Sarepta Therapeutics, Inc. (NASDAQ:SRPT) Q4 2023 Earnings Call Transcript

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Sarepta Therapeutics, Inc. (NASDAQ:SRPT) Q4 2023 Earnings Call Transcript February 28, 2024

Sarepta Therapeutics, Inc. beats earnings expectations. Reported EPS is $0.47, expectations were $-0.03. Sarepta Therapeutics, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good afternoon and welcome to the Sarepta Therapeutics Fourth Quarter and Full-Year 2023 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] As a reminder, today's program is being recorded. At this time, I'll turn the call over to Francesca Nolan, Executive Director, Investor Relations and Corporate Communications. Please go ahead.

Francesca Nolan: Thank you, Shannon. And thank you all for joining today's call. Earlier this afternoon, we released our financial results for the fourth quarter and full-year 2023. The press release is available on our Web site at, and our 10-Q was filed with the Securities and Exchange Commission this afternoon. Joining us on the call today are Doug Ingram; Ian Estepan; Dallan Murray; and Dr. Louise Rodino-Klapac. After our formal remarks, we'll open the call for Q&A. I'd like to note that, during this call, we will be making a number of forward-looking statements. Please take a moment to review our slide on the webcast which contains our forward-looking statements. These forward-looking statements involve risks and uncertainties, many of which are beyond Sarepta's control.

Actual results could materially differ from these forward-looking statements, and any such risks can materially and adversely affect the business, the results of operations, and trading prices for Sarepta's common stock. For a detailed description of applicable risks and uncertainties, we encourage you to review the Company's most recent annual quarterly report on Form 10-K filed with the SEC, as well as the Company's other SEC filings. The Company does not undertake any obligation to publicly update its forward-looking statement, including any financial projections provided today based on subsequent events or circumstances. And now I'll turn the call over to our President and CEO, Doug Ingram, who will provide an overview of our recent progress.


Douglas Ingram: Thank you, Fran. And by the way, everyone, it was Fran's birthday yesterday, so Happy Birthday, Fran. And good afternoon, everyone, and thank you for joining Sarepta Therapeutics' fourth quarter 2023 financial results conference call. Led by an exceptional launch of ELEVIDYS and continuing performance of our approved PMOs, EXONDY, VYONDYS, and AMONDYS, we announced, this afternoon, another strong quarter of full-year growth and quarterly growth as we serve the patient community. As we pre-announced in January at the J.P. Morgan conference, fourth quarter total net product revenue came in at $365. 1 million, growing some 55% over the same quarter of prior year and the full-year net product revenue achieved $1.14 billion, growing 36% over the prior year.

In addition to continuing strong performance among our three approved therapies, ELEVIDYS' performance was particularly impressive, and reflects first-in-class launch excellence, notwithstanding, a label limited to four and five-year-olds, representing only about 3% or so of the total Duchenne population. ELEVIDYS net product revenue was $131.2 million for the quarter, and over $200 million for the full-year. I'm exceptionally proud of the team's performance here, which speaks to our level of preparation and attention to detail, expert understanding of all aspects of lunching innovative rare disease therapies, and, of course, our passion for bringing a better life to those living with Duchenne. Dallan Murray, our Chief Customer Officer, will speak to this in his remarks shortly.

We also continue to exercise the discipline of a fully integrated commercial-stage biotech organization. We were profitable on a GAAP basis in the fourth quarter, having achieved non-GAAP profitability in the third quarter of 2023. And we exited 2023 with approximately $1.7 billion of cash, cash equivalents, restricted cash and investments on our balance sheet. Our CFO, Ian Estepan, will provide more color on financial performance shortly. We also advanced our pipeline in the fourth quarter. In the fourth quarter, we submitted a BLA supplement for ELEVIDYS with the goal of both expanding the label by removing age and ambulation restriction, and transitioning our approval from accelerated to traditional. And in February of this year, the FDA accepted our supplement for review, and set June 21 as our target review completion date.

