. The second I would say...

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Ritu Subhalaksmi Baral, Cowen and Company, LLC, Research Division - MD and Senior Biotechnology Analyst [4]

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So motor neuron targeted, Doug?

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Douglas S. Ingram, Sarepta Therapeutics, Inc. - President, CEO & Director [5]

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Yes. Yes.

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Ritu Subhalaksmi Baral, Cowen and Company, LLC, Research Division - MD and Senior Biotechnology Analyst [6]

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Okay.

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Douglas S. Ingram, Sarepta Therapeutics, Inc. - President, CEO & Director [7]

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And the second thing I would say about it, just to credential our Pompe program, is that it was invented and developed at the University of Florida by none other than Dr. Barry Byrne, who, along with folks like Dr. Jerry Mendell and now our very own Louise Rodino-Klapac, is among that rarefied group of world luminaries in the development of gene therapy constructs. And then answering your question about Golodirsen and casimersen, while we haven't gotten that far to really pull out a sharp pencil on either one, the short answer is it will be priced at parity with eteplirsen.

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Operator [8]

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Our next question comes from Brian Abrahams of RBC Capital Markets.

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Brian Corey Abrahams, RBC Capital Markets, LLC, Research Division - Senior Analyst [9]

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Two from me. First, on the microdystrophin clinical hold, it sounds like you've already made good progress there. Wondered if you could give us a little bit more in terms of specifics with respect to what needs to be done at NCH? Maybe based on your initial audit of the third-party supplier and ongoing regulatory feedback, if you could characterize your level of confidence in a rapid resolution? And then I had a follow-up on casimersen.

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Douglas S. Ingram, Sarepta Therapeutics, Inc. - President, CEO & Director [10]

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Great. Okay. So first I'll start with the clinical hold. So the short answer is, as you said, we've made great progress. We have, from our perspective, drafted what we believe would be a complete response. We've completed an on-site significant audit of our third-party supplier that went very well. With respect to our partner, Nationwide Children's Hospital, they're -- they did their own independent review as well and they're also reviewing our work and it really is just kind of getting that all collated and together and then putting together a complete response to the clinical hold letter that is polished. So it's -- we really are on the final strokes of getting a response. So as I said before, I'm very confident this will get done by the end of August and frankly, I would be disappointed if it was the latter part of August. So -- and then on what we found -- so we've completed our audit of the third-party supplier and it went very well. We had great cooperation. We also had great confirmation of the approach that our third-party supplier takes to the development and release of GMP-sourced plasmids. We feel very good. I would say at this point, I am, frankly, very confident in the rapid resolution of the issues associated with the clinical hold.

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Brian Corey Abrahams, RBC Capital Markets, LLC, Research Division - Senior Analyst [11]

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That's really helpful. And just on casimersen, I was wondering if you could give us any more detail on how you're able to work the 48-week biopsies into ESSENCE. And I guess, working around methodologically, I guess, overcoming the challenges of maintaining study integrity, but still getting that data.

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Douglas S. Ingram, Sarepta Therapeutics, Inc. - President, CEO & Director [12]

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The short answer is, very carefully. Because I will say, we definitely don't want to put ourselves in a position that through the process of looking at these biopsies, we compromise the integrity of ESSENCE, which will act as -- not only is it an independent study, it will also act as a confirming study for golodirsen and of course, if we get a good results, it will act as the confirmatory study for casimersen. The good news is that, we came up in advance with a protocol that would essentially sort of hive off a group that when blinded to everyone else, would look at the biopsies themselves from the active arm for the casimersen arm. And that we could do it in a way that wouldn't compromise the results, wouldn't unblind the study to those who would be looking at it and the like. And we presented that, shared that with the division and the division is in agreement with us that we have an approach that works. So we feel very good.

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Operator [13]

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Our next question comes from Christopher Marai of Nomura Instinet.

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Christopher N. Marai, Nomura Securities Co. Ltd., Research Division - MD and Senior Analyst [14]

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So just thinking about dosing your next patients with your dystrophin gene therapy. Assuming the hold is removed, do you see any opportunity to dose additional patients before the start of a registration trial, which I think you said you'd hope to start by year-end, but will those patients dosed be part of that trial? And then secondarily, I was wondering, how you look to interpret competitor data as it may come out with respect to these biopsies. We understand maybe World Muscle would be a site of -- for competitor, data release, maybe 3 patients or so? And wondering how you internally would be evaluating, I suppose, biopsy and dystrophin data?

