Sarepta Therapeutics Inc (SRPT) 2017 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Sarepta Therapeutics Third Quarter 2017 Earnings Conference Call. (Operator Instructions)

As a reminder, this conference call is being recorded. I would now like to turn the conference over to Ian Estepan, Executive Director of Corporate Affairs. Sir, you may begin.

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

Joining me on the call today are Doug Ingram, Sandy Mahatme, and Bo Cumbo. After our formal remarks, we will 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, any of which are beyond Sarepta's control. Actual results could materially differ from these forward-looking statements, as any such risk can materially and adversely affect the business, results of operations and trading price of Sarepta's common stock. For a detailed description of applicable risks and uncertainties, we encourage you to review the company's most recent quarterly report on Form 10-Q, and annual report on Form 10-K, filed with the Securities and Exchange Commission, as well as the company's other SEC filings. We plan to file the 10-Q for the third quarter of 2017 by the SEC-required filing deadline in November.

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 our CEO, Doug, who will provide an overview of our recent progress. Doug?

Thank you, Ian. Good afternoon, everyone. We appreciate you joining us for Sarepta Therapeutics' Third Quarter 2017 Financial Results and Corporate Update.

Four months ago, I joined Sarepta. With each passing week, I have become even more excited about what we are doing, the positive impact we can make, and what we can become. I have joined a team that has a noble mission: profoundly improving the lives of children suffering from a rare, cruel disease.

And better still, we at Sarepta have the technology, the pipeline, the resources, the talent, and the passion to fulfill that mission. I am proud of the fine work of my team this quarter. As you will have seen from today's earnings release, the third quarter net revenue for EXONDYS 51 reached $46 million, exceeding consensus. Our strong performance places us in a position to once again raise guidance.

As reported today, we are increasing our full-year guidance to $150 million to $155 million, up from $125 million to $130 million as reported in the previous quarter.

Our performance to date reflects the feedback that we have received from scientists, thought leaders, the many physicians who have experienced treating patients with EXONDYS 51, as well as patients and caregivers who have received this treatment. We regularly and consistently receive feedback about the positive impact of EXONDYS 51 which, in addition to our team's tenacious execution, explains our fine performance to date.

Let's put this performance in context. If we achieve our full-year guidance, EXONDYS 51 will represent the greatest ultra-rare disease full-year launch in history. But, let us look across all rare disease launches. If we achieve our guidance for 2017, our performance will place us in the top five most successful rare disease launches of any kind, ever, rightly sharing that rarified distinction with biotech standouts Vertex, Shire, Alexion and Biogen.

Let me now turn to the progress we have made this quarter in advancing our development programs.

In late September, we reported positive top-line data from our 4053-101 study, which was an important step toward bringing golodirsen to the DMD community and the 8% of patients who could potentially benefit from this therapy. The 4053-101 results further validate our precision medicine RNA splicing platform and our commitment to scientific excellence through our continuous methodological improvements. For instance, we believe that the scientific rigor we employed to quantify dystrophin in the study could become the gold standard for the accurate measurement of dystrophin going forward.

Now, as a reminder, the 4053-101 study received statistical significance on all primary and secondary biological endpoints in 25 patients with DMD amenable to skipping exon 53. Golodirsen uses Sarepta's proprietary PMO chemistry to precisely skip exon 53 of the DMD RNA transcript, allowing for the production of an internally-truncated but functional dystrophin protein.

In the study, there was a 100% response rate of exon skipping as measured by RT-PCR with all 25 participants in the study exhibiting a statistically significant increase in skipping exon 53 above baseline levels.

Mean dystrophin protein increased to 1.019% of normal compared to a mean baseline of 0.095% of normal, and to remind you, that is a p value of better than 0.001 as measured by Western Blot, the primary biological endpoint in the study. And that represented a 10.7-fold increase over baseline.

These data were also supported by the highly statistically-significant increase of dystrophin expression in the sarcolemma membrane, as measured by immunohistochemistry. This is now the second exon-skipping therapy to have shown a statistically-significant increase in exon skipping, dystrophin production, and proper dystrophin localization, and it takes us one step further in our journey to treat all of the boys with DMD who have amenable mutations.

We were honored when Dr. Francesco Muntoni, the principal investigator for the study, presented the 4053-101 results as a late-breaking poster at the 22nd annual Congress of the World Muscle Society, and we understand that experts in the field were impressed with the rigor of the methods and the consistency of the full results. As a reminder, golodirsen along with another one of our drug candidates, casimersen, are the subject of our ESSENCE trial, a global, randomized, double-blind, placebo-controlled study evaluating patients amenable to skipping exon 45 or exon 53, which together make up approximately 16% of boys suffering from DMD.

Golodirsen's recent in vivo results are consistent with in vitro models that indicated that it was two times or more efficient in exon skipping versus EXONDYS 51, and it should be noted that casimersen, our exon 45 candidate, has shown exon-skipping efficiency in vitro that is comparable to golodirsen.

Turning to another important development from the quarter, our marketing authorization application is currently being reviewed by the European Medicines Agency. On our last quarterly conference call, we reported that we received initial feedback from the agency on our application and we requested a six-month clock stop. We have completed the necessary analyses and have provided the agency with the ADME study results, which demonstrated no unexpected findings.

The review clock has restarted, and we remain on track to receive a response from the EMA's Committee for Medicinal Products for Human Use, the CMPH, on our application in the first half of 2018.

Now turning to the rest of our pipeline, let me start with this. The children we serve do not have the luxury of time, and that means that we also do not have the luxury of time. We are refining our five-year strategic plan, and our 2018 budget. As we frame our strategy for 2018 and beyond, you will hear me say repeatedly that our plans will be fueled by a sense of urgency to advance our pipeline and bring medicines to market with rapidity and a sense of profound duty to these children who are waiting for therapy. And as we grow as a fully-integrated biopharmaceutical company, our corporate strategy will rest on two fundamental principles.

