Sarepta Therapeutics Inc (SRPT) 2017 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Sarepta Fourth Quarter and Full Year 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, Vice President, Chief of Staff and Corporate Affairs. Sir, you may begin.

Thank you, Tekia, and thank you all for joining today's call. Earlier today, we released our financial results for the fourth quarter and year-ended 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 up the call for Q&A.

I'd like to note that during this call, we will be making a number of forward-looking statements. Please take a moment to review our slide on the webcast, which contains our forward-looking statements. These forward-looking statements involve risks and uncertainties, many of which are beyond Sarepta's control. Actual results could materially differ from these forward-looking statements, as any and such risk can materially and adversely affect the business, results of operations and the 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 annual report on Form 10-K filed with the Securities and Exchange Commission as well as the company's other SEC filings. We filed our 10-K this afternoon, March 1, 2018, for the full year 2017 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.

With that, let me turn the call over to our CEO, Doug Ingram, who will provide an overview of our recent progress. Doug?

Thank you, Ian. Good afternoon, and thank you all for joining Sarepta Therapeutics' Fourth Quarter and Full Year 2017 Financial Results and Corporate Update Conference Call.

In 2017, an important foundational year for Sarepta, we exhibited our commitment to the rare disease mission, advanced our pipeline with a focus on scientific excellence and showed that we have the ability through a ruthless focus on execution to fulfill our commitments.

In 2017, we executed the successful launch of EXONDYS 51 in the U.S., one of the most successful first year rare disease launches in history. We signed 4 new collaborations for our next-generation precision medicines in gene therapy and gene editing.

We advanced numerous programs across our multiplatform pipeline. For instance, driven by our partners at Nationwide Children's Hospital, we received investigational new drug clearance from FDA for a micro dystrophin and our Galgt2 gene therapy programs. We received an IND for our internally developed RNA-targeted PPMO candidate, SRP-5051. And we advanced 5 additional PPMOs into IND enabling preclinical programs.

And we successfully strengthened our cash position so that we exited 2017 with nearly $1.1 billion on our balance sheet to invest in making our vision a reality.

And our vision is not only ambitious but it is also meaningful. Our goal is to improve and extending the lives of individuals with Duchenne muscular dystrophy and along the way, emerge as one of the most important leaders around the globe in precision genetic medicine. And we have all of the elements to make that a reality.

We have, as you know, an urgent mission to improve the lives of patients with DMD, a cruel and unforgiving disease that is universally fatal. We had a strong foundation in EXONDYS 51, which continues to perform well. We have an industry-leading pipeline of 16 distinct DMD programs, cementing our leadership position in this very underserved disease area and we have a substantial cash position, enabling us to aggressively advance our pipeline and build for the future.

Moving into 2018. I will remind you that we announced at the JPMorgan Health Care Conference that our EXONDYS 51 2018 revenue guidance is $295 million to $305 million, and nearly 100% year-over-year growth versus 2017. We reaffirmed here our full year 2018 guidance. The team is engaged and continues to execute well with progress in securing reimbursement and persistent commitment from prescribing physicians, patients and their caregivers.

Turning to our PMO platform. In September 2017, we announced positive dystrophin results from our 4053-101 study of Golodirsen. Our phosphorodiamidate morpholino oligomer engineered to treat about 8% of DMD patients with mutations amenable to exon 53 skipping. As you may recall, the study results achieved statistical significance on all primary and secondary biological endpoints in 25 patients with DMD.

In addition to offering the potential to treat another 8% of the DMD community, these results further validate our precision medicine, RNA splicing platform and our focus on scientific excellence to continuous methodological improvements.

Based on these results, in the first quarter of 2018, we met with the FDA to seek guidance on the possibility of filing a new drug application this year and to seek an accelerated approval for Golodirsen. After the final meeting minutes from our FDA meeting are complete, we will provide an update on our Golodirsen plans.

We also note that on February 15, the FDA issued a draft guidance for the development of treatments for DMD and related dystrophinopathies, a particular importance to technologies like our RNA-targeted pipeline. In addition to other elements, the guidance states that "deficiency of functional dystrophin appears to be the proximate cause of the symptomatic and functional consequences of dystrophinopathies, justifying particular interest in dystrophin as a biomarker and as a potential surrogate endpoint or Accelerated Approval."

As our RNA-targeted technology is designed to restore dystrophin, we are pleased with the FDA's further guidance on the importance of dystrophin restoration as a treatment approach for DMD.

Golodirsen, along with casimersen, another one of our drug candidates, are being studied in ESSENCE, 4045-301, a global randomized double-blind, placebo-controlled study evaluating safety and efficacy in patients amenable to skipping exons 45 or 40 -- or 53, which together, make up approximately 16% of the boys with DMD. It should be noted as well that casimersen, our exon 45 candidate, has shown exon skipping efficiency in vitro that is comparable to Golodirsen.

Our ESSENCE study remains on track. We have enrolled well over 100 patients in the study, and we expect enrollment to be completed in the near future.