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Douglas S. Ingram, Sarepta Therapeutics, Inc. - President, CEO & Director [15]

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Well, okay, so let's start on the dosing side. So our focus right now, really, frankly, independent even of the clinical hold, is to focus on meeting with the agency to get alignment around the clinical path and the appropriateness of what we envision to be a pivotal trial for the therapy. So that really is our big focus right now. So even if we came off of clinical hold immediately, which is not going to happen, it's going to take some time to get this response and the agency has 30 days to review it -- we still really want to focus our effort and energy into getting a meeting with the agency, getting alignment around a clinical pathway and then dosing patients. And we -- if things work well and we execute brilliantly, we think we can get that all done and we can start not only enrolling patients by the end of 2018 but actually dosing patients in what hopefully is a pivotal trial by the end of 2018. So that's going to be our focus. And it really is informed not only by our own ambition but also by this draft guidance from the FDA regarding gene therapy and rare disease, which came out, I believe, as I said, on July 11, which really gives us a lot of confidence that the agency wants to look innovatively at gene therapy, particularly gene therapy in rare genetic diseases. But also provides very explicitly, that it's important to have early and robust communications with the agency. So that's our focus right now. And then on how we deal with competitors, I guess the issue about competitors is a simple one, it's great for us. It fuels us to work fast and work hard, and we'll wait to see what we have. What I will say, rather than speak about others' programs, I can speak again to our own, we have a very elegantly designed construct. So we have a construct, quite apart from just the fact that we have extraordinarily good dystrophin production through immunohistochemistry and through Western blot as revealed in the first 3 patients at our R&D Day, we have a construct that's very elegant in a number of other ways. We have low screen out rates for pre-existing antibodies, likely because we're using rh74, which is unique to us. We have a promoter, which, again, is unique to us that expresses very robustly in the heart, in fact, in animal models, it expresses 120% of what we would see in skeletal muscles. If that held true, for instance, for these 3 patients, it means that they would have 100% or so of expression on immunohistochemistry in the heart, which is great. And then of course, there was really an elegant design around the cassette itself. It maintains spectrin repeats 2 and 3, which is very recently in a paper, I believe it was March this year, confirmed it was extremely important to avoid muscle damage and to protect for muscle damage. So we think we have a fantastic construct and marrying that with the fact that we're going to move as fast as possible, we think we have a real opportunity to benefit a lot of patients if the trial works out. One final thing I do want to point out, apologies for being a little long-winded on this, but talking about trial design, one of the things we focus on is the discussions with the agency, which of course is extraordinarily important to make sure we're aligned with the FDA. But it's even more complicated than that because we want to make sure that we're designing a study that's not only appropriate for the United States and for the FDA, which is important and we certainly want to make sure we do that, that is fit for purpose for the rest of the world. Because as we said many, many times before and as Bo just said a moment ago, our goal is not to treat a subset of patients with Duchenne muscular dystrophy, we really want to treat as many patients living with muscular dystrophy as is possible around the world. There are 70,000 or so individuals around the world who are living with Duchenne muscular dystrophy. Our goal is to create a program that gives us a pathway to be in the communities all around the world, treating patients.

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Christopher N. Marai, Nomura Securities Co. Ltd., Research Division - MD and Senior Analyst [16]

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Okay. And then just to clarify, so we don't expect additional dystrophin production data from your gene therapy program to be presented? That'll be number one. And number two, again, with respect to thinking about how you -- sorry, go on.

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Douglas S. Ingram, Sarepta Therapeutics, Inc. - President, CEO & Director [17]

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I apologize. Go ahead, finish your question. Apologies.

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Christopher N. Marai, Nomura Securities Co. Ltd., Research Division - MD and Senior Analyst [18]

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Well, with respect to, I guess, interpreting potential competitive data, I guess what I was wondering is how does the company look at it? Obviously, you're going to see it, you're going to be interested in it. Should we -- how should we look at that? Should we look at vector genome copies, dystrophin levels, CK levels or all of the above? Or I mean, I would love to understand how you guys want to compare and contrast the potential data that we see here later this year from a competitor. And what might be the most meaningful? Because obviously there are problems interpreting dystrophin data from biopsies, et cetera and it's a cross-trial comparison. So would love to understand just maybe from your lens as gene therapy experts in Duchenne, how you would look at that?

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Douglas S. Ingram, Sarepta Therapeutics, Inc. - President, CEO & Director [19]

