Sarepta Therapeutics Inc (SRPT) 2012 Q3 法說會逐字稿

Hello, and welcome to the Sarepta's third quarter 2012 earnings call. My name is Maisha and I'll be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note this conference is being recorded. I will now turn the call over to Erin Cox. Erin, you may begin.

Thank you, Maisha, and thank you for joining today's call. Earlier today, we released our financial results for the third quarter of 2012. The press release is available on our website at www.sareptatherapeutics.com and our 10-Q is filed earlier today.

Joining me on the call are Chris Garabedian, our President and Chief Executive Officer; Sandy Mahatme, our new Chief Financial Officer; and Mike Jacobsen, our Vice President of Finance.

I would like to note that during this call, we will make a number of statements that are forward-looking, including statements about the development and clinical status of Sarepta's product candidates and the potential efficacy, clinical results, intellectual property position, revenues, expenses, potential funding from the governments and other sources, and collaboration and partnering opportunities.

These forward-looking statements involve risks and uncertainties, many of which are beyond Sarepta's control. Any such risks could materially and adversely affect the business, results of operation, and the trading price of Sarepta's common stock. For a detailed description of risks and uncertainties we face, you're encouraged to review the Company's official corporate documents filed with the Securities and Exchange Commission.

With that, let me turn the call over to Chris Garabedian, Sarepta's President and Chief Executive Officer. Chris?

Thank you, Erin. Good afternoon, everyone, and thank you for joining us. I'm pleased to provide you with an update and overview of our activities and accomplishments since our last quarterly earnings call along with our financial performance in the third quarter of 2012.

I will soon speak about how the recent data with eteplirsen, our lead program for the treatment of Duchenne muscular dystrophy, has us preparing for a number of activities to move the program forward successfully. But first, I'd like to speak about the financial health of the Company.

I'm pleased to announce that we've strengthened our cash position in recent months and have a current cash balance of approximately $57.4 million as of today. This cash position was achieved through utilization of our ATM or At-the-Market facility in addition to warrants that were exercised in the month of October.

We've drawn down $38.7 million between September 6 and October 16 from our ATM, with the majority of the $38.7 million being drawn down prior to receipt and release of our 48-week data. The overall average price of the stock sold under the ATM was $19.05 on a total of 1.984 million shares. Additionally, we started to receive proceeds from the exercise of warrants in October, and raised an additional $5.6 million in cash as of today, November 7, on the exercise of approximately 532,000 shares.

We also filed a shelf registration today as our previous $100 million shelf was largely accounted for due to the $40 million ATM facility and the $46 million registration of our outstanding warrants. Our new shelf of $180 million will replace our existing shelf and allow us flexibility to continue to finance the Company's operations for the coming years.

The Company has made significant changes to our operations over the last year to run more efficiently and to reduce the cash burn as we moved the DMD program forward. The current cash balance of more than $57 million has us well positioned to prepare for many of the activities that will take place in 2013, including preparing for our regulatory discussions with the FDA on the requirements for approval of eteplirsen, planning our confirmatory studies with eteplirsen, including the initiation of enrolment of a confirmatory pivotal study by the end of 2013, and the set-up cost and production runs required to scale up manufacturing to prepare for additional studies with eteplirsen and our follow-on DMD drug candidate.

This has been a big quarter for the Company and many activities have been set in motion as a result, and we have a lot to cover. We announced an important dataset from our lead clinical program with eteplirsen for the treatment of DMD. Specifically, we announced on October 3, the 48-week dataset from our Phase IIb study of eteplirsen in the Duchenne muscular dystrophy. This analysis from our Study 202 protocol, which is our long-term safety and efficacy expansion study of eteplirsen, showed that we met our primary endpoint, the production of dystrophin measured as a percentage of dystrophin-positive muscle fibers.

We produced meaningful dystrophin levels across the entire patient population with a statistically significant benefit across both of the 48-week treatment dose cohort as well as the placebo-delayed treatment groups that receive 24 weeks of eteplirsen treatment. I'll briefly go over some of the highlights of that dataset before I go onto other activities that are ongoing.

The primary efficacy endpoint, defined in our protocol and statistical analysis plan of Study 202, again our long-term safety and efficacy extension study, was the increase in dystrophin-positive fibers at 48 weeks as a percentage of normal, compared to baseline. Eteplirsen administered once weekly at either 30 mg/kg or 50 mg/kg for 48 weeks resulted in statically significant mean increase of dystrophin-positive fibers of 47% as a percentage of normal across all treated patients with a p value of 0.001. There was no significant difference between the 30 milligrams and 50 milligrams arms on the production of dystrophin through 48 weeks, but all patients demonstrated high levels of dystrophin-positive fibers that ranged from 30% to [50%] of normal across those two dose cohorts. The placebo-delayed treatment cohort, which we had received 24 weeks of eteplirsen at either 30 milligrams or 50 milligrams followed by 24 weeks of placebo, also produced statistically significant mean increase in dystrophin-positive fibers of [13.3%] as a percentage of normal with a p-value of less than or equal to 0.009.