First, for our approved therapies, currently EXONDYS 51, we will work doggedly to ensure that eligible patients are able to gain access to and benefit from our DMD therapies. Second, we will rapidly and diligently advance our pipeline with three goals in mind: first, that the greatest number of DMD patients can benefit from therapy; second, that we do not rest on our prior success but continue to advance our therapies to have the greatest impact on the lives of those with DMD; and third, as we get positive signals, that we extend our innovative pipeline into new areas where those who are suffering from genetic diseases can benefit beyond DMD.

Let me speak about the PPMO progress. We have spent considerable time this quarter advancing our PPMO platform. As a reminder, PPMO is our next-generation platform designed around a proprietary cell-penetrating peptide conjugated to our PMO backbone, with the goal of increasing tissue penetration, increasing exon skipping, and significantly increasing dystrophin production. If successful, the PPMO offers the potential for improved efficacy and less frequent dosing for patients.

We have previously presented data in the MDX mouse model that indicates that a single dose of PPMO produced significantly more dystrophin protein than a single dose of PPMO in skeletal and cardiac muscle. In addition to being a promising next-generation therapy for DMD, PPMO has the potential to address multiple neuromuscular diseases, as well as potentially having utility in a broad range of other diseases. We are currently reviewing the toxicology from pre-clinical studies, and we remain on track to dose the first patient with a PPMO candidate targeting exon 51-amenable children before the end of this year. At the same time, we are working on an ambitious strategy to advance multiple additional PPMO candidates.

In addition to our internal programs, as you know, we have three gene therapy collaborations, two with Nationwide Children's Hospital, and a third with Genethon. Let me first comment on the two programs we have with Nationwide.

Significant progress has been made this quarter in both programs, and both are scheduled to enter the clinic this year. The first is our collaboration with Jerry Mendell, M.D., and Louise Rodino-Klapac, Ph.D., co-inventors of Nationwide's micro-dystrophin program. Doctors Mendell and Rodino-Klapac are leaders in neuromuscular gene therapy, and the developers of the gene therapy AVXS-101 for spinal muscular atrophy, currently licensed to AveXis, which recently received and released positive and promising Phase I results.

As background on the micro-dystrophin program, in pre-clinical studies, systemic delivery of the construct resulted in high levels of gene expression in skeletal, and equally importantly, in cardiac muscle. This program is agnostic to genetic mutation and holds the promise of treating a majority of DMD patients. As we move closer to the clinic, we anticipate that patients will be dosed at levels which are potentially therapeutic. This means that the program should generate not merely safety, but also gene expression data. We expect that the first patient in this study will be dosed this quarter.

Our second program is a collaboration with Kevin Flanigan, M.D., Nationwide's Director of Gene Therapy and the principal investigator for the Galgt2 program which was developed by researcher Paul Martin, Ph.D. This gene therapy program targets the dystroglycan complex to enhance utrophin expression and preserve muscle function. The Galgt2 approach is also agnostic to genetic mutation, and has the potential to treat patients of all ages, disease severities, and even to potentially address alternative forms of muscular dystrophy. We expect that the first patient in this study will be dosed this quarter.

Our third gene therapy partnership is with Genethon. Of note, Genethon recently published data validating its micro-dystrophin gene therapy approach in an animal model for DMD. The results were featured in an online issue of Nature Communications. While early, these data highlight the potential for Genethon's micro-dystrophin gene therapy program and once again underscore the significance of dystrophin production in the treatment of DMD.

Finally, before turning the call over to Sandy for an update on the financials, I would like to officially welcome to Sarepta Dr. Guriq Basi, our new Chief Scientific Officer. Under Dr. Basi's leadership, we will accelerate our pipeline and the pursuit of new innovative approaches to treat DMD and other rare neuromuscular diseases.

With that, Sandy?

Thanks, Doug.

Good afternoon, everyone. We are pleased to report that based on continued progress with the launch, we have generated net revenues of $46 million of EXONDYS 51 sales in the third quarter of 2017. For modeling purposes, it is important to remember that last quarter we reported a change in ordering patterns, due to the Fourth of July holiday that pulled forward approximately $2 million of revenue from the third quarter into the second quarter. With that in mind, the revenue number for the third quarter would have been approximately $48 million.

As Doug previously mentioned, we have raised our net revenue guidance for the year to a range of $150 million to $155 million. Our ability to forecast is based on commercial trends, and our comfort in the trajectory of the launch. This also takes into consideration the holidays and the remaining business days in the quarter.

Our guidance only includes sales generated in the U.S., and does not include any potential sales from our managed access program. We expect very limited revenue from this program, late in the fourth quarter, and into 2018. We are quite pleased with how the launch is progressing, our Q3 achievements, and that our guidance ranks EXONDYS 51 amongst the top rare disease launches of all time.

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

In the third quarter of 2017, we reported a non-GAAP net loss of $12.4 million, or $0.20 per share, compared to a non-GAAP net loss of $45.9 million, or $0.95 per share, in the third quarter of 2016. The decrease is due to the product sales of EXONDYS 51, lower manufacturing expenses due to the capitalization of inventory upon the approval of EXONDYS 51, and offset by increased professional services, primarily due to our global expansion.

Net revenue for the third quarter of 2017 was $46 million. No revenue was recognized in the third quarter of 2016. Cost of sales was $3.1 million in the third quarter of 2017, which relates to sales of EXONDYS 51 following the commercial launch in the U.S.

Included in the cost of sales is approximately $2.3 million of royalty costs of goods sold, as a result of the settlement and license agreements we entered into with BioMarin in July of 2017. There was no cost of sales recognized for the same quarter last year.