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Yes. Those are great questions. One thing I want to make sure I clarify, it is very possible, in fact, it's probable that there will be additional data out of our first treated cohort by the end of this year. Dr. Mendell will be making the choices about the forum but it'll be at a medical forum, likely before the end of this year. But remember we'll have 2 things, we'll have biopsy data from a fourth patient. We had a -- there was a fourth patient dosed even before the June 19 date, we just didn't have a 3-month biopsy yet, so there was no ability to provide that information. So he'll be able to present that. There will also be biomarker data including obviously CK level data for all of the patients in -- at least in the first patient, will be nearly a year's worth of biomarker and CK level data that will be presented by the end of the year. So I suspect that we will get more and increasingly robust data out of our program, even though we're going to spend a lot of our focus on designing our pivotal trial. As we think about other therapies and what they might present later this year or otherwise, I think there's -- you've raised some very good points, I think obviously, dystrophin expression is extraordinarily important. One of the issues with dystrophin production is measuring it. We tend to be expert at measurement, we tend to be very conservative at measurement as well, frankly. I think most people that would look at us say, we are so thoughtful that we're conservative. And so one of the things we'll be looking at very carefully as others might be looking at things like immunohistochemistry and Western blot is to ensure that they've done it in ways that are similar to ours or looking at the ways they've done it and sort of comparing and contrasting associated with that. I think there's other things that you need to look at beyond that. Obviously, CK levels or CK drops is very valuable. We, frankly, are very excited about the CK level drops that we've seen, they're unprecedented. As you know, in the first 3 patients that we have, the drops were nearly 90%, that's never been seen before in a 3-month period or otherwise. And I think Dr. Mendell has already revealed, so I don't think I'm revealing anything secret that the initial drop in the fourth boy was quite significant as well. Certainly, at least in the hunt of that if not maybe a little better than even that. And those are important things to look at. But then beyond that, there are other things to consider. And that's why we really talk a lot about the elegance of our construct. So I think, frankly, the fact that we're seeing less than a 15% screen out rate is really important and it's important even in addition to the great results that we're seeing so far because it means that we're going to have the opportunity to treat an enormous number of patients and that seems to be better than at least what the literature would suggest for other AAVs. I think, probably extraordinarily important and it would be -- is the amount that a promoter expresses in the cardiac muscle. These children are taken from us, these patients are taken from us either from pulmonary or cardiac complications and so being able to protect the heart is enormously important. Other promoters have shown some expression in the heart, but I'm not sure we've seen animal models from any other promoters associated with other programs that would show the kind of expression that we're seeing here, which is 120% of what we're seeing in the skeletal muscle. Now to look at these patients and to start to correlate cardiac expression is really going to require us to look at preclinical models in the animal models. We've been willing to share that and so presumably others will do the same and we get to see what other people look like there. And then I think quite apart, we've got to sort of start predicting what's going to happen over the long run with the protective quality of the construct that's been created. We know that microdystrophin works in animals. We know that there is a wonderful natural case study associated with this, a 61-year-old patient started all of this. It was a Becker's patient who had essentially a naturally occurring form of microdystrophin and was 61 years old and remained ambulatory. So there's a lot of hope that there's protection associated with microdystrophin and certainly our CK levels would lead us to believe that that's what's occurring here. But really looking carefully at the construct itself and seeing that, that construct matches that 61-year-old patient and also seeing how elegantly it matches the natural dystrophin protein is important. That's why we continue to emphasize what others have independently emphasized in published literature recently that maintaining spectrin-like repeats 2 and 3 is extremely important to predict the protective quality of the dystrophin. So -- and there's a lot to consider when we consider comparing across programs.

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Operator [20]

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Your next question comes from Brian Skorney of Baird.

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Brian Peter Skorney, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [21]

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Two quick ones from me. Assuming you guys get the clinical hold lifted in the outlined time frame. Just wondering, are you at production scale that would allow you to dose every patient on the third cohort immediately or is that a rate-limiting step to completion of enrollment? And on ESSENCE, it looks like on clinicaltrials.gov, the study is still enrolling. Just wondering where you are at in the enrollment process there, seems like it's taken longer than originally expected. Do you guys have an updated time frame on that?

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Douglas S. Ingram, Sarepta Therapeutics, Inc. - President, CEO & Director [22]

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Yes. Thank you for that. So first, on the clinical hold, if we're off clinical hold and we have alignment from the agency, we won't have -- clinical supply won't be a rate limiter for us. Okay? We'll be in good shape with clinical supply for our next cohort or trial. As relates to ESSENCE, so we are continuing to enroll ESSENCE and we're continuing to enroll ESSENCE in Europe, not in the United States, that's an important thing to remember because one of the things we want to ensure is that if we obtain accelerated approval either for Golodirsen or for casimersen, we want to make sure that it doesn't compromise our confirmatory trial or we would have a fundamental issue associated with it. We've also increased the end of ESSENCE of the number of patients in ESSENCE, frankly, in light of the fact that we're going to use it as a confirmatory trial. So we want to increase the probability of success by placing more patients in the trial and we -- frankly, was one of the issues that we discussed with the agency who was enthusiastic about the concept of increasing the N and gave us their approval for that.

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Operator [23]

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Our next question comes from Matthew Harrison of Morgan Stanley.

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Matthew Kelsey Harrison, Morgan Stanley, Research Division - Executive Director [24]

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I think I'd like to focus a little bit just on manufacturing and just understand where you are in terms of process development and scaling now? What are the steps that you need to take over the course of the next year, let's say, to be in a position to be able to have commercial supply and assuming that Cohort C plays out as you previously described be able to dose crossover patients with commercial supply.