The previously-reported cohort of patients who administered eteplirsen once weekly at 30 mg/kg over 24 weeks that resulted in a statistically significant increase of 22.5% which was presented at the American Academy of Neurology Meeting earlier this year. These patients showed an additional increase of approximately 30% additional dystrophin-positive fibers between weeks 24 and 48 for a mean of 52.1% dystrophin-positive fibers at week 48. This lends further evidence that dystrophin levels in the muscle continue to increase with continued treatment with eteplirsen. This increase was highly consistent across these four 30 milligram/kilogram patients and ranged from 28% to 31% additional dystrophin-positive fibers between weeks 24 and 48 across these patients.

Overall, we were very encouraged by these consistent high levels of dystrophin across all of the patients in the study with patients who received eteplirsen for 24 or 48 weeks with the added evidence of increasing dystrophin levels with continued dosing as evidenced by the four patients described in the 30 milligram cohort.

In addition to the production of novel dystrophin, we had previously reported that eteplirsen administered once weekly at 50 mg/kg over 48 week resulted in a 21 meter improvement from baseline on the six-minute walk test compared to a decline of 68.4 meters in the placebo delayed treatment cohort.

Again, these patients in the placebo delayed treatment cohort received placebo for 24 weeks followed by 24 weeks of treatment with eteplirsen in the open label extension. This difference resulted in a statistically significant clinical benefit of 89.4 meters on the six-minute walk test and achieved the statistical p-value of less than or equal to 0.016. The treatment benefit [exceeded] 48 weeks as unprecedented in DMD and reflected a significant delay of disease progression using the standard well-accepted measure of ambulation.

Another important objective of this study was to evaluate the safety profile of eteplirsen. At doses that are the highest-ever evaluated using our morpholino drug chemistry, the safety profile of eteplirsen at 24 weeks continued to show promise as a potentially safe drug for long-term use. This is an important characteristic of a drug for a disease that might require lifelong treatment. Through 48 weeks of treatment there were no serious adverse events, no treatment-related adverse events of any kind, and no treatment-related changes detected on any safety laboratory parameters including several biomarkers of renal function.

We are in the process of putting a briefing document together for the FDA that will include results from Study 201 and Study 202 supportive data [from] the additional 26 patients that were studied in two previous UK studies along with data from our long-term animal tox and pre-clinical program, in support of our end of Phase II meeting with the FDA.

As we prepared the briefing document, we are preparing the questions that we will pose to the FDA for this meeting to ensure we gain the most meaningful information to understand what is required to gain approval of eteplirsen. We will request the meeting before the end of the year and expect the meeting to take place in the first quarter of 2013. One goal of the meeting with the FDA will be to discuss the design of our confirmatory pivotal study and acceptable end points to gain full approval of eteplirsen while we also hope to better understand the feasibility of an accelerated approval filing on the studies we've conducted to date.

We continue to collect safety and clinical outcomes data from Study 202 and are gathering additional safety data with each weekly visit and are taking clinical outcome measures, including the six-minute walk test, approximately every 12 weeks. While we originally have scheduled the clinical outcomes measures at weeks 60 and 72, due to scheduling conflicts and the availability of the appropriate personnel at the central site in Columbus, Ohio data collection was shifted to take place at week 62 and 74. As we prepare our primary analysis of study 202 for discussion with the FDA, we will continue to asses data from the ongoing study and will provide further communication of additional safety data and follow-up six-minute walk test measures at the appropriate time.

We are still planning to initiate enrollment in a larger confirmatory pivotal study for eteplirsen in the latter part of 2013 with dosing to begin in the first quarter of 2014. And the size, design and endpoints of this trial will be determined after our end of Phase II two meeting with the FDA.

Many in the DMD community have asked us what is Sarepta's intention related to accelerated approval. So I'd like to provide our perspective on our current plans. First, I'd like to say, we've received a tremendous amount of positive feedback and support from the DMD community following our 48-week date of release as many were encouraged by the [disrupts] in production, the safety profile and the clinical outcomes that were observed.

While we understand the DMD community's desire to gain access to eteplirsen as soon as possible, we have to ensure that we adhere to the standards set forth by the FDA to determine the appropriate path toward approval and we don't want to make any missteps that would delay or compromise our role as a drug developer.

We have benefited from the support of many DMD organizations, both financially and otherwise, across both our eteplirsen program and our broader DMD program efforts.

We received help from and support from PPMD, from [NBA], CureDuchenne, Charley's Fund, Action Duchenne, and the Duchenne line to name a few, and we've heard directly from many families affected by Duchenne who have expressed their interest in gaining access to eteplirsen through clinical trials, compassionate use or other mechanisms.

Let me state that we hear you and we are working expeditiously to ensure that we can get eteplirsen to the patients that may benefit as quickly as we can and we believe that meeting with the FDA is an important step in this process.

Now regarding our intentions as it relates to accelerated approval, as a reminder, accelerated approval is a mechanism the FDA has to facilitate earlier approval of drugs to treat serious diseases on the basis of surrogate or clinical endpoints that can be measured earlier in drug development to be followed by confirmatory trials to verify the anticipated clinical benefit.