Finally, on our PMO technology. Let me provide a brief update on the status of our EXONDYS filing in Europe. As you may know, our marketing authorization application is currently being reviewed by the European medicines agency. We are in the late stages of responding to the EMA's committee for medicinal products for human use and their 108 questions -- 180 day questions, and preparing for an oral examination in late April. We believe we have compiled a robust data package and a strong response. But of course, given the lack of precedents in this disease and the regulatory hurdle for approval in Europe, a process that does not accommodate surrogate endpoints, this review remains challenging. But we remain on track this year for the CHMP in mid-2018.

As it relates to our next generation RNA technology, we are pleased with the progress of our PPMO platform. The PPMO is designed to increase cell penetration of our PMO technology with the goal of producing greater quantities of dystrophin. In early November 2017, we announced that FDA cleared our single ascending study, IND Application for our first PPMO candidate, SRP-5051, engineered to treat the 13% of DMD patients who have exon 51 amenable mutations. This successful PPMO offers the potential for improved efficacy with less frequent dosing for patients.

In addition to SRP-5051, we are conducting IND enabling preclinical trials on 5 additional PPMO candidates covering patients with mutations amenable to exon skipping for exons 53, 52, 50, 45 and 44. Our first 6 PPMO candidates would, if effective, treat up to 43% of the DMD population. Beyond this, we are working on an approach to bring PPMO therapies to the extremely rare exon mutations and we have commenced a dialogue with the FDA regarding a potential pathway.

In addition to being a promising next-generation therapy platform for DMD, with a successful proof of concept in DMD, the PPMO has potential utility in a broad range of other diseases. We intend to build out a strategy for the use of our PMO and PPMO technology in other rare diseases over the course of 2018.

Turning to our gene therapy platform. I would like to provide updates on 2 of our programs. Doctors Jerry Mandell and Louise Rodino-Klapac are the principal investigators for our micro-dystrophin Gene Therapy Program, which is designed to evaluate safety, biological activity and efficacy of the rAAVrh74 micro-dystrophin construct. The study is comprised of 2 cohorts with a total of 12 patients with DMD.

Cohort 1 includes infants 3 months to 3 years of age. Cohort 2 includes patients ages 4 to 7. Patients are being enrolled at a rate of approximately 1 per month, starting with Cohort 2. All boys in this clinical trial will receive 2 times 10^14, a significant and potentially therapeutically meaningful dose. The construct employs the MHCK7 promoter, which was optimized for DMD by Doctors Mendell and Rodino-Klapac.

In pre-clinical studies, high levels of gene expression in and the skeleton, diaphragm and cardiac muscle have been observed. Patients will receive a needle biopsy at 3, 6 and 12 months to measure micro-dystrophin expression. 2 patients have already been dosed and we remain on track to report for preliminary data from this program by mid-2018.

Also, in November of 2017, we announced that FDA cleared the IND application for our Galgt2 Gene Therapy Program. This program is partnered with Nationwide Children's Hospital as well. Dr. Kevin Flanigan, Director of Nationwide Children's Center For Gene Therapy is the principal investigator for the Galgt2 program, which was developed by Dr. Paul Martin.

The program explores the potential surrogate gene therapy approach to treat DMD by targeting the dystroglycan complex to enhance utrophin expression. In animal models, over expression of Galgt2 restored muscle function to normal even in the absence of dystrophin. This approach could potentially preserve muscle function regardless of genetic mutation.

The Phase I/IIa study will enroll at least 12 patients with DMD, who will receive rAAVrh74.MCK.GALGT2 by direct injection into the femoral arteries of the leg beginning on the dose of 5 times E^13, which has shown robust gene expression in preclinical studies for Galgt2.

In order to measure gene expression, which is the primary outcome measure, open muscle biopsies will be performed at baseline and at 3 months and needle biopsies will be performed at 6, 9 and 12 months. Dr. Flanigan has dosed his first patient and is on track to dose the second patient early in the second quarter. We anticipate reporting preliminary data for this trial in 2018.

Sarepta is proud to partner with the foremost gene therapy top leaders at Nationwide Children's, Doctors Mandell, Rodino-Klapac, Flanigan and Martin have, for decades, led the way in gene therapy research and the treatment in rare neuromuscular disease. Their dedication to DMD is only matched by their commitment to scientific excellence and rigor. We are also proud to be associated with parent project muscular dystrophy, PPMD, which provided $2.2 million in support of the micro-dystrophin Gene Therapy Program. PPMD, the largest and most comprehensive DMD specific nonprofit organization in the United States is singularly focused on finding a cure for Duchenne muscular dystrophy.

I will now turn the call over to Sandy for an update on the financials. With that, Sandy?

Thanks, Doug. Good afternoon, everyone. 2017 was an extremely successful year for the company. As previously announced, we achieved $154.6 million of net product revenue for the year. In the fourth quarter, we completed a convertible debt transaction, which generated net proceeds of over $555 million.

As of December 31, 2017, we had approximately $1.1 billion in cash, cash equivalents and investments on hand. Our bolstered balance sheet provides us with the resources to accelerate our R&D, expand our talent base and execute on our strategic plan. These efforts will lay the foundation for a successful 2018 and beyond.