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

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So we have provided only a certain amount of information regarding the entire process, for competitive reasons. What I can tell you is the following: we are in the process development, tech transfer process with Brammer. We have -- we've informed our thinking from the experience that others have had. So for instance, AveXis has been very informative on the sidelines as they really went through the exact process we had from Nationwide Children's Hospital and that's helped inform our thinking. From a bridging perspective itself, we are making essentially only those changes necessary from a process development perspective that are necessary to scale up. Otherwise, we are trying to remain as close to the original process as possible so we don't create unnecessary risks associated with bridging. The Brammer relationship will provide us, as we've said, with sufficient supply to robustly launch in the United States and elsewhere, even assuming very aggressive development assumptions and timelines. And we will be comfortably in a position to use potential commercial supply to dose patients at crossover after 1 year. So those are our plans.

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Operator [26]

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Our next question comes from Salveen Richter of Goldman Sachs.

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Ross Howard Weinreb, Goldman Sachs Group Inc., Research Division - Research Analyst [27]

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This is Ross on for Salveen. You initially indicated your strategy is to broaden your reach as a neuromuscular-focused company. However, you're now expanding into more broadly CNS and lysosomal storage disease. So how should we be thinking about your long-term strategy here? Is Sarepta a more of a broad-play gene medicine company?

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Douglas S. Ingram, Sarepta Therapeutics, Inc. - President, CEO & Director [28]

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So the -- here's the way we look at it, we marry 2 things at Sarepta. So we marry big ambitious strategic vision with very strong execution-oriented ability. So -- and that's an interesting concept. So we have very significant ambitions. And I wouldn't envision, if you looked out 5 years from now, that we would necessarily be limited to neuromuscular and CNS. We will be on the gene therapy side in multi-therapeutic area, significant gene therapy. Company, as I said, we will -- our aspiration is to be one of the most meaningful, if not the most meaningful, genetic medicine company in the world over the coming years. But the approach that we're taking to get there isn't going to stray from what we know. We're going to continue to build on what we know as we kind of move out in concentric circles of focus. Then -- and our most recent partnership with Lacerta is a perfect example of that. We start with Duchenne muscular dystrophy and RNA technology and then we're moving to gene therapy and we're becoming the world's experts, hopefully in gene therapy, hopefully you'll agree with me on that. And then we move to Limb-girdle. Limb-girdle is right next door to Duchenne muscular dystrophy. And as I said before, it was basically the Goldilocks type of transaction. Very similar in many ways. So we're going to move from there, moving to CNS is a very logical next step. It's very similar to neuromuscular in many ways. And the kinds of CNS programs that we're looking at right now are the kinds of CNS programs that are closely aligned to neuromuscular. Pompe is a perfect example of this. We are taking a CNS approach but to a disease that has a significant neuromuscular manifestation. With that said, we're going to continue to build our expertise, build our ambition, build our gene therapy center of excellence, and we are not limiting ourselves in how far that takes us from a therapeutic area perspective. Just know we're not going to wake up one day sort of crazy over our skis in area that we don't understand. So that's -- yes, so there's a number of things that we look at. We are a rare disease company, for the time being, we will remain a rare disease company. We're looking for monogenetic diseases that are understood and well characterized. And we're going to do a combination of 2 things over time, we're going to continue to do thoughtful transactions like Lacerta and Myonexus, our Nationwide Children's Hospital transaction and the like, in-license, and we're also going to build the capability of building our own as well. So...

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Ross Howard Weinreb, Goldman Sachs Group Inc., Research Division - Research Analyst [29]

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Great. And then just 2 follow-up questions. On the Lacerta deal, can you specifically provide more details around the types of AAV vectors that you're going to be bringing in? And really what highlights about these programs that sparked your interest in comparison to other players out there?

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Douglas S. Ingram, Sarepta Therapeutics, Inc. - President, CEO & Director [30]

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Well, a couple of things. We're not prepared to provide a lot of detail on that. But I promise you we will in near term. It won't be a year from now when we start discussing some of that. We're going to discuss that over time some of the capsid-related issues and vector-related issues. And even -- we have 2 early-stage CNS programs beyond Pompe and we'll discuss that over time when they get closer to being inpatients. The thing that really got us interested about Lacerta's a couple fold. Certainly we're excited about the program that we have and the access to these 2 programs and the access to Pompe disease, which is -- which really fits with our mission and our passion brilliantly. The opportunity to work with these types of genetic medicine luminaries like the 9 founders of Lacerta is extraordinarily important to us. The ability to get closer to University of Florida is extraordinarily important to us. One of the things that's -- we've built a lot of our gene therapy thinking around was this relationship with Nationwide Children's Hospital. And the ability to take that and extend it to University of Florida, which is unquestionably one of the world centers in gene therapy is valuable to us. And then the other tools. We are building a significant gene therapy division, and we need tools. So the idea that we have access to a breadth of capsid library to play with is really very valuable. The fact that they have really innovative ways of looking at manufacturing that might benefit us in the future is really valuable to us. So all of that together aligns with our vision of becoming a very significant meaningful genetic medicine company.