The expansion of FDA's accelerated approval pathway under FDASIA and PDUFA-V as special consideration to enable the greater use of this pathway for rare diseases. Some of these special considerations for rare diseases included considering the availability or lack of treatments for a particular disease. This severity or rarity of that disease and the corresponding risk benefit ratio of an intervention compared to the morbidity on mortality associated with the disease based on the needs and views of patients suffering from the disease and if a new intervention has shown a benefit using a surrogate marker that would reasonably predict a clinical benefit among other considerations.

As we've stated previously, we are very encouraged by our DMD dataset in our Phase IIb study which has met its primary endpoint of novel dystrophin production has shown a clinical benefit in the six-minute walk test through 48 weeks and has had a favorable safety profile to-date across the patient population with no treatment related adverse event through 48 weeks.

We will be discussing these data with the FDA to determine the most appropriate registrational path for eteplirsen. Specifically, we will discuss the potential design and end points of a confirmatory trial that would support a full approval of eteplirsen.

Additionally, we will discuss the feasibility of filing for accelerated approval based on the current data set. We will not be making a decision on whether or not we will file for accelerated approval of eteplirsen until after we've met with the FDA and understand their perspective and have received their input. As I mentioned, that meeting is not calendared at this time, but we expect it will take place in the first quarter of 2013.

We have also received questions as to whether we will pursue a designation from the FDA for eteplirsen as a breakthrough therapy. The breakthrough therapy designation is a new mechanism established under FDASIA to expedite the development and review of an application for approval of a drug by enabling increased interaction with the FDA.

Drugs are eligible if they treat a serious or life-threatening disease or condition, and if they may be a substantial improvement over existing therapies based on preliminary clinical evidence, such as substantial treatment effects observed early in clinical development. The breakthrough therapy designation by itself does not create an alternative means for approval of a product, but we are evaluating this designation, and all other mechanisms that may expedite the registration process for eteplirsen.

We are currently showing good progress on our two collaborations on other exon targets, exon 45 and exon 50 drug candidates, where we're receiving grants to support the IND-enabling work to move these two candidates into clinical development.

We are also in discussions to obtain grant funding and/or foundation support to assist us with two additional exon-skipping targets, exon 53 and exon 44. We plan to discuss these follow-on drug candidates with the FDA and EMA regulators to determine the requirements to evaluate these compounds in clinical studies. Our goal is to have IND filed in the US and EU on some or all of these drug candidates by mid-2014, with approval to begin clinical studies by the end of 2014. These additional drugs against other exon targets will enable us to provide treatments for a broader group of DMD patients who can benefit from exon-skipping drugs.

Related to our additional exon-skipping DMD drug candidate, and the broader DMD pipeline and global opportunities, I'd like to speak about our current plans for a potential partnership. First, we are committed to determining what will be required to get eteplirsen through FDA approval and are confident in our ability to execute on this development program and the potential commercial activities associated with a product approval. Therefore, we are not seeking a partner to help us with eteplirsen in the US.

We have stated our willingness to consider a partner for ex-US or ex-North American rights across our current and future DMD drug candidates. To be clear, we are not holding up our development in pursuit of additional DMD drug candidates and have utilized mostly non-dilutive funding to advance these candidates through the IND-enabling work through collaborative government and academic grants. However, we believe that with the right partner, we might benefit from having additional resources to expand drug supply production and accelerate clinical development of additional exon-skipping targets.

We have received a tremendous amount of interest from potential partners, including large pharma, large biotech, and mid-sized biotech companies that are interested in the rare disease and/or neuromuscular disease areas. We have been contacted by about a dozen companies and are at various stages of discussions with each of them.

While I do not feel we need an ex-US partner to deliver on our eteplirsen program, or expanded DMD development program, we believe that with the right partner, the right collaborative structure and the right economics, there is an opportunity that may be beneficial to the success of the program.

Now, I'll speak briefly in providing an update on our active government-sponsored infectious disease program for the treatment of the life-threatening hemorrhagic fever virus of Marburg. Our current drug candidate, AVI-7288, has shown excellent efficacy at 15 mg/kg in multiple non-human primate studies and we reported unprecedented data in a delayed time-to-treat setting where we showed 100% survival with a 40-day course of treatment after 40 days, despite initiating treatment 48 hours after infection, and 83% survival when initiating treatment 96 hours after infection.

We are preparing for a multiple ascending dose study in healthy volunteers that is scheduled to begin in the first half of 2013. While we were planning to initiate the Marburg multiple ascending dose or MAD study this year, we decided not to proceed with dosing using the drug supply that was manufactured to support the study.

Specifically, we identified a new impurity in our Marburg drug product that resulted from a new process and a new contract manufacturer that we are further investigating as we explore an alternative source for the drug supply. Importantly, this is an impurity that is only associated with the PMO-plus chemistry and has not been seen with our non-conjugated PMO drug production runs that relate to eteplirsen or other drugs in support of our DMD program.