Prior to the approval of EXONDYS 51, we expensed such manufacturing and material cost as research and development expenses.

Adjusted non-GAAP research and development expenses were $32.4 million for the third quarter of 2017 compared to $30.9 million in the third quarter of 2016, an increase of $1.5 million. The increase is primarily driven by increased patient enrollment in our ongoing clinical trials, a ramp-up of pre-clinical studies for the company's PPMO platform, as well as other follow-on exons, and increases in professional fees partially offset by lower manufacturing expenses due to the capitalization of inventory following the approval of EXONDYS 51.

Adjusted non-GAAP selling general and administrative expenses are $23.1 million for the third quarter of 2017 compared to $14.8 million in the third quarter of 2016, an increase of $8.3 million, due to increased professional services related to our global commercial expansion and the BioMarin settlement as well as compensation and other personnel expenses due to increases in head count.

We had approximately $618.4 million in cash, cash equivalents, restricted cash and investments at the end of this quarter. In addition, we have prepaid approximately $20.3 million towards our 2017 and 2018 manufacturing expenses. We are pleased with the way the business is trending, and are well-positioned going into 2018.

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

Thank you, Sandy. Good afternoon, everyone.

We remain confident in our ability to continue the successful launch for EXONDYS 51, as evidenced by the strength of our third quarter earnings and our updated net revenue guidance for the first full year of launch. We are very pleased with the progress the team has made to date, and are looking forward to a strong finish to the year.

Operationally, we performed well during the quarter against our four key activities within the United States: driving prescriptions for identified and appropriate exon 51 skip-amenable patients, which has continued to strengthen throughout the launch; maintaining active dialogue with payers to support coverage and reimbursement decisions for all patients with amenable mutations to EXONDYS 51; addressing procedural barriers to therapy to shorten the time frame from START form to first infusion; and ensuring DMD patients have genetic tests and are appropriately identified for exon amenability.

Our internal assumptions of the market size have been consistent since launch. The team continues to ensure physicians understand the importance of identifying and starting their patients on EXONDYS 51, and we are pleased to hear of more physicians doing chart pulls within their own clinics and finding additional patients as we progress throughout the launch. Our genetic testing collaborations have also continued to identify more patients who could benefit from EXONDYS 51, and additional exon-skipping products for any potential future launches.

Patient demographics have remained fairly consistent throughout the launch. The percent mix of patients on commercial and Medicaid plans are approximately 60 to 40. We are pleased that we are seeing adoption across all age groups. The average age of patients currently on therapy is 13 years of age, which indicates both ambulatory and non-ambulatory patients are obtaining access to EXONDYS 51. This is consistent with our expectations on how the launch would progress.

From a compliance and persistency perspective, we have previously reported that approximately 40% to 50% of patients opted to have ports placed prior to their first infusion. Based on discussions with physicians and our specialty pharmacy partners, we expect this trend to continue. We believe port placements, home infusions, and minimal side effects reported have all led to higher-than-anticipated compliance rates. Throughout the first year of launch, we are continuing to see high compliance rates and minimal discontinuations.

At the end of the quarter, 100% of Tier 1 and Tier 2 centers have now submitted START forms. These centers, which treat approximately 75% of the DMD population, have continued to identify new patients amenable to exon 51 skipping, and submit START forms accordingly. We are continuing to see an increase in the number of new START forms for Tier 3 sites as well, and now have over 160 individual physicians who have submitted a START form since launch.

Based on ongoing efforts and engagement, we also believe payers have a much better understanding of the disease, the number of patients eligible for treatment under their plan, and the patients who would most likely benefit from EXONDYS 51. We have previously highlighted that educating physicians, healthcare providers, and DMD families about the importance of genetic testing would be critical for a successful launch. As a result of increased genetic testing since approval, a greater number of physicians now know which patients have mutations that are amenable to skipping exon 51, and we expect this trend to continue.

Our managed access program continues to expand to include more countries, and we are beginning to build appropriate commercial operations infrastructure in key regions to support global growth over time.

We have now made offers to select country managers within key markets across Europe. We have also started building our commercial infrastructure in Latin America and other countries as we look to expand globally.

We believe our operational preparedness has supported a very successful launch in 2017. We are excited about the future at Sarepta, and will continue to build out thoughtful commercial infrastructure to prepare for EXONDYS 51 launches in other key markets, as well as prepare for future approvals with other PMO and PPMO exon-skipping products, and our multiple gene therapy programs in DMD and beyond.

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

Thank you, Bo.

We've made great progress this quarter. Looking forward, in the coming months, we anticipate a flow of important milestones regarding our clinical programs. We are poised to have a total of seven programs in the clinic by year-end 2017, and we anticipate the following milestones in the coming months: first, we anticipate that both our micro-dystrophin and Galgt2 collaborations will enter the clinic this year. We will provide additional color on the design and scope of these trials following initiation.

Second, we remain on track to dose our first patient in our next-generation PPMO program by year-end 2017. We are designing clinical studies to aggressively move this program forward.

Third, we anticipate completing enrollment in our ESSENCE study by year-end 2017 or early in the first quarter of 2018.

Fourth, and based upon the positive results of our 4053-101 study, we are targeting a meeting with the FDA in the first quarter of 2018 to discuss the golodirsen program and the proper path to bring this therapy to the children who are waiting for it.

Fifth, our partner, Summit Therapeutics, is on track to announce 24-week data from their Phase II proof-of-concept clinical trial of ezutromid in the first quarter of 2018.

And lastly, we anticipate that the review of our application by the CHMP should be complete in the first half of 2018.

We have continued to strengthen our position as the leader in DMD, with the ongoing commercial success of EXONDYS 51, a deep pipeline of DMD candidates and platform technology, and significant progress toward the realization of our strategic vision upon which we are building a global biopharmaceutical company dedicated to improving the lives of those suffering from devastating rare neuromuscular diseases.