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Ross Howard Weinreb, Goldman Sachs Group Inc., Research Division - Research Analyst [31]

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Got it. And then finally just on Limb-girdle, so how can we think about the severity of the [B] 2E compared to DMD. And really what's the read-through we can expect from this initial program onto the remaining 4 others?

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

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So -- and I can allow Dr. Rodino-Klapac to talk a little more about this. But let's start with 2E. 2E is the most straightforward. It's very similar to Duchenne muscular dystrophy in its manifestations and the like. 2E is -- in fact, there's many things about -- that have symmetry about Duchenne muscular dystrophy. First of all, the size of the program is about the same size of EXONDYS 51 amenable patients, it's sort of in that same hunt. The capsid that we're using, rh74, is the same, which the same across all 5 programs. This is a dystrophinopathy, it results in the lack of dystrophin. So we're using a promoter that expresses in the heart -- it's the same promoter that we're using with DMD. There's enormous symmetry there and then beyond that I -- Louise, if you'd like to comment a little bit more on sort of extending to the other 4 as well?

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Louise Rodino-Klapac, Sarepta Therapeutics, Inc. - VP of Gene Therapy [33]

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So 3 of our 5 programs are focused on the sarcoglycans, which, if you remember from our R&D Day, are components of the dystrophin-associated protein complex. They're very similar in the fact that when you have a deficiency in one, you have a deficiency in the others. And by destroying dystrophin, you restore those. And conversely, when you restore sarcoglycan, you restore the others. There's a lot of similarities, as Doug mentioned, in the severity of the disease. There's cardiomyopathy involvement in 2E. And so there's a lot of adjacencies between the programs and we'll expect that we'll see similar results with the rh74 and also the same promoter between the 2 programs.

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Operator [34]

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(Operator Instructions) Our next question comes from Joseph Schwartz of Leerink partners.

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Dae Gon Ha, Leerink Partners LLC, Research Division - Associate [35]

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This is Dae Gon dialing in for Joe. So one quick one and one follow-up if I may. One with regards to your Cohort C plan as you're contemplating it. You mentioned the draft guidance that was very supportive of a single trial for marketing authorization. So going back to that, the draft guidance also stipulates evaluating multiple doses as highly appropriate. So given that you have had some great success with your initial cohort, how are you think about implementing perhaps multiple doses in your Cohort C? And then as a follow-up, the microdystrophin program, I was wondering if you could comment on the rh74's transduction efficiency in satellite cells. And as we look at the satellite cell specifically, what observations have you made in terms of asymmetric cell divisions there?

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Douglas S. Ingram, Sarepta Therapeutics, Inc. - President, CEO & Director [36]

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Well, let me briefly mention on the dosing issue and then I'll pass it over to Dr. Rodino-Klapac on the satellite cell-related issue. So the short answer is that we -- there was an enormous amount of preclinical work that supported the dosing that went into what we call Cohort B, the dosing of the patients that you saw in June 19. And as a result of that, it provided Dr.Louise Rodino-Klapac and Dr. Mendell and the FDA and Sarepta with the comfort to go -- to what was very robust dosing. And that is to give you -- to remind you, for instance, regarding other ones. Like one of the other programs is about 1/4 of the current dose of our program. And then the other one, Pfizer's is half the dose of our current program. So we are -- we really went to very robust dosing. Given the expression levels that we're seeing, just to remind everyone, we're in the 75% to 80% dystrophin-positive fiber range and just by any measure, extremely robust Western blot dystrophin expression, we have no intention of increasing the dose beyond where we are right now, which is very robust. On the satellite cells I'll pass it over to Dr. Rodino-Klapac for her views.

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Louise Rodino-Klapac, Sarepta Therapeutics, Inc. - VP of Gene Therapy [37]

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What we know from our preclinical models is that we are getting transduction of satellite cells with rh74 and moreover, as I alluded at R&D day, also on the patient biopsy, we were very intrigued to see that we were also getting transduction in the patient biopsies of satellite cells that were also expressing microdystrophin. What we're doing now is doing careful quantification to be able to say what the percentage of these cells are. But I think it provides a strong rationale moving forward that if we're also transducing satellite cells, we'll get even a more sustained and enduring effect. So more to come on that.

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Operator [38]

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Our next question comes from Debjit Chattopadhyay of H.C. Wainwright.

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Debjit D. Chattopadhyay, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [39]

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On the ESSENCE study, do we need to re-consent the patients because I believe not all patients were undergoing biopsy because the biopsies are staggered between week 48 and week 96? And then on the GALGT2 program, any updates on that and getting it to maybe a systemic dosing and restarting the program with a more frequent dosing schedule as opposed to once every month?