Now moving to the financials. This afternoon's press release provided details for the fourth quarter of 2017 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 excludes stock compensation expenses, restructurings, milestone payments and other one-time nonoperating adjustments. Please refer to our press release for a full reconciliation of GAAP to non-GAAP.

In the fourth quarter of 2017, we reported a non-GAAP net loss of $18 million or $0.28 per share compared to a non-GAAP net loss of $38.6 million or $0.71 per share in the fourth quarter of 2016.

I will now go through each P&L line item. Net revenue for the fourth quarter of 2017 was $57.3 million which reflects sales from EXONDYS 51 compared to net revenue of $5.4 million for the same period of 2016. The increase reflects increasing demand for EXONDYS 51 in the U.S. In the fourth quarter of 2017, we recorded approximately $3.5 million in cost of goods compared to $100,000 in the same period of 2016. Including the cost of goods was a $2.4 million royalty payment as a result of settlement and licensing agreements that we entered into with BioMarin in July of 2017.

Prior to the approval of EXONDYS 51, we expensed manufacturing and material costs as R&D expenses. As materials that were previously expensed are being consumed, our cost of goods will continue to grow. We expect our COGS for 2018 to be approximately 8% to 10%, which includes the BioMarin royalty. Adjusted non-GAAP R&D expenses were $41.8 million for the fourth quarter of 2017 compared to $27.8 million for the same period of 2016, an increase of $14 million.

The increase was primarily due to increased patient enrollment in the company's ongoing late-stage clinical trials and a ramp up of preclinical studies for the company's PPMO platform and other follow-on exons. Adjusted non-GAAP SG&A expenses were $27.3 million for the fourth quarter of 2017 compared to $16.1 million for the same period of 2016, which is an increase of $11.2 million.

The year-over-year increase is primarily driven by increases in professional services due to global expansion and compensation and other personnel expenses driven by net increase in headcount.

In the fourth quarter, we recorded $2.7 million in interest expense compared to less than $100,000 on the same period of 2016. The year-over-year increase was primarily driven by accrued interest expense related to the convertible note that we issued in November of 2017.

Given the multiple inflection points throughout 2018, we will not be providing guidance on our operating expenses at this time. However, we expect non-GAAP research and development expense to grow compared to last year as we are accelerating the development of our gene therapy and our PPMO programs. Any increase in non-GAAP SG&A expenses will be appropriately phased and it will be related to infrastructure build and manufacturing scale up to support our global expansion efforts. We plan to utilize our resources to advance our industry-leading pipeline for DMD and pursue multiple disease targets for underserved and life-threatening rare diseases.

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 fourth quarter earnings and our net revenue guidance for 2018. We are very pleased with the progress the team made in the first full year of launch and are looking forward to further adoption of EXONDYS 51 in the United States.

We're also building infrastructure in key markets outside of the United States to expand our preparations for commercialization and continue our leadership role in treating boys affected by Duchenne.

In 2017, our U.S. commercial efforts were focused around 4 key activities: driving prescriptions for identified and appropriate exon 51 skip amenable patients in major centers across the U.S.; maintaining active dialogue with payers to support coverage and reimbursement decisions for all patients with amenable mutations to EXONDYS 51; addressing the administrative and procedural barriers to therapy to shorten the time frame from start form to first infusion that are common among rare disease treatments; and ensuring DMD patients have genetic tests and are appropriately identified for exon skipping amenability.

We will continue to focus on these efforts in 2018 to build on what was already accomplished and work to provide access to EXONDYS 51 to all amenable patients. The team continues to ensure physicians understand the importance of identifying appropriate patients and starting them on EXONDYS 51. 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, including exon 53.

Decode Duchenne, the genetic testing collaboration with PPMD, has identified many patients amenable to exon 51, 53 and 45 skipping candidates. We are proud of this collaboration and the genetic testing success we are seeing.

Patient demographics have remained fairly consistent throughout the launch. The percent mix of patients on commercial and Medicaid plans are approximately 60 to 40 and. At this time, we do not expect this to dramatically change in 2018. We are pleased to continue to see adoption across all age groups. The average age of patients on therapy is between 13 and 14 years old. This age demographic indicates that both ambulatory and non-ambulatory patients are obtaining access to EXONDYS 51. We expect this trend to stay relatively intact until newborn screening for Duchenne becomes standard medical practice, which would identify hundreds of new patients eligible for EXONDYS 51.

From an adherence and persistency perspective, we believe port placements, home infusions and the safety profile of the drug have all led to higher than anticipated compliance rates. Throughout the first full year of launch, we are continuing to see high compliance rates and minimal discontinuations and at this time, expect compliance to stay relatively high.

We previously shared that approximately 40% to 50% of patients opted to have ports prior to their first infusion. Based on discussions with physicians and our specialty pharmacy partners, we expect this to continue. However, we do not actively monitor how many patients ultimately choose a port for drug delivery. We feel confident that approximately 40% to 50% of all new patients starting EXONDYS 51 will opt for a port.