In the fourth quarter, we also commenced EMERGENE, our trial for SRP-9003 to treat LGMD Type 2E. Also in January of this year, we announced the positive results of our trial MOMENTUM Part B, investigating the use of our next-generation peptide conjugated PMO, SRP-5051, to treat Duchenne patients that are exon 51 amenable. Dr. Louise Rodino-Klapac, our Head of Research & Development, will provide more color on our pipeline progress shortly. You have 2017, starting with one approved therapy, $5 million in sales, a modest pipeline, a short cash runway, and little more than ambition and grit, we set out to build a sustainable, mature biotech organization, improve the lives of the greatest possible number of Duchenne patients along the way as we've become the leaders in the use of RNA and gene therapy to treat rare genetic disease.

If we are successful in our plans this year, we will have achieved that vision. From there, we can and we will expand our ambition and rely on our scientific and financial strength, we intend to advance our internal pipeline, but also to bring in external innovation to grow from here, not incrementally, but in great multiples. In short, 2024 is going to be a very important year. And with that, I will turn the call to our Chief Customer Officer, Dallan Murray. Dallan?

Dallan Murray: Thank you, Doug, and good afternoon. The fourth quarter of 2023 represented a strong finish to an already impressive year as the team generated over $1 billion in net product revenue, a milestone for Sarepta. As previously noted, net product revenue for 2023 totaled $1.14 billion, consisting of roughly $945 million from our PMO franchise, and $200 million from the launch of ELEVIDYS, the first gene therapy approved for patients with Duchenne muscular dystrophy. Each of these accomplishments stands on their own merits, and the performance of both surpassed our internal projections and external consensus. In the seventh year of our PMO franchise, we again grew net product revenue by double digits from the nearly $844 million in net product revenue from 2022.

As with previous years, we delivered this growth organically, without taking price increases on any of our approved PMO products. As such, this growth represents an increase in the number of patients we are serving, reflecting our commitment to the Duchenne community. Turning to ELEVIDYS, we're extremely pleased with launch execution, exceeding our own lofty expectations. In fact, the $200 million in net product revenue surpassed the combined 2023 revenue of the other five gene therapy launches from the past 18 months. Remarkable, given the ELEVIDYS approval occurred just this past summer. The success of ELEVIDYS shows that gene therapy can be commercially viable, providing hope for those patients with Duchenne, and for all those with genetic conditions with unmet need.

While revenue is how we quantify the success of this launch externally, we measure ourselves on how we support patients. Our preparation is deliberate and intense, and our process was put to the test with the narrow label. The team responded to that challenge with an incredible commitment to supporting all eligible four to five-year-old patients. This is our fourth Duchenne launch, and our knowledge and experience played a significant role in how the team rallied, worked together, and rapidly supported those patients who were approaching their sixth birthday, and who were at risk of becoming ineligible for therapy. Ensuring no eligible patients are left behind is what motivates us. Let's now review the results from the fourth quarter, starting with ELEVIDYS.

Net product revenue for the quarter was roughly $131 million. This represented a nearly 90% increase over Q3. We are pleased with our penetration into the very small and narrow segment of the Duchenne population. This four-to-five-year-old label has presented a number of unique executional challenges that are relevant moving forward. Firstly, a significant proportion of the patients in this age group are not yet diagnosed, given that the average age of diagnosis is around five in the United States. Secondly, those who are diagnosed have not had a lot of time to be fully educated about Duchenne, which means the patients and families need to understand that diagnosis, become aware of therapy options, go through a more involved and longer pretreatment process than the PMOs, one example of this being antibody testing.

And on top of this, the patients must also secure access to a ELEVIDYS in this very short time window. Our team has found themselves in a race against time to help these patients. And finally, the relatively small number of diagnosed four-to-five-year-old patients results in a situation in which we will be working through this prevalent population quickly within the first-half of the year. On the flip side, many of these dynamics are reversed once patients have transitioned over to the decline phase of the disease. This is illustrated by our real-world experience with the PMOs, where we see a larger proportion treated in the older age groups, which is on top of a larger diagnosed patient pool. Because of all this, we do not expect to see significant additional growth within the existing population through the first-half of this year.