I'd also like to mention that we announced today that we received orphan drug status for our Marburg single-agent drug, AVI-7288, as well as for our previously-funded Ebola single-agent drug, AVI-7537.

Lastly, I'd like to welcome two new members of the Sarepta executive team. Sandy Mahatme, our new Senior Vice President and Chief Financial Officer, who joined us from Celgene where he was most recently Head of Corporate Development and served in a variety of senior finance roles with the company over the last seven years. And Ty Howton, our new Senior Vice President and General Counsel, who joined us from Vertex where he spent three years serving in different capacities including at Chief Legal Officer and Chief Compliance Officer and served on the legal team at Genentech prior to joining Vertex.

Both Sandy and Ty bring a tremendous amount of experience and breathe to the management team as they presided over some of the most successful biotechnology companies in the industry during times of rapid growth. They will no doubt be an instrumental part of helping us through what we hope will be Sarepta's growth in the years to come.

Both Sandy and Ty will be based at our new headquarter location in Cambridge, Massachusetts where many of our critical activities and staff are currently located.

We are preparing for the closure of our two Bothell, Washington sites over the next six months and have begun the process of transferring activities and employees to our new location.

Overall, it has been a great quarter for us, and we feel we are well positioned to continue to drive value with our eteplirsen program and our other corporate activities.

That concludes my corporate update, and before I turn the call over to Mike Jacobsen, who will give you a financial update for this quarter, I'd like to introduce Sandy Mahatme, our new Chief Financial Officer, to say a few introductory words.

Thank you, Chris. Since this is the week in the job, Mike will be providing an update on our financials for the third quarter, but I just wanted to express how excited I am to join Sarepta and to become a part of the management team. The data that Sarepta has generated this past year highlighted to me promise of this technology platform, and I believe represents a potential to build Sarepta into a leading biotechnology company in the industry.

The recent eteplirsen data in DMD was remarkable, and I am excited to work for a company that is trying to make drugs available for a devastating disease like Duchenne muscular dystrophy.

Now, I would like to turn the call over to Mike Jacobsen, you will walk through our third-quarter financials. Mike?

Thanks, Sandy. In the third quarter of 2012 we reported an operating loss of $6.9 million, compared with an operating loss of $11.3 million in the third quarter of 2011. This decrease was primarily due to lower research and development expenses related to our non-DMD programs. Revenue for the third quarter of 2012 was $7.6 million, and it's very comparable to one year ago.

Compared to the prior-year quarter, we had $1.1 million increase the Marburg contract revenue, primarily due to the timing of sub contracting activities and a $900,000 decrease in our Ebola revenues due primarily to the stop-work-order we received in early August.

During the third quarter, we did enter into a [$3.9 million]

contract with the US government to evaluate the feasibility of delivering our Marburg drug product candidate intramuscularly. This new [high-end] contract had minimal impact on the third-quarter results and almost all of the revenue associated with the contract will be recognized in 2013.

With regards to research and development, our expenses were $10.9 million in the third quarter of 2012. This is a decrease of $4.7 million from the prior-year quarter. The decrease was primarily due to a $4 million reduction in personnel related costs and non-DMD proprietary research associated with our restructuring that we did in December of last year. We also had a $1.3 million decrease in our DMD program cost based on the timing of clinical and manufacturing activities. These decreases were partially offset by a $400,000 increase our Marburg related cost and that's again due to the natural fluctuation in activities that are required under the program.

G&A expenses for the third quarter was $3.6 million, which was an increase of $400,000 from the prior year and that was due primarily to some increase in legal cost.

Now I'd like to look at the year-to-date comparisons. For the first nine months of 2012, our operating loss was $19.3 million compared with an operating loss of $26.9 million in the nine months of 2011. The $7.6 million decrease was the result of $11 million of reduced operating expenses, partially offset by $3.4 million in reduced revenue.

Revenue for the first nine months of 2012 was $30 million, compared to $33.4 million for the same period last year. And most of this decrease was due to the completion of the H1N1 flu contract in June of 2011.

Research and development expenses are $39.6 million so far this year which is a decrease of $8.6 million from the prior year. This decrease was primarily due to a $5.6 million decrease in the personnel-related cost and proprietary research, a $2.6 million reduction in cost associated with the completion of the H1N1 flu contract.

G&A expenses in the first nine months were $9.8 million. This is a decrease of $2.4 million from the prior year. The decrease was primarily due to a $2 million reduction in employee-related costs and a $500,000 reduction in costs associated with professional services.

In the third quarter of 2012, we had a net loss $49.6 million or $2.17 per basic share, compared to a net loss of $4 million or $0.18 per basic share in the third quarter of last year. For the nine months, the net loss was $59.2 million or $2.51 per basic share compared to a net loss of $900,000 or $0.04 per basic share in the prior year.

For all periods the loss per share has been restated to reflect the one for six reverse stock split our shareholders approved in July. For both the quarter and the year, the large fluctuations in our liability for the outstanding warrants was the major driver impacting this net loss.