A significant measure of progress is that during the first year of launch, 100% of the top Tier 1 and Tier 2 treatment centers prescribe EXONDYS 51. These centers treat approximately 75% of the DMD population and have continued to identify new patients amenable to exon 51 skipping, and submit star forms accordingly. We continue to call on the top tier centers, as we have since launch, but now -- have now expanded our reach into additional sites to educate physicians on EXONDYS 51 and the importance of identifying exon 51 amenable patients.

With strong prescriber understanding established, payers have better understanding of the disease, the number of patients eligible for treatment within a given plan and clarity around the patients who would most likely benefit from EXONDYS 51. Our ongoing efforts with payers include both Duchenne information and EXONDYS 51 data, laying the foundation for access physicians regarding EXONDYS 51 and helping to prepare for future launches for the treatment of Duchenne.

In January, we received our permanent J code. While there are always temporary disruptions involved with this transition, we expect the permanent J code will help ease future reauthorizations. Operationally, we continue to build appropriate infrastructure in key regions around the world to support growth as part of building our global leadership in Duchenne. We have now extended offers to country managers, medical directors and MSLs within key markets across Europe. We've also started building our infrastructure in Latin America and recently hired the country manager of Brazil and are currently seeking the medical director.

In addition to these key markets, we are carefully assessing investment into other markets as we look to expand globally. In summary, our operational preparedness has supported a very successful launch in 2017 and set the foundation for a solid 2018 and beyond. We will continue to build thoughtful operation 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 exciting Gene Therapy Programs in DMD and other disease states.

Given these multiple opportunities before us, we are very excited about the future of Sarepta. And with that, I will turn the call back to Doug for closing remarks.

Thank you, Bo. And before I begin let me apologize to those on the line for the technical issue that we had a moment ago.

In closing, let me reiterate that we set the stage in 2017 by establishing our execution-oriented credentials, both scientifically and commercially, built out our pipeline, enhanced our balance sheet to make that pipeline a reality. 2018 will be our year of transformation with a steady stream of potential catalysts and milestones, all as we continue to serve our community with a (inaudible) and advance our pipeline with a sense of urgency.

We have much to do in 2018. But along the way, we will remain true to our mission of working to profoundly improve the lives of all patients with DMD.

And with that, operator, please open up the call for questions.

(Operator Instructions) Our first question comes from the line of Anupam Rama with JPMorgan.

Maybe perhaps a strategic pipeline question here. Are you guys still thinking about business development pretty actively here in the DMD space? And how much of the business development is dependent on flipping over to PPMO and micro-dystrophin cards?

Thank you. So we have -- this is Doug, obviously. We have -- we will always be active in business development going forward. We serve the DMD communities, so we are constantly looking at opportunities to find therapies that would -- would be like enhancing for children with DMD. Going beyond that, if we see positive signals into Gene Therapy Program or in our PPMO, it will give us an opportunity to extend ourselves even beyond DMD and other areas. And in those situations, I'm sure we'll be looking at business development as well. So we've got a fantastic pipeline. We've got a lot to do. We're well funded to execute our pipeline. But we are always on the lookout for new ways to improve the lives of kids with DMD and beyond.

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

I was wondering if you could further comment on, perhaps, some of the data that we'll be seeing mid '18 on the micro-dystrophin biopsies for your Gene Therapy Program. Might we see copy number information from that biopsy? Or are there any other markers that you guys will be measuring and reporting on that we should expect in that day of release?

So we'll have -- so we're going to have preliminary data releases in 2 of our Gene Therapy Programs, just so we're clear. We'll have preliminary results of our micro-dystrophin Gene Therapy Program after the first few biopsies, 3 months and likewise with our Galgt2 program, we'll have preliminary results. I would expect us to be primarily biopsy-related biomarker information regarding gene expression in the case of micro-dystrophin and dystrophin expression.

Okay. And then a quick follow-up. The (inaudible) is not included in your micro-dystrophin construct, as far as I recall. I was just wondering if you could comment, perhaps, on the utility of that or why, perhaps, your micro-dystrophin didn't include that domain?

Our construct is the result of an enormous amount of work of a number of years. And as it relates to our cash (inaudible) probably many years of work in preclinical work. In preclinical models, a construct that we have for micro-dystrophin shows very robust expression and correlates with significant restoration function. So we feel very good about the construct that we're using. Obviously, the results will have to wait for a preliminary read out from our biopsies but we feel very good about the construct and we feel very good about the preclinical work, both from a potential efficacy and in function perspective but also uncertainty from a safety perspective as well. The amount of preclinical safety work that went into our rh74, the construct that we're using, the vector that we're using for both micro-dystrophin and Galgt2 is been the subject of enormous amounts of animal and other preclinical work that gives us a lot of confidence about where we are today.

Our next question comes from Alethia Young of Credit Suisse.

I want to talk about Europe. Do you guys expect a sag or if there's not a sag and you don't get a positive vote, what's the next step there? And the second question is just exactly around gene therapy. I would assume you'll go on and try to communicate PPMD this year. Do you think that you'll be able to kind of have dystrophin and functional? And do you plan communicating again later in the year on this program?