And with that, Operator, I would open the call for questions.

(Operator Instructions) Our first question comes from the line of Alethia Young of Credit Suisse.

Congrats on all the progress with EXONDYS 51 on the launch. You're going to kill me, but I kind of have two.

One, since we haven't spoken since the adverse events database came onto the scene, I just wanted to get your perspective on the findings that are there; and then the second question, I guess I just wanted you to kind of lay out and help us think about what the base case is for this meeting with exon 53, and what would be a potential, more positive case, and are you talking to the same people that you knew from before when you were working with [Tefferson]? Thanks.

Thanks for those questions. So first, let's talk about the FAERS database and the reports. To make sure we're both on the same page, they're the FAERS database which is the FDA's database on spontaneous adverse reporting that occurs post-market. They updated their database to provide a user-friendly tool and a few weeks ago some folks, not physicians -- I think it was others -- did some searching and then discovered in their searches that there were two children, I believe at the time, that had -- or three children, actually, that had -- that were DMD patients that had been on our therapy and that had died.

Here's the obvious issue: the reason we are so passionate about what we do is because this disease is so extraordinary cruel. It will, unfortunately, kill 100% of these children. DMD is a horrible and cruel disease. It takes the lives of these children usually in their late teens or very early 20s, and certainly before they're 30, almost every child who suffers from DMD is going to die. And these three children unfortunately were among those. One of them was 27, two of them were 28.

When DMD takes you, it usually takes you through respiratory or cardiac issues, and that's exactly what happened with these kids. So, it did not relate to their treatment with EXONDYS 51, it was entirely consistent with the natural history and the course of this disease. And unfortunately, as we treat this disease, and as this FAERS database exists, we will see more children like this.

And to make that point even more poignantly, we have two children who died waiting to get on therapy while they were going through the pre-approval process with payers, and that's the horrible nature of this disease. It is a tragedy, it is a tragedy for the families of these children, it is unfortunately also completely to be expected. So, that is what was going on with that.

So, the second question, as relates to a meeting with the FDA on golodirsen, I think the short answer is, we really can't speculate until we have our meeting with the FDA and the division, and it will be at the division level. I think we are in a good place to have a robust discussion with the FDA. The results of our study with golodirsen not only are statistically significant on all of the measures, but also the scientific rigor with which the team approached this study is impressive. And I think, I'm certainly hopeful, we'll impress the division as well, and then we'll have to have an open dialogue.

The best case scenario would be that they would find an accelerated pathway with us, perhaps with some additional data they would need, or we may joint issue and they may see things differently. But, we won't know exactly what their perspective is until we talk with them and discuss it at a scientific and evidence-based meeting, and that's going to be our approach, and we'll certainly update folks as we progress.

Thank you. Our next question comes from the line of Salveen Richter with Goldman Sachs.

At this point, you're now about a year post-launch. Just wanted to understand, as payers are interacting with physicians, what ongoing clinical assessments are they requiring, and how could these evaluations impact reauthorization? And then just secondly, what is the current proportion of DMD patients that have been genotyped, and when we think about growth for EXONDYS 51 in terms of newly-identified patients here, how should we think about that?

I'll say two broad-stroke answers, and then Bo, please feel free to follow up and provide more data.

So, particularly as it relates to I think the kind of concept of penetration, the second question, penetration -- the short answer is, we are still in launch phase. We've made great progress, we have a long way to go. We are not deeply penetrated. There's sort of three groups of children -- there are children that are on therapy, early in launch on therapy; there is a significant queue of patients that are working their way through the process to be on therapy; and there is a great number of patients that are left to be identified and brought in to the Tier 1, 2, and 3 clinics and to be genotyped, and there's a lot of work to do there.

There's a lot of work to continue education and genetic testing and the like as we go forward. So, we're not deeply-penetrating, we're doing very well, but we've got a lot of runway and a lot of work to do ahead of us.

I'll now say a little bit on the first one, and then Bo should really answer more about the -- on the payer side, the short answer is, apparently with respect to reauthorizations oftentimes they've been approaching the treating physicians and asking for granular information from the treating physicians about their experience with EXONDYS 51 and how they see it affecting the patient versus natural history or what they would have expected.

To the extent that that is going to be the approach that's being taken, these children are going to fare very well in getting reauthorized, because as you've heard earlier in the script, we have very good adherence, and one of the reasons for that is that physicians are reporting a lot of utility with EXONDYS 51 and success with EXONDYS 51. So, I think they are going to fight for these children, and for these children's continued use of EXONDYS 51 as a therapy.

With that, Bo?

Yes, thanks for the question.

I'm very pleased with the progress that we've made on the managed care front, and the physicians are actually, I mean, the managed care organizations are proactively reaching out to the true treaters, the KOLs, and so they're not looking for one individual six-minute walk test. They're asking really good and thoughtful questions about how the patient's doing.

They're also taking a hard look at some of the guidelines that are out there, like California, the CCS guidelines, which take a look at Brooke Score, pulmonary function tests, and which is very broadly, it's an open type of formulary. And they're asking questions about PFTs for the non-ambulatory patients, Brooke Scores, and just the overall feeling of the patients.

I think we've been going through the reauthorizations really immediately after launch, about six months after launch. So, we've been going through it, it's been very positive, and I think what I'm very pleased about is the managed care plans are thoughtfully reaching out to the right people across the country and gathering feedback from multiple KOLs. So, I'm pretty pleased with that.

As far as the genotyping question, originally at launch we estimated it was roughly 60% of the population was genotyped with 40% being non-genotyped, and a lot of those patients were either the very young or the very old. And we've made a lot of progress there. I don't have an actual percentage for you, because we're going to be doing the market research now, one year post-approval. But, across the board we're seeing genetic testing rates increase.