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Douglas S. Ingram, Sarepta Therapeutics, Inc. - President, CEO & Director [40]

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On the ESSENCE trial, we don't have to -- we're not re-consenting kids or we're not doing any new biopsies. These are biopsies that are either already completed, 1-year biopsies already completed for children or biopsies that are coming out that were already planned in trial. So this is simply -- frankly, this is a pretty simple concept. We create a protocol that allows us to look at what already would have existed by -- before the end of this year. Actually, I think by the end of the third quarter. And then analyze it. So it's -- am I missing anything there?

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Gilmore Neil O'Neill, Sarepta Therapeutics, Inc. - Chief Medical Officer [41]

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That's exactly it. The other changes are in expanding the sample size. But with regards to the procedures, the procedures have not changed and so we do not need to re-consent for procedures.

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Douglas S. Ingram, Sarepta Therapeutics, Inc. - President, CEO & Director [42]

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And then on GALGT2, we're still in discussions with Dr. Flanigan on GALGT2. As we know, he wants to move -- is informed by the results that we've seen with rh74 and the great safety that we've seen associated with rh74, he wants to review the program and change to full infusion. He had some work to do to set that up and we're actually in the process of discussing that right now.

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Operator [43]

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Our next question comes from Liisa Bayko of JMP Securities.

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Jonathan Patrick Wolleben, JMP Securities LLC, Research Division - Associate [44]

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This is Jon on for Liisa. Just a follow up on casimersen. I'm wondering if you can provide any more color on your interaction with FDA in terms of how many samples they would like to see as far as dystrophin for something that would be sufficient for Accelerated Approval? Is there a certain number they've given you or how robust does the data have to be to proceed forward?

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

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Our proposal to them was to show them biopsies from 25 patients, which is identical to what we showed with respect to golodirsen. And that was the basis for our type C meeting and they were comfortable with those numbers as they were comfortable with golodirsen. Do you want to add anything, Dr. O'Neill?

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Gilmore Neil O'Neill, Sarepta Therapeutics, Inc. - Chief Medical Officer [46]

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Yes. That's absolutely correct.

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Jonathan Patrick Wolleben, JMP Securities LLC, Research Division - Associate [47]

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Were there any discussion about a lower number of patients?

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Douglas S. Ingram, Sarepta Therapeutics, Inc. - President, CEO & Director [48]

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We didn't propose it. So I am quite confident they wouldn't have proposed it if we didn't. We think 25 patients was appropriate. That's what we had with golodirsen, and we get there very soon.

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Gilmore Neil O'Neill, Sarepta Therapeutics, Inc. - Chief Medical Officer [49]

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And we are on track for those -- to generate those data by the end of the year.

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Operator [50]

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Our next question comes from Hartaj Singh of Oppenheimer.

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Hartaj Singh, Oppenheimer & Co. Inc., Research Division - Research Analyst [51]

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I just had a couple of housekeeping questions. One is that you've got some still ongoing expenses, preclinical expenses for ramp up in tox studies for PPO platform, golodirsen and casimersen. If I remember correctly, you had to do an ADME study last year for eteplirsen before you filed with CHMP, which actually was the reason for the delay of the filing last year with Europe. Is there any kind of, are these just ongoing clinical kind of preclinical tox studies or is there additional requests coming from the regulators. And then the second question was this. Just your inventory levels have gone up almost 25% to $104 million, I assume all the casimersen, golodirsen gene therapy manufacturing has gone through the pure R&D line because they're still in clinical development. So just any thoughts on that? Is that the norm as you're just having more and more sales (inaudible)?

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

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Before I pass the inventory question over to Sandy, the short answer on the preclinical expenses are they're all part of the current strategy that we have. We're doing IND enabling toxicology work for 5 additional PPMOs beyond our 51, what we call 5051, our PPMO for the 51 amenable mutations. And we're doing all of that work including ADME work. So it's not coming as a result of additional requests from agencies at all, it's coming from our strategic plan.

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Alexander Bo Cumbo, Sarepta Therapeutics, Inc. - Senior VP & Chief Commercial Officer [53]

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That's correct.

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Douglas S. Ingram, Sarepta Therapeutics, Inc. - President, CEO & Director [54]

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And then, Sandy?

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Sandesh Mahatme, Sarepta Therapeutics, Inc. - Executive VP, CFO & Chief Business Officer [55]

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Yes. So our inventory levels did go up and that's primarily stocking up subunits as well as API for 45 and 53 as well as a our PPMO study. So yes, the inventory levels did go up because of all of our expanded manufacturing for the clinical programs.

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Operator [56]

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Our next question comes from Tim Lugo of William Blair.

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Myles Robert Minter, William Blair & Company L.L.C., Research Division - Research Analyst [57]

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Myles on for Tim. Just on your R&D day, I believe you alluded to an [organ] nucleotide therapy that you might intend to develop for Pompe disease? And given today's announcement with Lacerta, is it safe to assume that you're just going solely gene therapy for the therapeutic rationale in that indication? Or are you taking the approach like you do with DMD where you might have a patient on EXONDYS 51 and microdystrophin gene therapy? Just trying to get our heads around that?