Notably, however, by the time of label expansion, we expect to have cleared the way for those older patients to get dosed as rapidly as possible upon eligibility. I would caution analysts, therefore, to not use this current younger population as a frame of reference for our market potential in the overall population. The team is preparing, as we speak, for a broad label with a focus on building upon the successful launch execution to date, and we have the access and capacity in place to execute successfully on any broader label scenario. Let's now take a look at the PMO franchise as a whole. As previously mentioned, 2023 net product revenue of $945 million exceeded our full-year guidance of $925 million. This performance represents solid revenue growth across all three brands.

In fact, both VYONDYS 53 and AMONDYS 45 continued their double-digit growth trajectory. Looking now at the fourth quarter of 2023, the team delivered roughly 234 million in net product revenue. This was flat versus Q4 of 2022, net product revenue of roughly 236 million. As you may recall from our Q4 2022 earnings call, we cautioned around keeping the guidance of $925 million for the year due to an increase in the quarter-to-quarter lumpiness that we were observing at that time. Looking now in retrospect, it's clear the PMO has performed exactly as we expected and guided. And finally the performance we just discussed in our PMO business was achieved despite the incredible effort on the ELEVIDYS launch. Notably, we saw minimal impact on our PMO business from ELEVIDYS cannibalization in 2023, given the narrow age range.

A laboratory technician in a white coat holding a microscope and examining a vial of biopharmaceuticals.
A laboratory technician in a white coat holding a microscope and examining a vial of biopharmaceuticals.

In closing, in 2023, Sarepta set a new standard for gene therapy launches with ELEVIDYS. We beat external expectations and delivered roughly $200 million. Equally important, we continue to increase the number of patients we support with our PMOs globally. I continue to be immensely proud of our mission-driven team. Combining our PMO and gene therapy businesses, we exceeded a billion in net product revenue for the first time, and we have entered 2024 with momentum. And with that, let me turn the call over to our head of R&D and Chief Scientific Officer, Dr. Louise Rodino-Klapac. Louise.

Louise Rodino-Klapac: Thanks, Doug. 2023 was a year of great accomplishment for Sarepta, for the advancement of science, and for the health and well-being of patients living with rare disease. 2023 will also be remembered as being a defining moment in genetic medicine. In June 2023, the FDA granted accelerated approval to ELEVIDYS, first gene therapy to treat to Duchenne muscular dystrophy. Since that time, we've been successfully treating ambulatory pediatric patients aged four through five years with Duchenne, who have a confirmed mutation in the DMD gene. And then, just about two weeks ago, and as Doug mentioned, we were thrilled to announce that the FDA accepted and filed our efficacy supplement for ELEVIDYS, whereby they will now evaluate broadening the approved indication of ELEVIDYS.

By removing age and emulation restrictions and converting the ELEVIDYS accelerated approval to a traditional approval. Should we receive accelerated approval for ELEVIDYS in the non-ambulant population in the United States? Our ENVISION study also called SRP-9001-303 will serve as our confirmatory study for this population. ENVISION is a global randomized double-blind placebo-controlled two-part study evaluating the safety and efficacy of delandistrogene moxeparvovec-rokl gene therapy in non-ambulatory and older ambulatory individuals with Duchenne. This study is ongoing with all remaining patients being enrolled outside of the United States. With U.S. enrollment completed and the remaining 85% of recruitment occurring ex-U.S., we are confident in our ability to complete this trial.

Moving now to our limb-girdle muscular dystrophy or LGMD program, on January 16th, we announced that screening was underway in study SRP-9003-301, also known as the EMERGENE study. We are pleased to now share that the first patient has been successfully dosed in that study. To remind you, EMERGENE is a Phase 3, multi-national, open-label clinical trial of SRP-9003 for the treatment of limb-girdle muscular dystrophy Type 2E or beta-sarcoglycanopathy. The primary endpoint of EMERGENE is expression of beta-sarcoglycan, which is an extremely important endpoint for this program, for the other sarcoglycanopathies, including LGM2D and LGMD2C, and for the field of gene therapy. I'll explain why? Beta-sarcoglycanopathy is characterized by a mutation of the beta-sarcoglycan gene, which sits in a complex of the membrane called the sarcoglycan complex, and is important for function and for preventing muscle damage during contraction.