We have a Decode Duchenne program, I'm very pleased with the program. We've had over 700 test, and from those tests we've actually identified 500 DMD patients, with the approximately 13% of those patients being exon 51. And we're also seeing other genetic testing companies have five-fold, six-fold increase from baseline. So, we're going to do the market research. We'll have a better understanding, but it's much higher than the 60% at pre-launch.

Our next question comes from the line of Christopher Marai of Nomura.

Just on the two new programs that are going to enter the clinic in the fourth quarter, I was wondering if you could just help us understand the manufacturing process, and obviously the dose levels that you'll be entering the clinic with, with the micro-dystrophin? Is it correct to assume that those are being produced at Nationwide, the clinical side, that is?

And then maybe how should we look at the potential for data from that program? Obviously, the dystrophin measure could come rather quickly after the first dose, and you sort of hinted at that earlier on the call.

And then finally, just maybe follow up a little bit on some thoughts on the PPMO chemistry and the toxicity profile that you'd be looking for in humans? I know you're doing the pre-tox now, but that's sort of been a focus of the investors we've talked to, and we'd love to hear about what tox you're particularly worried about, what signal we should watch for when we see that data, and when we'll see that data? Thank you.

Great, so let's walk through them.

So, first of all, yes, the therapy is being manufactured at Nationwide. In fact, it's been manufactured, so we're in good shape to start the clinical program, and start dosing.

We haven't discussed externally, and it isn't fully confirmed, the exact dose that's going to happen although I can tell you that it's intended to be certainly what the experts would imagine would be a therapeutic dose. So, we should be able to get good gene expression as well as safety, and hopefully good signals on dystrophin.

We haven't fully nailed down or disclosed externally the exact protocol, and when biopsies are going to be taken. You are certainly correct that gene expression will happen fairly rapidly in a matter of some months, certainly not years, and therefore you could envision earlier signals, but that's all subject to the protocol and when biopsies are going to be taken. So, we'll give you a further update on that after the study initiates and we're able to do that.

And then on PPMO, so, on PPMO we are reviewing the tox data now. Our goal is to have patients -- and they will be patients, these won't be in healthy volunteers -- patients begin dosing this year. We're very hopeful on the safety side; obviously the signal that one would look for here really is the kidney issues, and that's the issue you ought to look for and the signal you ought to look for, and we'll have that fully evaluated and we'll certainly -- once we have an IND filed and accepted and we're ready to dose a child, we'll press release that and you'll have access to that information when that happens. And it is our goal to have that, this quarter.

Our next question comes from the line of Anupam Rama of JPMorgan.

For EXONDYS 51, the age range here has kind of skipped around between say 13 and 15 years old. How's this trending, what's assumed in the 2017 guidance, and how should we be thinking about this going into 2018?

I'm going to say one thing about it, then Bo's going to talk about it.

So, as you may have seen, we are about -- 13 is the average age now. And so our goal, of course, is to have as broad of coverage as possible, and as we move forward that's our goal and that means that hopefully if things go well, we'll be getting to younger and younger children, we'll be enhancing people's ability to get children diagnosed earlier and the like, and our goal would be that there would be younger children and the mean age would actually go down over time, which would be a signal of very positive answers from our perspective. But, with that said, Bo, do you want to make some --?

I think this is a very positive signal. It shows that what we thought at launch would happen, is happening. And when you think about, we break things down into five age groups. Age groups of five years at a time.

So, from a conversion standpoint there's really no difference in conversion percentages across any of the age groups, all the way up to 24, 25 years of age. So, we're converting ambulatory, non-ambulatory patients, at the same rate. But, due to the dynamics of this -- unfortunately this cruel disease state, there are a lot more boys that are younger, in the younger age groups, and this is -- and we're also doing a lot of genetic testing.

And so, when you think about the average age of diagnosis being close to five years of age, and you're out here putting a lot of emphasis and effort on genetic testing, you're finding a lot of these other kids that are below 5 and it's just pulling down the age group. But, only because we're finding so many more patients. It's actually a great thing, it's what we anticipated pre-launch. It's showing up now, and we're happy because long-term these kids are going to be on the drug for much longer, and hopefully generate better efficacy.

Our next question comes from the line of Brian Skorney of Robert W. Baird.

First, you mentioned that your efforts are getting payers to have a better understanding of the benefits of the drug. I just wonder, do you expect this to result in any formal changes to medical policies as we move towards the fiscal year? And then, on the two gene therapy micro-dystrophin programs, could you just review what the differences are between the Nationwide and the Genethon programs, and the manufacturing capacities for both of those constructs right now at those centers, and if early clinical data justifies it, how should we be thinking about the class, or to scale up those gene therapies?

Okay, let me take these in order. So, the first question was, the physicians are getting additional experience with EXONDYS 51, and what does that mean for coverage. So, the answer, I think, is hopefully the body of evidence that supports the utility and benefits that come from EXONDYS 51 are increasing.

So, let's first start with, there are hundreds, a hundred or more, KOLs, thought leaders and physicians who have experience -- some of them have years of experience with EXONDYS 51 with children -- and can point with objectivity and with specificity to the benefits that they're receiving. That's helpful with payers, certainly.

There's additional data that we are developing now and we will be in the future. We have a non-ambulatory study that's reading out, that hopefully will get published, it's very interesting on EXONDYS 51 and it will be very helpful to us going forward. I can't say with certainty that the coverage issues will change immediately, but I think that there should be an increasing confidence among payers as they see physicians' reactions.

And you can see it, I mean, the revenue numbers we have right now are important as revenue, but they're more important in what they signal. What they signal is, we're having very good adherence, much better than one would have imagined. Physicians are fighting to keep these children on-drug, and children and caregivers are seeing the utility even though they have to get infused every single week and are fighting to stay on-drug, all because they see the utility and the benefits of this drug. And if you couple that with the data that we're developing over time, I think there really is a chance to get better policy answers over time.