In the third quarter of this year, the upward revaluation of our outstanding warrant liability was due to the significant improvement in our stock price. This re-evaluation resulted a change to other income loss of $42.7 million.

In the third quarter of 2011, a reduction in our stock price resulted in creating other income of $7.1 million. Similarly, if you look at the nine months of this year, the increase in the warrant liability impacted or decreased our loss by $40.2 million compared to 2011 or was an increase in other income loss of [$25.6 million].

I would like to emphasize that the change in the warrant valuation is a non-cash charge, and as I mentioned earlier, it's extremely dependent on our ending stock price at the end of the quarter.

If you look at the balance sheet, as of September 30 of 2012, we had cash and cash equivalents of $38 million. This is an increase of $13.5 million from the second quarter due primarily to $19.9 million in net proceeds from the sale of stock via our At-The-Market stock offering, and $1.2 million proceeds from exercised stock options, and $300,000 from the exercise of outstanding warrants. These increases were partially offset by $7.8 million in cash used for operations.

During the third quarter, we sold 1.4 million share of the stock under the ATM offering with an average price of $14.64. So far in the fourth quarter, we've sold an additional 555,000 shares through the ATM offering with an average price of $30.40, resulting in $16.9 million in gross proceeds. This brings our total gross proceeds on the ATM offering to $37.8 million, and resulted in an average price of $90.05.

In the fourth quarter, we've also seen an increase in the exercise of the outstanding warrants. So far, the conversion of these warrants has resulted in $5.6 million in proceeds and the issuance of another 532,000 shares since September 30. On a combined basis, we have therefore raised approximately $22 million in cash net of issuance costs and issued an additional 1.1 million shares since the end of the third quarter. Consequently, as of today, we have $57.4 million of cash on hand.

As we look at the remainder of the fourth quarter, the warrants expire on December 18 of this year will likely be converted if the stock price remains above the $14.70 exercise price. This will result in approximately $10 million in proceeds to the Company through the issuance of approximately 700,000 additional shares.

I'd now like to just give a quick update on our guidance. In our last earnings call, we estimated our full-year revenue would be in the $37 million to $43 million range and that our operating loss would be in the $25 million to $30 million range. Our current estimate is that our revenues will be at or near the lower end of our previous guidance due to the termination of the Ebola portion of our government contract and the delay in dosing of our Marburg MAD study. We currently expect our operating loss will remain in the $25 million to $30 million range.

With that, I'd like to turn the call back over to you, Chris.

Okay. Operator, it's fine to turn the call over to questions.

Thank you. (Operator Instructions). Ted Tenthoff, Piper Jaffray.

Great. Thank you. Can you hear me okay?

Yes, I can hear you, Ted.

Great. Hey, Chris, thanks very much for the thorough update. I know people are probably jumping on a bit to get this drug out there, both investors and families, and I know you guys are in a difficult situation to do this as quickly and prudently as possible, and I appreciate the color that you guys are giving. Quick question. When it comes down to the confirmatory study, could you say that that would begin in 2014? And I guess, kind of a high-level question, what's going to take so long to start that confirmatory study and also to begin the exon 45, exon 50 INDs and clinical studies? I know you guys are a small group, but what's going to take that full 12-month period to really get those balls rolling?

Yes. Ted, so this has been pretty consistent to our previous guidance in that we had -- prior to the 36-week and 48-week clinical trial results, we had really halted a lot of our scale-up manufacturing production plans. With the encouraging data, we restarted a lot of those activities and so there's a few things that need to take place before we begin dosing in our confirmatory study.

So first, we have to figure out what that trial design is going to look like and that's going to be based on our FDA feedback and our discussions with the regulators in the first quarter of next year. Then, we will determine based on the design of that study, the inclusion criteria, the size of that study, the site selection, how many sites we need, where -- what are the best sites to include in that type of study. There is a lot of planning activities that would take place in, let's call it, the second and third quarter of next year.

The enrollment, we would expect, would begin in the latter part of 2013, and the dosing would begin in again that first quarter of 2014 based on a drug that will be ready for release. This means that three batches with three-month stability validated production batches potentially with a new scale of manufacturing that would have to be cleared for release. So those activities take time. We've already started on many of those activities, but again, the three batches -- three validated batches with three-month stability is probably the biggest factor in dosing starting in 2014.

Got you. So it's really the drug supply, that makes a lot of sense. And is that the same factor with respect to the IND filings or is it just that you want to be focused on eteplirsen and obviously again, resources are limited?

Yes. Well, I'd say, it's a combination of factors. Obviously, we would have to scale up production to be ready for clinical studies for the other exons as well, so that's one factor. The other factor is, just the feedback that we want to gain from the regulators through pre-IND meetings on these other exons, and we are trying to do two right now and potentially a third and fourth additional DMD drug almost simultaneously and part of that is by design in that we hope that we could construct almost a companion confirmatory study with these other exons where we could enroll, unlike eteplirsen which when enrolled only goes amenable to an exon 51 skipping-drug, if we could time and sequence these drugs, so that we could do a study that would enroll for lack of a better word all-comers, those who are amenable to an exon 45, an exon 50, an exon 53, maybe an exon 44.