The sarcoglycan complex is a subcomplex of the dystrophin-associated protein complex, or DAPC. A defective sarcoglycan protein results in loss or reduced expression of the other sarcoglycan, as well as other proteins in the complex, such as dystrophin. Therefore, by restoring the missing protein, such as beta-sarcoglycan, we're able to restore that functional complex at the membrane and thereby restore function to the muscle. Further, earlier this month, I had the opportunity to participate in the Speak Foundation's LGMD Scientific Workshop, which also featured officials from FDA, including Doctors Marks and Verdun, as well as patients, caregivers, and clinicians, among others. The key takeaways from the workshop included the perspective that traditional trial designs are not suitable for certain types of LGMD, and that to ensure these therapies have the best chance of success, the totality of evidence must be considered.

Doctors Marks and Verdun also expressed their strong support for regulatory flexibility and a higher tolerance for uncertainty for rare diseases such as LGMD, when you're replacing the native protein, as well as support for surrogate endpoints for gene therapies. Currently, no treatments exist to effectively treat LGMD2E or the other LGMDs. The EMERGENE study, which will enroll 15 participants who are ambulatory and non-ambulatory, ages four and older, not only holds great promise for individuals suffering from LGMD2E, but will lay the foundation for other LGMD programs, as well as provide a viable regulatory pathway that supports the development of future gene therapies for rare and ultra-rare diseases. These data, combined with positive expression and functional data shared from our initial LGMD2E study, SRP-9003-101, which was also published in Nature Medicine earlier this year, and our Voyagene study, SRP-9003-102, which establishes safety experience across a broader patient population.

They're together as totality of evidence. As a reminder, Voyagene is a Phase 1 study evaluating SRP-9003 for the treatment of LGMD2E in patients ages 18 and older in the ambulant population and ages 4 to 50 in the non-ambulant population. The primary endpoints are safety and change in beta-sarcoglycan expression. We expect to have the clinical results this year. Moving now to our RNA platform, we were also pleased to recently announce positive results from Part B of our MOMENTUM study, study SRP-5051-201. Based on the data we've generated to date, we believe SRP-5051 represents a best-in-class therapy from an efficacy perspective. MOMENTUM is a global, multi-ascending dose clinical trial of SRP-5051. Our next generation peptide phosphorodiamidate morpholino oligomer treatment for patients with Duchenne were amenable to exon 51 skipping.

As previously discussed and based on these results, we believe we have a path forward to an NDA and are planning a meeting with FDA to discuss an accelerated approval. We anticipate that this meeting will occur in the third quarter of 2024. Regarding our post-marketing studies for the PMOs as mentioned, we completed enrollment in the ESSANCE trial, our post marketing requirement for golodirsen and casimersen. As a reminder, ESSANCE is a two-year study and is due to readout in early 2026. In addition, we are pleased to have completed enrollment in our MIS51ON study, our dose-ranging post-marketing commitment for EXONDYS. MIS51ON is a randomized double-blind safety and efficacy dose-finding study comparing the approved dosage of the Eteplirsen, 30 mg/kg/weekly, to a dosage that provides significantly higher exposure, up to 200 mg/kg/weekly.

MIS51ON is a two-part Phase 3 study. It was fully enrolled in October 2023 with 160 patients. We remain committed to rapidly and diligently advancing MIS51ON and sharing data as soon as it becomes available. In conclusion, the months ahead are filled with great promise to advance our mission and serve patients around the world living with rare disease. I will now turn the call over to Ian Estepan for an update on our financial results. Ian.

Ian Estepan: Thanks, LRK. Good afternoon everyone. This afternoon's financial results press release provided details for the 4th quarter of 2023 on a non-GAAP basis as well as a GAAP basis. Please refer to our press release available on Sarepta's website for a full reconciliation of GAAP to non-GAAP financial results. Before we get to the results, I just wanted to flag that beginning in the fourth quarter of 2023, amortization of in-licensed rights and income tax expense or benefit are no longer excluded from non-GAAP results. The company has added income tax effective adjustments, which represents the estimated income tax impact of each pre-tax non-GAAP adjustment based on the applicable effective income tax rate. Non-GAAP financial results for the fourth quarter and full-year 2022 have been updated to reflect this change for comparability purposes.