As relates to both Genethon and Nationwide, a couple things. One is, they are different in the fact they have different promoters and different viral vectors, obviously. So, Nationwide's vector is AAV rh74 which is largely homologous to AAV 8, and their promoter is MHCK7. Genethon has AAV 2/a.

Both of them have very good manufacturing capabilities from a clinical perspective. Obviously, if we see positive signals in either one of these programs or with our Galgt2 program, we've got a lot of planning to do from a commercial manufacturing perspective, and we certainly will. We certainly have been doing a lot of planning around that and thinking around that. We wouldn't pull the trigger on those kinds of issues until we were at the right place. But certainly, they are well-prepared to support us from a clinical perspective, no issues there. We're in good shape. If we get to the point where we get positive signals and we need to think about commercial, then we're going to have to jump into gear, but it's premature to do that right now.

Our next question comes from Joseph Schwartz of Leerink Partners.

I was wondering if you could (technical difficulty) do you have any insight into how they may interact with the FDA (technical difficulty), can you draw any comparisons for us with the significant amount of activity that was seen for eteplirsen at a similar stage of development?

I apologize, we were unable to hear the middle there. So, can you repeat your question?

Oh yes, sorry about that, I'll speak up. I was just wondering if you could draw any comparisons with the significant amount of activity that was seen by patient advocates for eteplirsen at a similar stage of development that you find yourselves now for golodirsen? So, could you give us any insight into how you're interacting with the patient advocacy organizations for DMD, and do you have any insight into how they may be interacting with the FDA at this juncture, for golodirsen?

A Yes, excellent question.

So, as it stands right now our goal is to have a meeting with the division on golodirsen and walk them through the evidence, and do it on an evidence-based, science-based perspective.

I think it's very valuable at the right stage to ensure that everyone understands the impact of the disease on patients and families, but I think for the purpose of our meeting with the FDA it's not the appropriate time for that. So, there are no interactions that I'm aware of between patient advocate groups and the FDA today as relates to golodirsen, and I think really that going into our meeting with the FDA, we want to ensure that we keep this focus on the data review and evidence-based discussion about the path forward.

And when can we expect the earliest, what is the earliest we can expect some clinical data for golodirsen to be reported?

Well, with golodirsen the clinical data will be things like six-minute walks, and they're a few years away. We have an ESSENCE trial right now that has exon 45-skipping drug in it, and we also have golodirsen, exon 53 in it, and we are recruiting right now. We should be completed with recruiting very soon, either the end of this year or maybe early into next quarter, and then we've got to -- it'll be a couple of years before that study would read out. So, it'll be sometime from now from an ESSENCE trial perspective, which is where we would get those results.

Our next question comes from the line of Ritu Baral of Cowen & Company.

I wanted to ask about some of the other studies that are ongoing. One, have you settled the confirmatory EXONDYS trial design with FDA? Two, what are your plans at this point for PROMOVI? And three, any plans to run a 101-like study for casimersen, the 45 candidate? And then I have a follow-up.

I'm sorry, I apologize for that, I missed the third question.

Casimersen, your 45 candidate, was there any plans to run a 101-like dystrophin study for that candidate and have that readout before ESSENCE?

So, we have a safety study for casimersen, but that was in non-ambulatory children, so it doesn't have -- we weren't taking biopsies, so we don't have data from casimersen like we do with golodirsen.

Depending on the outcome of our meeting with the FDA, we're going to have to review that and decide if that's a meaningful approach, and do that post-discussion with the FDA.

Going back to the original question, on the confirmatory trial, we're still designing the trial as we speak. It will likely be probably a combination of a couple of trials that together would be confirmatory, and I think as you know we're working with diligence on that, the (inaudible) readout until 2022. But (inaudible) trying to get that done (inaudible) confirm with the FDA as soon as possible. Then PROMOVI is fully-enrolled, it's (inaudible) now, and we're (inaudible) through it.

Got it, and one question actually for Sandy, just as you and Bo look at commercial expansion, what should we think about as far as Europe and Latin America, final commercial numbers, and impact on SG&A for 2018?

Yes, so we are in the process of preparing our long-term strategic plan; that will be in Q4, so it would be a much better place to address it. Early next year perhaps at JPMorgan, because it would be too early to speculate on that. Having said that, we've been very disciplined in the manner in which we have tackled our SG&A and the growth has been very phased.

We're ensuring that we're using a combination of distributors and boots on the ground, but a theme here is that it's going to be a very phased approach. Perhaps the EU5, Brazil and some countries initially, and then gradually we'll look at everything else based on the revenue expectations as well as the expenses we might have.

Bo, am I missing anything?

No, Sandy, I think you've covered it. To Sandy's point, we're taking a very thoughtful and conservative approach, and looking at the countries with the biggest opportunity that we can get to as soon as possible.

I think our quarter-over-quarter SG&A growth, which actually isn't growth, it's actually contraction to flat, indicates that we are taking a very disciplined approach to SG&A. What we're really focused on is upsizing research and development, regulatory on the platform.

As relates to Europe, to Bo's very good point, we're going to definitely build but we're going to phase our build with the way approvals happen in Europe. So, we're going to phase in some regulatory, and medical affairs, and then access and reimbursement, and then we'll phase in additional SG&A as necessary post-approval, when we get closer to actually launching the drug.

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

Congratulations on the progress. I was wondering if you could comment, maybe even just directionally, on START forms and the process from when they're submitted to when a patient gets drug, and whether that's -- is that getting longer, or shorter? Has it reached some kind of steady state? And then, likewise for the numbers of new START forms that you're seeing?