That could be very powerful in gaining the additional drug approvals, and aspirationally lead to a class approval for the rare exon targets. So we have pre-IND meetings we need to get through, we need to complete obviously all the preclinical animal work that needs to be done to submit an IND, and we're trying to do that simultaneously with multiple exon-skipping targets. And so, all of that combined really puts us more comfortably in filing INDs in the first half of 2014.

Makes a lot of sense. Very helpful, Chris. I appreciate that.

Great. Thanks, Ted.

Christopher Marai, Wedbush Securities.

Hi, thanks. Chris, congrats on the quarter and thanks for taking my question. First, I wanted to ask about the ATM. It appears you've taken down about half of that or $20 million. Given the liquidity in your stock in the levels we've recently, it seems to me you could have taken it all down at attractive prices. So, I was wondering, since you didn't, could we conclude that you're very confident about the potential for other non-dilutive financing options, such as partnerships in the future? And then, could you perhaps elaborate on that and help us understand how you think about using the ATM to meet funding needs going forward?

Yes. Right. So Chris, I think in the script, it gives some of the detail, but basically, we've pulled down half of the ATM prior to the 48-week data release. Okay. So that was a strategic decision, because we did not know obviously what the data would garner. And so, the average price that we stated includes the majority of the amount that we've pulled down [was on] prior to the October 3 release.

The window is not opened throughout, right, the month and a couple-week period of time that we drew down from the ATM, particularly in anticipation of the release and the subsequent release of the 48-week data and every company is different in terms of their -- the risk that they will take regarding being in the market proximate to a news event like that, but we did begin to draw down after that as soon as we determined it was okay to do so. So we ended up drawing down most of the rest of the facility, short of a couple million, post the 48-week data and so that came to that average price of about $19 in terms of issuance.

I'll just add that we did better than the average weighted price in almost every day that we were in the market. We did comparable to the average weighted price, if you take from September 6 through October 16, which was the period of time. So effectively, we were able to issue shares in that period of time with minimal or no effective discount. So we thought we used it very efficiently that it was a good financing vehicle and again allowed us to take almost $40 million in the ATM in a very short period of time.

Okay, great. Thanks for clarifying that a bit for us. And then, finally, could you perhaps help us understand what the rate-limiting step is here for bringing the other exons into the clinic? Actually all four of them, not just the two new ones that you mentioned today. Thanks.

Yes, so just briefly explaining kind of the step-wise activities. So first, we need to optimize the sequence and select the sequence that will be brought in to the preclinical testing. And so we have engaged in that process on exon 45 and exon 50, and we are close to preparing to embark on the preclinical testing that would be required as part of an IND filing. There is a variety of animal testing that's required to get an open IND, very similar to what we did with eteplirsen and we need to talk to the FDA to ensure that the program that we've shaped based on precedent with a [surrogate] drug, but also based on other dialog we've had in the past with the FDA.

We will determine if everything is being met to qualify to have an open IND in these pre-IND meetings. So those have to take place and we have to have room to adjust or augment what those preclinical studies and activities will be. The same is true for the additional exon-skipping drug. We need to do the appropriate screening and validation of the exon efficiency to select the target sequence that we would bring in.

The reason this step is very important is because this could be an important linchpin for leveraging data that we collect across multiple of these initial exon-skipping drugs so that when we look for future-rare exons, we can use the same type of validation assays and methods to determine exon-skipping efficiency and lead sequences where we may not be able to get the type of clinical data that we're afforded to get with the more prevalent exon. So there is a variety of factors that influence that. But largely, it's the sequence identification selection, screening, and then the preclinical program in conjunction with a pre-IND meeting to determine if we have the appropriate data to file.

I'll also just state that once that occurs to be ready for clinical studies, the agency typically wants to see three months of stability data in the manufacturing process it needs to produce the drug. And so before release of that drug, right, you'd expect three months to four months on top of that to get into clinical testing and dosing.

Okay, great, thanks. And just one quick question. I'll jump back in the queue. But in terms of these candidates, do you expect to do sort of Phase I -- traditional Phase I studies for them as well or do you think that you could do sort of a safety, efficacy study altogether with regard to this -- in fact, these are similar class to eteplirsen?

Yes. I mean, it's a good question and I don't think we have a definitive answer at this time. I think we are firmly in the belief that we have the same backbone chemistry. We'd use the same manufacturing process that we're using for eteplirsen. All of the experience we've seen to date suggests that we have similar sequence-independent pharmacokinetics and safety profile.

I think if we established that with a standard dose that we get similar exon-skipping efficiency and can show dystrophin production. I think you start to build a case that these drugs are very similar or almost identical with the exception of the specific genetic sequence information that's attached to the backbone chemistry. So I think it's premature to state what the development program is going to look like. But part of the dialog in a pre-IND meeting is going to be gaining some insight into how they're thinking about these broader follow-on exon-skipping drugs.