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Douglas S. Ingram, Sarepta Therapeutics, Inc. - President, CEO & Director [58]

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Yes. I should really turn this over to Dr. O'Neill, who I know is very passionate about this particular issue. It was the very first thing we discussed in our very first interview. But let me just say, the short end, we -- our goal is to be a precision genetic medicine company and the best way to provide the most benefit to patients from our perspective is wherever possible to provide multiple modalities that could treat and enhance lives. So with that said, it's obviously our goal to proceed with our Pompe program in gene therapy but would be looking at Pompe from an RNA perspective as well.

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Gilmore Neil O'Neill, Sarepta Therapeutics, Inc. - Chief Medical Officer [59]

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Yes. I would agree with that. I am actually quite passionate about the idea that we should offer multiple modalities that can either be selected by patient based on preference or actually look at combinations to maximize the effect. And so from a strategic point of view and a strategic intent, our goal and objective would be to never exclude a number of approaches. I think the best way to look at it is the way we're approaching Duchenne with a Morpholino platform and a gene therapy platform.

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Operator [60]

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Our next question comes from Yun Zhong of Janney.

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Yun Zhong, Janney Montgomery Scott LLC, Research Division - Equity Research Analyst & Director of Biotechnology Research [61]

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So on the agreement with Lacerta, I see from the company website under pipeline, there are a couple of indications. So is it fair to assume that the 2 CNS indication will come out from those indications listed on the website? And also, are you able to share whether the delivery is going to be systemic or local or still to be determined?

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Douglas S. Ingram, Sarepta Therapeutics, Inc. - President, CEO & Director [62]

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Yes. So on the first -- your first question the answer is, yes. It'll come from among their previously disclosed CNS assets. The second one, the Pompe program and I believe the other programs as well, will be intrathecal in its delivery.

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Yun Zhong, Janney Montgomery Scott LLC, Research Division - Equity Research Analyst & Director of Biotechnology Research [63]

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Okay. On manufacturing, I believe you said it was slightly different from what you're using for microdystrophin and Limb-girdle. At some point, you do you plan to maybe to make it more consistent so that all programs can be integrated?

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Douglas S. Ingram, Sarepta Therapeutics, Inc. - President, CEO & Director [64]

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Well, we'll look at that over time. Here's the exciting thing and then the interesting thing about their program. So Lacerta has a very innovative approach to manufacturing that we want to explore, and we want to explore for future programs. One of these things I want to make very clear is we are not going to jump at that program and start moving over to this program, as innovative as it may be from a manufacturing perspective because it would almost certainly ensure that we wouldn't be able to get to the community and treat patients as fast as we want. The program that they have is a baculovirus approach, we're mammalian virus with a mammalian cell approach with respect to our microdystrophin and Limb-girdle program. So it's certainly a possibility that we could, in the future, look at other innovative ways to manufacture. But as we stand here right now, as I have said before, we want to constantly marry strategic vision with practical execution. And so we're going to take the programs that we currently have that we're very excited about, Duchenne muscular dystrophy with microdystrophin and our Limb-girdles, in particular, and we're going to move as fast as we can to get those therapies assuming that they work and assuming that they get across the finish line, to the community and to patients and that's going to mean that we're going to make the least number of changes necessary to scale up from a commercial perspective. And then we have over here, from a research perspective and a future therapy perspective and maybe even a future perspective with respect to current programs down the line, a really interesting approach to manufacturing that we're going to look at very carefully.

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Operator [65]

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Our next question comes from Tim Chiang of BTIG.

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Timothy Chiang, BTIG, LLC, Research Division - MD and Specialty Pharmaceutical Research Analyst [66]

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Doug, do you guys have a reexamination date set yet for the CHMP review for eteplirsen before year-end?

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Douglas S. Ingram, Sarepta Therapeutics, Inc. - President, CEO & Director [67]

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What -- we have -- we'll have 2 things, we'll have a SAG, Scientific Advisory Group, that we will be invited to and then subsequent to that we'll have a reexamination and an oral explanation. I think it'll occur in the fall.

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Timothy Chiang, BTIG, LLC, Research Division - MD and Specialty Pharmaceutical Research Analyst [68]

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Okay. And maybe just 1 follow-up. I know Dr. Mendell, there was certainly a lot of interest in the 3 patients with the data and all of the biomarker data that he showed. I think you cited that (inaudible) he's going to show some additional follow-up data from those 3 or 4 patients. Is it possible that we might even see some functional data at year-end?