So, the number of START forms we've really never got into it, since JPMorgan, but I would tell you that it's been very consistent throughout the launch. Our team has been working very hard with all the offices to try to identify patients, and we've done a really good job of making sure that we find new patients, they're appropriate for EXONDYS 51, and get them in as soon as possible.

I think from a time-to-infusion standpoint, it really varies. And to answer one part of your question, yes, it's stabilized, it stabilized early on, about a quarter or a half ago. And if anything, we are getting faster.

But, to be quite honest, it is up to -- every individual patient takes sort of a different path. I've had patients that have got on therapy within three days, and I've had others that have taken many months, and that could be because of a number of reasons. One, sometimes there's intellectual issues with the child so that he is not ready for therapy. There's port issues, if there's a port problem then you have to get a port consult, so that delays time. Also, it depends on the insurance plan.

So, it is variable, but overall it has stabilized. If anything, it is getting faster. And I'm quite pleased with where we are right now, and we have multiple patients in the queue.

Our next question comes from the line of Matthew Harrison of Morgan Stanley, your line is now open.

Hello, this is Dave Lebowitz in for Matt. I had a question regarding comparing the exon 53 patients versus the exon 45 patients. How do these patients compare phenotypically, and how should we look at treating those patients as far as the challenge that's ahead, as compared to exon 51 patients?

Well, I think broadly speaking the assumption is that the phenotype of 53 and exon 45 boys are the same. Hence the reason that the FDA admitted us to do a combined study with ESSENCE.

And how would they both compare to 51?

The assumption is they're the same, and there's one significant exon-amenable group that is significantly different, and those are exon 44-amenable children. As we've probably mentioned before, exon 44-amenable children have a very different phenotype than these other children. They tend to have a delay in loss of ambulation that can be as much as five years on mean, difference than exon 51 children.

And there's a good reason for that -- those children have a very low level of sporadic background exon-skipping that's natural, that results in that. Even though I will point out that in Western Blot it's often difficult to impossible to see the difference in production in those exon 44 kids, because it's below detectable levels, and yet they are actually ambulant for an additional five years compared to exon 51. But, as relates to exon 51, exon 53 and exon 45 children, they are phenotypically similar to identical.

And I guess one more question on patients coming online, have you noticed any specific trends with respect to proximity to infusion centers? Has it been primarily patients that are closer, and then moving outwards? Or, have there been patients coming from I guess further from the centers, as well?

No, it's been the same since launch. The patients are really all over. They travel to the neuromuscular center, the center of excellence. They meet with one of the top KOLs in the country, and then if they don't live close to the center, they go back home. The KOL teleconferences with the local physician, and then that's how the patient starts on therapy. It happens really all across the country. It's pretty seamless, now.

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

You mentioned therapeutic levels are expected from your initial doses of the Nationwide gene therapy programs. I think in some of the canine models we've seen some constructs show 30% to 50% micro-dystrophin production. What are your views that this is going to be mimicked in humans? When do you think we'll know if this is comparable to let's say a Becker's patient with 30% to 50% dystrophin production, and what levels of production would you be happy with?

Well, I suppose given the early nature of this gene therapy we would be happy with solid identifiable dystrophin as measured by Western Blot, but to your very good point, you saw in the Genethon paper that they are getting significant expression of dystrophin in dog models. So, we don't know, we'll see.

It's very difficult to take the animal models and then to make the assumption that you're going to get identical results in humans, so I want to be very careful about it. There's a lot of differences here, obviously, in many ways. But, the hope is that you get a significant expression of dystrophin in these children. That is certainly the hope, and that's the reason that with respect to our micro-dystrophin program with Nationwide, the goal is to go for potentially therapeutic doses.

There's a strong belief at Nationwide, and it's a belief that we concur in, that we should try as early as possible to confer a therapeutic benefit on these children. Our hope is that we'll get something that would be predicted from the animal models, but we will see that when we see it.

Understood, and can you maybe talk a little bit about the IP protection around the Nationwide programs and the Genethon programs? It looks like there are some COM patents out there covering micro-dystrophin?

Well, there's great intellectual property surrounding the programs that we have. There is certainly in gene therapy, generally there is always the potential for a crowded field as relates to intellectual property, and if we get to the day where we're in a dispute with someone and arguing about royalties, it'll be a great day for Sarepta and these children.

Understood, just like the EXONDYS.

Our next question comes from Matthew Eckler of RBC Capital Markets.

I wanted to ask about the SRP-4053 and specifically, any plans to take the current data to the EMA now? Or, are you really looking for clarity on what's going to happen with EXONDYS 51 before showing them data from a second drug?

Oh, for golodirsen in Europe? First of all, we're focusing on Europe right now, definitely specifically for eteplirsen, EXONDYS 51 in the U.S., and we're going to go through that process and it'll help inform our thinking going forward. One needs to understand that what we have today with respect to golodirsen is very solid data from biological endpoints, great surrogate endpoints including expression of dystrophin. With that said, we've got to talk to Europe. There isn't an obvious pathway in Europe without some additional discussions regarding using surrogate endpoints alone, so we'll have to really think that issue through before we approach the agency in Europe about that. So, I would say, as it stands right now our goal is -- as relates to Europe, work with the EMA on our file for golodirsen, and we'll get a response on that file in the first half of 2018, and as it relates to the FDA to have a good, evidence-based discussion with the FDA in the first quarter of 2018 and talk to the FDA in a collaborative way about the path forward for golodirsen in the United States.

Our next question comes from the line of Liisa Bayko of JNP Securities.

This is John on for Liisa. Just a couple short ones for me. You mention the average age is 13 years, I was wondering what's the average weight? And what's the dropout rate you're seeing? Is there anything characteristic of a patient that would drop out, whether it be port status, or age, or ambulatory status, anything you can comment there?