So as it relates to Europe in next -- to be honest, our effort right now is singularly focused on providing a brilliant data package so that we're in a good position to show the CHMP at our oral explanation, which will happen in late April that this therapy is very efficacious and safe and ought to be brought to children in Europe that have DMD that are exon 51 amenable. So what the next steps would be after that? In the event that we're unsuccessful, it's something we're going to have to look at that time. Obviously, we've got options, we have a number of options. But right now, our singular focus is trying to be successful as possible. As it relates to the gene therapy, we'll have to see next steps after our preliminary results. But right now, we're tracking to getting preliminary results from biopsies by the middle of the year. And then we'll sketch where we from there when the next readout would be. And we'll certainly communicate it once...

So we shouldn't expect functional at this first update?

I think it'll be very likely too soon to provide meaningful functional view after the first few biopsies. It will be a 3-month lead on biopsies and it'll be a few patients. So it will probably be potentially misleading to provide functional information to that point.

Our next question comes from Joseph Schwartz of Leerink Partners.

I was wondering if we could get your thoughts on the recent FDA guidance for DMD drug development? And what do you make of the timing of its issuance, the lack of any reference to a threshold effect for dystrophin expression as well as the exclusive focus on dystrophin to the exclusion of some related targets that you have agents directed towards like utrophin and micro-dystrophin?

Let me say, we're very pleased that the FDA issued a guidance that spoke to dystrophin as an important endpoint, particularly as our RNA-targeted technology is focused on the restoration of dystrophin to improve the life of the kids. So obviously, from our perspective, it was a very good step forward. As you -- beyond that, let me say this. As you may have heard earlier, and as we had suggested in advance that we're going to do, we had meetings with the FDA on our Golodirsen therapy based on the results of a trial that we had that's looked at dystrophin expression and Golodirsen. And I'd like to speak more about that once we have the final minutes from that meeting, which we would anticipate happening in the next month or so.

Okay. Great. And then can you give us an update on enrollment in ESSENCE? Are you finding either the 45 or 53 patients are growing more rapidly? And when do you think you'll be able to complete enrollment for all the patients as well as that 75 who are being evaluated before they go into the LOE?

So we're doing very well with enrollment right now. We -- the 45 enrolled are a little faster than the 53, which very likely was simply random in nature since both 45 and 53 represent about 8% of the DMD population. We increased the end of the study as we got to the 45s were coming up and were hitting the ceiling and we still had 53 to enroll. So we wanted to ensure that we didn't exclude people while we were enrolling 53. So we increased the end of the. trial. But we should be fully enrolled by April. So things are going well.

Our next question comes from Tim Lugo with William Blair.

Can you talk about your reasons behind not issuing operating expense guidance for the year? What are some of the levers that maybe made you feel uncomfortable as of now to issue guidance for spending? And is it pipeline related? Is it -- are you waiting for gene therapy, obviously, to read out? Would gene therapy manufacturing be a big swing factor? Can you just talk about it?

Yes, Tim. So as explained in my prepared remarks, we have multiple inflection points throughout 2018. And that's the gene therapy readout, our EMEA feedback that we'll be getting as well as all our PPMO programs. So there would be -- there could be a significant swing throughout the year in terms of the investments that we might have to make. And because of that, we are not providing any expenses -- expense guidance at this point. Obviously, we do have internal budgets that account for all these situations and our, obviously, our capital expenditure plan and our liquidity take all of these things into account. But it's just a little too early for us to providing guidance at this point.

Understood. And if you do receive a positive opinion from Europe, will that significantly change your revenue guidance for the year? Or is that more of a 2019 impact?

No, this should -- if we have a positive opinion, I would presume that our revenue guidance would significantly change. Remember, obviously, post the guidance, and then getting the approval, we have to get through in almost every country, the HTA process to the access reimbursement process, which takes some time. So we obviously integrate the next step, we'll begin to continue to build and work through the HTA process but I wouldn't presume there will be a significant increase in revenue guidance post that for 2018. It will be certainly be coming next year, 2019.

Our next question comes from Brian Skorney of Robert Baird.

Two for me. I guess to start, what are the current thoughts on the decision to not do or to do the interim analysis in ESSENCE? If it were to be done, can you give us guidance as to when the first 75 patients will wind up reaching that 1-year time point? And then on the micro-dystrophin Gene Therapy Program, how frequently are you monitoring patients for dystrophin-specific T cells? I know Jerry's prior construct, that seemed to be one of the major issues in terms of immunoreactivity. Are you monitoring that right now in the gene therapy? Patients who have been treated with microdystrophin, are seeing anything there? And maybe even talk about what's done on this construct to avoid generating immunity micro-dystrophin?