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

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Obviously, the decision on functional data will be Dr. Mendell's. We will -- almost certainly he is going to want to present the fourth biopsy data as well as the biomarker data and he may also present some functional data as well. At least one of the patients will be almost nearly a year post therapy, so there might be some insight that can be provided. One of the things we want to be very careful about, of course, is not to overanalyze functional data after a short period of time in a limited number of patients. The good news, by the end of the year is, that we'll have 1 patient that will be 11 months on therapy, almost a full year. But I'm -- ultimately leave that to Dr. Mendell to make the decision on the exact data that he wants to present.

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Operator [70]

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Our next question comes from Gena Wang of Barclays.

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Gena Wang, Barclays Bank PLC, Research Division - Research Analyst [71]

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Just one quick question regarding the PPMO data update later this year, just wondering if you can share with us some color regarding the type of data you will be presenting, for example, number of patients? How many dose cohorts and type of data? The protein level safety. If you can share with us any of these information.

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

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Yes. It will be -- it's a little difficult to say the numbers of patients because it kind of depends on how we proceed in dosing and how many cohorts we get up to, et cetera. What we'll have by the first quarter of next year will be very important but will seem to many as very soft data. Because what we're going to get by the first quarter of next year is dosing insight. We'll be able to know through a combination of the doses that we've escalated to and the modeling that gets done off of that dosing because we're in a single-ascending dose study right now and we'll move to a multi-ascending dose, where we imagine the -- where the data tells us we can go from a therapeutic dosing perspective. So it'll be a very interesting discussion because it will seem to people very soft. To us it's very hard data, to be real direct, because we know from animal models that we get significant increases in the therapy at the right place as a result of these, the peptide. And we know when we get the therapy there, we get very significant exon skipping and dystrophin production literally as much as a full high -- or an order of magnitude higher, I should say, versus what we get with a PMO. So the biggest issue for us is ensuring we can get to those kind of therapeutic doses that do induce very significant dystrophin. So it'll be very soft, Gena, to be honest. It'll be dosing insight, essentially how high we can get from a therapeutic perspective without concern from a safety perspective. But it will also be very meaningful to us and to the rest of the program.

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Gena Wang, Barclays Bank PLC, Research Division - Research Analyst [73]

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So I would assume we will also see the protein level, right, about the protein data from these patients in addition to safety data?

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Douglas S. Ingram, Sarepta Therapeutics, Inc. - President, CEO & Director [74]

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Yes. We won't have that kind of data because these are single-ascending dose. These are literally single-ascending dose studies, so they're just single doses. So the issue -- this is purely a safety issue right now. How high can we get the dose. And then it'll be some time, it will be about 12 month thereafter before we actually see dystrophin production. Now one might therefore think that this is really -- less interesting than we think it is. But this is really an interesting issue because if the animal models tell us if we can get to good robust therapeutic doses, we are going to see significant increases in dystrophin production because we're going to see very significant increases in exon skipping. We see exon skipping in animal models at high therapeutic doses in the -- far better than 50%, 70%, even 80% of exon skipping range in dystrophin production as measured by Western blot that is a, order of magnitude or even more in some muscles. So dosing insight we get is going to be very telling for us and for the future of the program.

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Gena Wang, Barclays Bank PLC, Research Division - Research Analyst [75]

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Just one quick follow-up regarding the Lacerta partnership. For the AAV library strategy, just wondering, are you looking for -- are you collaborating with them looking for some vector can cross the blood-brain barrier or would that be some local delivery directly to the CNS system?

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Douglas S. Ingram, Sarepta Therapeutics, Inc. - President, CEO & Director [76]

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We're going to look at sort of all of those interesting issues. We just have an entire capsid library to play with. We already know. There are capsid obviously that cross the blood-brain barrier. We know that, for instance, AAV 9 crosses the blood-brain barrier in a very promiscuous way, which makes tons of sense for something like SMA, which benefits both in the periphery and in the central nervous system. Makes, one would argue, significantly less sense in something like Duchenne muscular dystrophy, where you don't actually want the therapy crossing the blood-brain barrier. Good news is we don't use AAV9, we use rh74 there. But we're going to look at the capsid library across all of our programs over time including programs that we don't yet have developed or in-licensed.

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Gena Wang, Barclays Bank PLC, Research Division - Research Analyst [77]

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How's the IP regarding these vectors?

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Douglas S. Ingram, Sarepta Therapeutics, Inc. - President, CEO & Director [78]

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It's -- we have -- the good news is that we've got good initial property around the constructs that we have.

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Operator [79]

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And ladies and gentlemen, this does conclude our question-and-answer session. I would now like to turn the call back over to Doug Ingram, Sarepta's President and Chief Executive Officer, for any closing remarks.

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Operator [80]

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Thank you, everyone, for joining today's calls and for your questions. We look forward to updating all of you on the ongoing progress over the coming months as we track toward our goals and toward our catalysts. Otherwise, have a good evening.

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Operator [81]

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Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program. You may all disconnect. Everyone, have a great day.