Two things, and then Bo, you either correct me or add to it, okay? So, first of all, with the respect to the weight, we haven't provided weight. We're using [revenue] as our -- as our surrogate for things, and we have been providing ages and I would envision we'll continue to do that going forward. As related to dropout rates, the assumption at launch was we would probably get dropout rates you would expect, and probably as low as 20%, as high as 30%. We're having adherence well over 90%, so it's very difficult to talk about trends because we're seeing almost no dropouts at all.

Yes, Doug summed it up. I know that there's been some reports out there that had dropout rates listed as higher, and I can tell you absolutely it is in the single digits. So, and that has not -- that has stabilized all throughout the launch, so we're very, very pleased.

Great, and one last one for me, how many state Medicaid plans have formal coverage policies in place, and how long does that typically take to get a coverage policy?

I don't think we have the data in front of us on the number of state Medicaid plans.

Yes, we don't go into -- you know, a lot of the states actually have it listed as case-by-case. Most of the states do a case-by-case for these types of patients. What I can tell you though, is that we've definitely made an effort to target the largest states, and the three largest states, the Medicaid states, have the broadest policies. And then we leverage these policies with the other states. California really starting the trend with the CCS guidelines, looking at Brooke's Scale and looking at pulmonary function, and then that transferred over to Florida, and then that transferred over to Texas. And then, we've used this across the country. So, many times when states do not have a plan, a policy in place, they go case-by-case, but they look at big states that have a lot of resources like California, Florida, and Texas, and they adopt these types of plans.

Our next question comes from the line of Hartaj Singh of Oppenheimer.

Just had one question, and then just a very quick follow up. The one question is, Doug, Bo, Sandy, you're going to have -- if the PPMO 51 candidate risk benefit profile looks good, assuming it looks good next year, you're going to have potentially a fast follower to EXONDYS 51 in the clinic. Just how do you think about that from a strategic planning perspective? And then, I just have a very quick follow-up after that, thank you.

Yes, hopefully it would be a fast follower, if it goes well. Our goal is to continuously improve. EXONDYS 51 is conferring significant benefits, physicians are seeing a lot of utility. The issue with our PMOs is clear, this is what's wonderful about the PMOs, let's start with this. The PMOs are an amazing precision medicine. When the therapy gets into the cell -- and by the way, 100% response rate in every study we've ever looked at as far as getting in the cell -- gets in the cell, it gets right to the pre-messenger RNA, it does precision editing at the RNA level, it creates the right messenger RNA, it creates dystrophin, the dystrophin gets localized in the right place. Really, very elegant. The issue for the PMOs is that they are neutral, and so they don't penetrate the cell as well as one would like, and therefore, the amount of benefit you get is limited by that. It is benefiting these kids. It's not fully transforming these kids. These kids, EXONDYS 51 is wonderful but these kids aren't going to envision that they can live to 60 or 70 years old, and that's our mission. So, the good news with PPMO is if PPMO shows positive signals and it's a fast follower, then that's just a wonderful answer for children and for the company, and we're going to pursue that aggressively.

Great, and then just a quick follow-up for Sandy. We've got JPMorgan coming up, I assume that Sarepta is going to be there in the fourth quarter, you said, you're going to think about next year then. Are you going to follow a strategy similar to this year, which is sort of, think about what you can do next year sort of conservatively, and then maybe as you get more visibility in 2018 keep on upgrading guidance? Is that a game plan that you think has potential?

Thanks for the question. It's a little too early to speculate. We'll have three very good quarters, as we've seen, we've updated guidance as we got more visible in the trajectory of the launch, and as we get more information, perhaps at JPMorgan we'll be able to provide more guidance. But, at this point it's too early to speculate.

Our next question comes from the line of Gena Wang of Barclays.

Regarding EXONDYS 51 launch in the U.S., 40% to 50% of patients opt to have a port. Just wondering, what is the breakdown of these patients on Medicaid, and the commercial payers?

I don't have the actual breakdown from a port standpoint from commercial to Medicaid, but I can tell you it's been pretty universal. Right from the beginning, from right at the start, the ports came out of left field and it was all kids. It was a lot of kids. So, I'm assuming the mix is going to be the same, because really it's about the disease progression with the child, and whether they can find the veins or not. It's been pretty uniform across the spectrum of ages. So, I don't have the breakdown for Medicaid and commercial, but you can assume it's roughly split.

I see, and just a very quick question regarding the European filing. Can you remind us the data that were included in the submission package, and also for the ex-U.S. launch, which countries you can launch with FDA approval, and which countries you will have to depend on the European approval?

Well, there's two things. Let's talk about the application itself. So, the application is a fulsome, robust discussion of all the clinical data that we have around EXONDYS 51, so it is not merely as an example, biological data. It's functional data, you have obviously dystrophin production is of course important, we have good backgrounders on things like exon 44-amenable children alike, then we go into clinical data. We've got information on the six-minute walk test, time to loss of ambulation, we have some recent data that we have yet to publish, but we are working on that, but some good data on pulmonary function test that will support the (inaudible). It is a very robust discussion of clinical data, generally. As relates to launch countries, they're really, in Europe in particular, there really aren't any countries that one can commercially launch the drug without an approval. So, to really commercially launch the drug will be dependent upon a positive response from EMA, and then working through access and reimbursement issues in individual countries. In the interim, we do have a managed access program. That managed access program is broadly across the world. We've got European countries, we've got the Middle East, North Africa, South America, Asia, but that's not a commercial launch, although there is -- we do sell the drug in that situation, it's not a commercial launch. It's a named-patient basis and we've rolled this out in two waves over the last couple of months.

Thank you. I'm showing no further questions at this time. I would like to turn the conference back over to Doug Ingram, President and Chief Executive Officer, for closing remarks.

Thank you, everyone, for joining today's call. We look forward to updating you on our ongoing progress in the coming months, and with that I would ask you all to have a good evening.

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