So, for the three months ended December 31, 2023, the company recorded total revenues of $396.8 million, which consists of net product revenues and collaboration and other revenues compared to revenues of $258.4 million for the same period of 2022, an increase of $138.4 million. Net product revenue for the fourth quarter of 2023 from ELEVIDYS was $131.2 million. Net product revenue for the fourth quarter of 2023 from our PMO exon skipping franchise was $233.8 million, compared to $235.9 million for the same period of '22. For the fourth quarter of 2023, individual net product sales were $131 million for EXONDYS 51, $69.9 million for AMONDYS 45, and $32.9 million for VYONDYS 53. The increase in net product revenue primarily reflecting increasing demand for our PMO products as well as net product revenue associated with sales of ELEVIDYS.

In the quarter ended December 31, 2023, we recognized $31.7 million of collaboration and other revenues compared to $22.5 million for the same period of 2022. This revenue primarily relates to our collaboration arrangement with Roche. So, the quarter ended December 31, 2023. The company recognized $9.2 million of contract manufacturing collaboration revenue associated with multiple batches of commercial ELEVIDYS supply delivered to Roche with no similar activity ended December 31, 2022. The reimbursable co-development costs under the Roche agreement totaled $23.5 million for the fourth quarter of 2023, compared to $51.7 million for the same period of 2022. On a GAAP basis, we reported net income of $45.7 million or $0.49 per basic and $0.47 per diluted share, and a net loss of $109.2 million or $1.24 per basic and diluted share for the fourth quarter of 2023 and 2022, respectively.

We reported non-GAAP net income of $86.6 million or $0.82 per diluted share in the fourth quarter of 2023, compared to a non-GAAP net loss of $53.6 million or $0.61 per diluted share in the fourth quarter of 2022. In the fourth quarter of 2023, we recorded approximately $44.2 million in cost of sales, compared to $30.8 million for the same period of 2022. The increase in cost of sales primarily reflect increasing demand for our PMO products, and increase in royalty payments due to ELEVIDYS sales in 2023, with no similar activity in 2022, and write-off of certain batches of our products not meeting our quality specifications in the three months ended December 31, 2023, with no similar activities for the same period of 2022. On a GAAP basis, we recorded $195.5 million and $213.8 million in R&D expenses for the fourth quarter of 2023 and 2022, respectively; a year-over-year decrease of $18.3 million.

The decrease is primarily due to a decrease in manufacturing expenses and upfront milestone and other expenses. On a non-GAAP basis, R&D expenses were $165.1 million for the fourth quarter of 2023, compared to $186.8 million for the same period of 2022, a decrease of $21.7 million. Now, turning to SG&A on a GAAP basis, we recorded approximately $131.7 million and $120.5 million of expenses for the fourth quarter of 2023 and 2022, respectively, an increase of $11.2 million. The increase was driven primarily by an increase in professional services in compensation and other personnel expenses partially offset by a decrease in stock-based compensation. On a non-GAAP basis, the SG&A expenses were $105.7 million for the fourth quarter of 2023, compared to $86.6 million for the same period, 2022, an increase of $19.1 million.

On a GAAP basis, we recorded $15.7 million in other income net for the fourth quarter of 2023, compared to $5.5 million for the same period of 2022. The change was primarily due to an increase in the accretion investment discount net due to an increase in interest rates. We had approximately $1.7 billion in cash, cash equivalents and investments in long-term restricted cash as of December 31, 2023. So, to conclude, we are incredibly pleased to achieve our first quarter of profitability from a GAAP perspective. It is impressive to reach this milestone in just the second quarter of the ELEVIDYS launch, and highlights the leverage in our business. For the reasons Dallan outlined and maybe some lumpiness on the bottom line in the first-half, that said, with an expansion of the label, we expect to be highly profitable for the full-year.

Also, as I previously noted, in preparation to serve the community in the event of a label expansion, we're continuing to ramp our manufacturing of ELEVIDYS. Its continued investment will be apparent in the first quarter financials and the remainder of the year. We are thrilled to have the resources on hand to continue to build the inventory needed to deliver ELEVIDYS to the Duchenne community. Now with that, I'll turn the call back over to Doug to start the Q&A. Doug?

Douglas Ingram: Thank you very much, Ian. Shannon, let's open the call for questions.

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