Great, thanks.

Bill Tanner, Lazard Capital.

Thanks for taking the question. First, Chris, just on the ATM, out of curiosity, was there any amount of debt that had to be taken down when you actually put in the facility?

Yes. No, the ATM facility is at our discretion, right, of when we want to issue shares.

Right.

We don't disclose discussions that we have strategically with Sarepta's Board in terms of what is the right strategy to implement the ATM. But no, I mean ATM facilities are -- they are typically at the discretion except if you're in possession of material non-public information, then typically you are not able to issue shares during those so-called blackouts.

Right, right. Now, I understand that. I was just wondering if when you put that in, was there some requirement that the Company takes some down at that point in time, but it sounds like that's not the case or just trying to get a handle on when the Company exercised the ATM, I guess, in full everything that was done in the third quarter was done just proactively?

Yes. There was no contractual obligation. We could have decided not to draw down on the ATM at all.

Okay. And then, as it relates to the manufacturing, if money was no object, how quickly could you ramp up the manufacturing to meet the market demand? And I guess maybe the demand just by the numbers of kids that have exon 51 mutations? And then, could you maybe ballpark what the cost of that would be to get you to the point to where you could meet the entire market demand?

Yes, Bill, it's actually -- it's not an issue of the cost of that, it is the issue of scaling up the production process and having a larger-scale, validated production method. And remember, this is the first time that we or anybody in the industry has scaled up the types of morpholino peptide -- synthetic peptides like molecules as oligos, right. I mean, there is not a lot of synergy in terms of any learnings that have occurred with the phosphorothioate chemistries like mipomersen drug that I'm sure has been scaled up. And so, we're really charting new territory and we know what we need to do and we're set on achieving that. But it's not anything that we believe a partner could accelerate our activities because of the financing need.

It really is executing on what we know we need to do and we believe we can manage the cost of that. Remember also, these are oligos, so they require the subunits. And this is one of large dose, it's a large (inaudible), so we are -- have to produce the various subunits, the As and Cs, the Ts, the Gs and then have API final drug product production from there. So we are setting forth. 2013 is going to be a big year for us in the efforts to scale up manufacturing, to do all the setup that's required and to start producing drug that we can use in clinical studies and ultimately for other purposes such as commercial access. So again, I just wanted to spell the notion that it's because of a lack of funding that is slowing us down or something.

But I mean, let's say that if we're thinking strategically that right now, you're planning obviously to scale up to a point that you could conduct a confirmatory study of whatever size that would be and presumably, it'll be a fraction of what the ultimate market opportunity would be. So then, going from starting to scale to meet a clinical requirement is, let's say, maybe mid next year, you hear from the FDA that you get accelerated approval, there is not going to be much of a time lag and going from we can fill the needs or fulfill the needs of a clinical trial, shifting gears to we can fulfill the needs of the market. Is it fair to say or --?

Yes. So let me provide some clarity. So we've been producing eteplirsen at what I would describe as small-scale production and that was sufficient to supply drug for our current ongoing 12-patient study. We knew that we would need to increase the scale, let's say, get to mid-scale production to be able to support pivotal studies or confirmatory studies or what would be needed for just registrational activities related to eteplirsen as well as some of the early development work needed for the other exons. We know that we will have to get to large-scale production capacity to be able to launch commercially and satisfy what we believe the demand might be for eteplirsen in the marketplace.

So we had already initiated and started plans for this mid-scale production to support the clinical studies that I've described we would be ready with those -- with that drug in 2014, the first quarter of 2014. But the large-scale production is a parallel effort, right. That's something we would have to do as well. Many companies with sequences, they would get to three validated batches, with three-month stability at a mid-scale production before moving to large scale. We're not anticipating the sequencing as we believe we can't do this in parallel so that we can prepare for the potential of a early commercialization.

However, we want to talk to the FDA to understand how feasible that scenario is before we move aggressively into the large scale production process. But we are already doing that in terms of the planning, the paper exercises around that, what that would look like assuming we get a positive nod from the FDA in terms of an acceptable accelerated approval filing.

So I hope that answers your question in terms of how we're managing it very effectively and what it means to supply for clinical trials versus supplying for a commercial demand.

No, I mean, I think that's helpful. I think the parallel aspect of it may be something that is perhaps lost in the conversation. Just a couple of real quick questions as it relates to meeting with the FDA, and -- I mean, it's our understanding that there are already assembling background information from others to better inform them as to how they should think about this. So, do you have, and I apologize for asking a question maybe difficult to answer just from a speculation perspective, but do you have any thoughts as to, let's say, meet with the FDA, how quickly you might have some -- you could have some feedback from them as to whether or not an accelerated path is viable?

Yes. So, Bill, as I mentioned we're not going to make that decision about whether we pursue an accelerated approval filing till after we meet with the FDA. What I'll say is that these are very nuanced discussions often, okay. And we asked certain questions, we get specific information in response to those questions and we try to ask questions to elicit the most unambiguous answers that we can imagine so that we can be better informed.