Yes. So on the interim analysis for ESSENCE, I want to be somewhat careful about what I say because I wanted to speak more robustly after we get the final minutes from our Golodirsen meeting with FDA. But I will note that in the event we were moving forward with Golodirsen and then NDA, we would very likely use ESSENCE as a confirmatory trial for our Golodirsen accelerated approval. Of course, marketing commitment. And so as it relates to that, we need to be quite careful about looking at ESSENCE and about looking too soon at things for fear that we risk the integrity of what could ultimately be a confirmatory trial for Golodirsen. So that's the way we're looking at it. We're very cautious about interim analyses with respect to ESSENCE. As it relates to the micro dystrophin program, the children on the micro dystrophin program are being monitored essentially constantly, at least on a weekly basis. So -- and so far, things have looked very good. Obviously, we need to do biopsies and then we can provide more meaningful updates.

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

This is Rick on for Brian. So could you remind us about the development timelines for PPMO 5051? Maybe when you expect to begin dosing? And then could you also maybe speak to your confidence to recruit patients for this trial given that EXONDYS 51 is already approved for patients amenable to exon 51 skipping?

Yes. So on 5051, to give a broad structure, you're in a single ascending dose study. Our goal -- and we're tracking to getting insight on dosing and then the maximum tolerated dose by the end of 2018. That's extraordinarily important because we (inaudible) of a model from an efficacy perspective, we have seen significant increase in cell penetration and significant increases in exon skipping, significant increases in dystrophin expression using the PPMO versus its GMO counterpart. So we're really excited about it need but we need to see if we get the therapeutic level. On timing and patients, we are already dosing patients. So far, things are going well. This is a small population, so it will be somewhat challenging to recruit patients. But we're very confident that we're able to recruit the patients and complete the single ascending dose study and then move into a multi ascended dose study and then maybe to an extension study. We'll go from there. And then just talking about PPMO, let me just go beyond that you mentioned. We -- as I mentioned in my text, we have 5 additional PPMOs that are currently in IND enabling preclinical and toxicology work right now. Our goal is to have at least an additional IND filed by the end of this year and then another IND for another one filed immediately next year and then another one shortly thereafter next year as well, at least. So we're working hard and as urgently as possible to complete the work that can get additional INDs filed and cleared and additional PPMOs in the clinics so that we can move these forward into patients and hopefully benefit patients.

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

This is David Lebowitz on for Matthew Harrison. Just extending on that last question with respect to PPMO. Given the higher tissue penetration, I guess, the early point so far, have you seen any safety signals that are different than EXONDYS 51?

So first of all, no, we haven't at all. And I just want to caution all of us, this is singular ascending dose study since you may recall (inaudible) for single ascending dose studies, we started at significantly subtherapeutic levels. So we are very confident from our preclinical work. We feel very good and optimistic and that's why we're growing at risk with 6 PPMO programs. But while I can tell you that we haven't seen any significant safety signals today, I would await more insight as we get to higher and more potentially therapeutic doses.

Fair enough. And we jump over to gene therapy, you have 3 different programs in the works, 2 that have already started to dose. I guess, going forward, at what point do you consider yourself to having enough data to be able to compare the various programs? Because generally, you would think that it's not the overall objective to push them all forward to the end game. So when do you think you might have enough to begin to at least evaluate in comparison?

Well, I think we're going to push them all forward for as long as possible until we're confident that there is clearly a route to treat all boys with DMD. And so it may be some time. And one of the goals behind our approach, people who want to ask this, why do you have 3 separate Gene Therapy Programs. And the goal is that we want to take numerous bets. We have a vision in our vision is to profoundly change the lives of these children in a positive way. And we're going to take as many shots on goal as possible. So we're going to run this for a while before we would ever make a call like that. I would also say beyond that, I would note that Galgt2 and dystrophin are entirely different approaches to treating DMD. And Galgt2, just so we're very clear, it has potentially utility even beyond DMD. Galgt2 has the ability to deal with other beyond DMD perhaps DMD perhaps other muscular dystrophy and then the other muscular disorders as well.

Our next question comes from Ritu Baral of Cowen and Company.

My first question is for Bo. You said something interesting. You said that you would expect the average age of the patients to stay in the 13- to 14-year old time frame going -- sorry, profile going forward. Why would that be? The average age of diagnosis is about 5, average lifespan is about 20. Why wouldn't we see a creep down even before we're doing screening on earlier with EXONDYS identified patients?

Thanks for the question, Rita. Yes, so if we just look at 2017, it held pretty consistently all through the year. Averages, it went back and forth between 13 and 14. The majority of the children that are on therapy fall in really just sort of 10 to 15 age bracket. And in 2018, we expect that to stay pretty consistent. We do get children all over the different age groups, but when newborn screening really kicks in, you're talking just hundreds of children because to your point about average age of diagnosis is around 5, there's hundreds of children that are undiagnosed. So we think the trend will, in 2018, will stay relatively consistent with the average age hovering somewhere in that 13 to 14 range. It could fluctuate a little bit but we don't see major fluctuations throughout the next year. The big fluctuation will happen when we have hundreds of new children being identified because of newborn screening.

Are you making an effort to, I guess, to convince clinicians that maybe you want to treat earlier because there are some should treat the 7, 8, 9 year olds or are they pretty -- do they have a pretty good idea of the profile of patient and severity of disease that they want to treat at this point?

You know what? I mean, Rita, it's actually very consistent in between ages of 5 and 19. All the children are getting -- not all of them, but the majority of children are being prescribed from the physician. So it's not about convincing physicians to prescribe earlier. They're actually prescribing as soon as they find the patient is, especially the young ones because those are going to be the ones that benefit the most from the drug. Really, it's just a fact of there's not a lot of patients that are identified in the younger age group from age 0 to 5 to 0 to 6. When they are diagnosed, it's mainly due to them having a brother that was diagnosed. And so this is why we do put a lot of effort on genetic testing. We also hand out flyers like child muscle weakness or -- and we talk about education to not only to the neuromuscular specialist but some large pediatrician groups on looking at CKs and looking for motor weakness and really getting a diagnosis of Duchenne. So it's just a matter of those hundreds and hundreds of boys that are not diagnosed less than 5 to 6 years of age. And when they get diagnosed, they will go on therapy.

Got it. A quick follow-up on Golodirsen (inaudible). Obviously, there was that CK issue in the U.K. patients very, very early into the year. Is that something that has either changed monitoring requirement in trials of Golodirsen? Is that something that has come up with the FDA in your discussions with them and in your meeting?

So the answer is no to all of those. Not at all. Just to remind everyone, in the ESSENCE trial, we have 48 sites and well over 100 patients. We have 4 sites in the United Kingdom out of the 48 sites that represents 6 boys. There was an adverse event in the U.K. that was rhabdo and CK elevation, to remind everyone. I hope it comes as a surprise to those who -- DMD children universally, have elevated CK levels, at some points and rhabdo is a known risk associated with DMD. But nevertheless that rhabdo and CK occurred very shortly after the therapy. So we're cautious and we said, it's possibly related to therapy notwithstanding the fact just by way of background that the boy actually had a significant fall the day before. So there was certainly an alternative potential explanation. Normally, that would have been the end of it. Our drug monitoring committee, the independent committee reviewed this issue, looked at the data, looked at all of the labs and then cleared all of the boys to continue. And that boy got back on therapy and there were no other incidents and certainly no rhabdo-related incidents at all. The issue here is a protocol related one. In the U.K., only in the U.K., but in the U.K., there was a specific stopping rule in the protocol that the MHRA noted that required us to stop while the MHRA reviews that -- the issue and we should hear back from them in March. And so our hope is that those boys will recommence therapy in March. (inaudible) whether if there was any impact and it should not have any impact on the performance of ESSENCE overall or the timing of ESSENCE.

Got it. And just a quick one last question for Sandy. Sandy, for 2018, it's 10% COGS range that you gave out. Do you think that's the final COGS range going forward? Are you still burning through some of the old supply at this point?

There's very little left over to burn. It will -- there will be a small uptick for next year or 2. But we don't expect the COGS to be significantly over a very low-teens number. And that could come down a bit as well because it continued to optimize our processes, which is why I didn't give any guidance for 2019. And as a result, 8% to 10% is the number we give for 2018.

And our next question comes from the line of Liisa Bayko of JMP Securities. I'm sorry, our next question comes from Chad Messer of Needham & Company.

Your partner, Summit, recently reported some Phase II data for their drug, ezutromid. I'm really interested in getting your guys' thoughts on this early biomarker data, particularly their ability to affect utrophin levels and some of the MRI findings that they reported?

So we're obviously very -- summit is our partner. We have ex U.S. rights with Summit. They've been a great partner with us in a number of regards and obviously, we're very excited about their results. I think they actually issued a release with further analyses on those results. That is the 24-week results so we await the 48-week result as well, and then we'll see where we are from there. But we're very happy for them and we're happy for the results so far.

(Operator Instructions) Our next question comes from the line of Yun Zhong of Janney.

A follow-up question on the PPMO program. Just wanted to know if the point is still to initiate the multi-ascending dose study, maybe somewhere around mid-2018 without waiting for the completion of the single ascending dose steady?

That's our current goal, yes. The exact timing of the multi-ascending dose is difficult to nail down, the precision of course because we have to see how high we get on the single ascending dose. But our goal is to get to a comfortable level and then commence the multi-ascending dose while the single ascending dose continues and will continue to inform the multi-ascending dose.

Okay. And you have been talking about this potential less frequent dosing with PPMO, but I'm wondering, comparing less frequent dosing versus potential maybe better efficacy with the same dosing regimen, which one do you think are the important given that FDA has some issues with the efficiency of protein production prescription? Just comparing the dosing versus efficacy?

Well, it's a very interesting issue. So the -- obviously, efficacy is extraordinarily important and continuing to increase the expression of dystrophin is extraordinarily important. And we'll know better what the ultimate dosing regimen may be as we get better informed, both from our single ascending dose and our multi-ascending dose. With that said, it may very well be the case that we're not compromising efficacy to get better dosing. What we've found in animal models is an extraordinarily long amount of exon skipping in the muscle with a single dose of our PPMO. So the goal here is to not compromise. So we're not making a trade-off between efficacy and dosing that we get actually a much better dosing regimen which would, obviously, be great for the boys. But we get robust expression of dystrophin as well. But we'll know all that better as we complete ascending into the multi-ascending dose study.

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

I have a few out here. So as far as 5051 program is concerned, I -- you were supposedly -- you were expecting to get to 8 to 12 mixed (inaudible) right? So -- and your single ascending dose study, where are you currently versus the goal?

We're still very low, so you're still clear. I'm sure, as you know, single ascending dose study, we start at significantly subtherapeutic levels and move up very slowly. So we're significantly far away from getting into potentially therapeutic doses right now.

Okay. And then for that micro-dystrophin program, at the recent investor event, you specified greater than 20% dystrophin expression levels. What's driving the relatively high value here? Is it because of the likely lower ability to sustain stress for a micro dystrophin construct versus a full dystrophin or the expected vector expression loss as the boys age?

Yes, that's a great question. So the answer really is often as it comes from the preclinical animal model. The reality is, as you point out, is that what we have seen repeatedly is extraordinarily small amounts of dystrophin expression correlate to functional benefit. We've seen this many times, and (inaudible) once you use that on Exon 44 amenable boys who have extraordinarily low amounts of background random exon skipping and yet have much mild phenotypes. So in one sense, you're right. If you look at it that way, we would say, even small amounts of dystrophin expression in gene therapy would be meaningful, and it may very well be. We don't think we need 20% to be meaningful, but we are seeing in animal models expression that gives us a lot of confidence that we may get to significant levels. I don't know if I actually said 20%. I know we would be very, very happy at 5% to 10% to 15%. Animal models, we get very optimistic.

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

Maybe just follow the previous question. So you mentioned the like 5%, 10% micro-dystrophin level you'll be very happy. So would that be the goal like for you to look at the market data when we're heading into later this year when you report the data? And will you plan to dose higher if the level is below your expectation?

Well, like so many things, we obviously adapt ourselves to what we see. And I would also note that because of the preclinical work that was done, and the safety package that exists with respect to our micro-dystrophin program, we actually are clear to go significantly higher even than where we are. But I would also note for right now that we are at 2 times 10^14 dosing, which is a significant potentially therapeutic dose, and we believe based on animal models, that, that is an appropriate and significant therapeutic dose. Things are working well that we will see robust expression. So in the event that something happens and we don't, certainly, we need to adapt ourselves and thinking about that higher. But our current planning is that we've chosen a very good therapeutic dose. In fact, if I'm not mistaken, I'm not sure there has been a dose in gene therapy higher than 2 times 10^14.

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

This is Emma on for Hartaj Singh. Doug, you've been alluding to eventual expansion into other rare diseases beyond DMD. Are there specific diseases that you have already identified that would make the most sense strategically? Or are you more just keeping an open mind and evaluating individual DMD opportunities as they arise? And then just more broadly, how you're think about that from a prioritization and timing perspective?

So couple of things. One, I think generally speaking we're probably looking at it in a very broad way. So we look at this in a very kind of broad way. With that said, obviously, there are no muscular rare disease targets that are right inside of our wheel housing and we are going to be thoughtful about where we go next to make sure that we do leverage the expertise, the abilities and talent that we have in house. It might be dangerous getting spread out and then going beyond your own ability. We wouldn't do that. But we do look at things pretty broadly before we throw kind of a wide net. And then the sort of the question about sort of where -- when do we go out beyond DMD? In addition to things that might be opportunistic along the way, I think there's 2 different times when we're going to look at this. The PPMO has positive signals, then that means that we have an already targeted technology with an extraordinarily laudable safety profile that has utility, significantly beyond DMD and we would certainly take advantage of that both internally and likely externally. Likewise, with gene therapy, if we see positive gene therapy signals, we are going to build for ourselves a very robust significant gene therapy approach division, manufacturing capabilities and the like. And once we have that expertise, we're certainly going to leverage that expertise beyond DMD as well.

And our next question comes from the line of Ted Tenthoff from Piper Jaffray.

I've got to say this, really informative, really helpful. I'm impress by the progress you guys continue to make. I have one very straightforward question, maybe 2. How many boys are on EXONDYS 51, right now? And at the time of launch, you guys discussed net pricing of $300,000 premium range. Can you give us an update on where that's coming out 1 year in the launch?

Thank you very much. And thank you for the comment. So we haven't provided the number of patients on therapy. We used revenue as our surrogate market to use on -- for our performance. I will say that logically, and I said this before, we are still in, I'm going to use a silly sports analogy, second inning of our -- of where we are right now. We're not deeply penetrated, so there's a lot of headrooms to do a lot with the boys with DMD. And as far as the pricing goes, things haven't changed significantly. So we -- the pricing that we've revealed before is where we are exactly today.

Ladies and gentlemen, this concludes today's question-and-answer session. I would like to turn the conference back over to Doug Ingram for closing remarks.

Well, thank you very much for your time, everyone. Again, apologies for our brief technical issue. Hopefully, all of the questions have been answered and really appreciate your patience and your time this evening. Thank you very much.

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