There are -- there is dialogs back and forth are written between the FDA and the Company prior to a meeting and then there is typically discussion of minutes that follow the meeting. I think we are going to approach this in a very measured fashion in that it's unlikely that we would try to interpret the results from an FDA meeting without confirmed formal meeting minutes to give us the confidence of how we're going to proceed.

And that can sometimes come 30 days or so after the actual meeting itself before you finalize those and formalize those meeting minutes for the files. So obviously, we don't know how the FDA is going to react. We don't know what information is going to be gleamed between now and then at the meeting. And so, it's hard to say how confident we're going to be, how determined we're going to be, but it's going to be based on that FDA meeting and the feedbacks we get, and that's all we're prepared to say at this time.

Right. And maybe one last question, and again, it's maybe unfair to put you on the spot, but I mean, it seems like one of the sticking points potentially with accelerated approval could be how do you actually conduct the confirmatory study if you got the drug available in the market, I don't know if you would care to comment on strategies that you just contemplated that you might take to the FDA and say this is how we think we can make it available as well as preserve the ability to do a confirmatory study?

Yes, Bill, we do. We think about that quite a bit and we discuss it internally various trial designs. I know we live firsthand when we were trying to get approval of the current study with eteplirsen, how challenging it was to get IRB approval with the placebo arm, right, with a investigational therapy that had shown at least some dystrophin production in a previous study.

The community, they are of the opinion that you should avoid a placebo if you can in the study and that's a lot of the feedback we've gotten, but we also know that the FDA is the important customer here to make sure we satisfy their requirement.

So what we'll be doing is having that dialog with the FDA. If it looks like we're having a constructive dialog around an accelerated approval filing, then we will be ready to discuss how we might augment a clinical design -- clinical study as a result.

There are ways that a study can be conducted without a placebo arm, but again it's premature to speculate what we might do without the FDA feedback. But to share some examples, you could envision a untreated cohort of DMD patients who might be amenable to other Exon skipping drugs, right, who have similar inclusion criteria, right, you follow them similarly, and we see how they perform without treatment because we don't have the drugs to treat those boys.

There are obviously a lot of companies in the rare disease area that are making a case for comparing to natural history and looking at endpoints on what would be typical of a DMD patient that you select for a study, and is that a basis for approval. There are ways to do time-to-event where you could have rescue therapy where you don't have to wait until a boy leaves this ambulation in a study on placebo where they may be irreversible, they may never be able to get the ability to walk again. But if they drop below a certain threshold another outcome that they would qualify for the study.

There are various ways to consider this and we're thinking about all of them and we'll be going into the FDA with the right strategy to discuss all of these options depending on their openness and are in the signals around an accelerated approval filing.

Great. Okay, that's all very helpful. Thanks for the responses, congrats on the progress, and good luck on rest of the way.

Thanks, Bill.

Ren Benjamin, Burrill.

Hi. Thanks for taking the questions, and congratulations again on the progress. Chris, can you talk a little bit about or provide any color regarding the secondary endpoints or benefits whether it's pulmonary function tests or EKGs just with the strength of the data, I imagine that a lot of clinicians are probably evaluating a whole spectra of tests at this point. Can you give us any color regarding this?

Yes, well, we did -- at World Muscle Society we did share the two non-ambulant boys, their pulmonary function scores. And the reason we did that is because in an ambulatory DMD population we typically don't see a decline. It's typically a compensatory decline after they lose ambulation, then you start to see the progression -- early signs of progression on pulmonary function, and sometimes cardiac function lags after that.

And so we really collected those measures as safety endpoints to show that a stable ambulatory DMD population would remain stable, okay. However, we thought for the two non-ambulant boys that this was something that was meaningful that they have been able to maintain good pulmonary function despite being non-ambulant now for several months.

We've talked a lot about the other exploratory clinical endpoints that were quite variable and less sensitive than the six-minute walk test. And so, now that the placebo/delayed treated patients are now on drug, it's even more noisy in terms of being able to interpret anything from those other clinical endpoints. But we continue to capture these data points and we will continue to capture safety in every 12 weeks or so these are measures that you're describing.

I think it's important to understand that although it's only a 12-patient study, we are capturing volumes of data, and it does take time to sit through and interpret. We are still going through the 48-week data set just to try to understand what the data telling us to prepare our briefing document.

It's one of the reasons we wanted to take the appropriate amount of time to understand the data so we can prepare the right briefing documents, ask the right questions, and prepare a good discussion with an understanding of the full 48-week dataset as we go into the FDA meeting.

We think this preparation work is very critical and very important to understanding our drug as we start to have these dialogues with the FDA around confirmatory studies and accelerated approval. So -- but again, as we get additional information on these data points and other ones and as we get follow-on information, we will be sharing those at the appropriate time and the appropriate venue accordingly.

Okay. And then just confirming, you mentioned that the next data collections will be at week 62 and 74, is that correct? And would we see some sort of -- I assume that's going to be before the FDA meeting, would we see those results?

Yes, we -- at this time, it's not clear when we would have those data points ready for presentation. So we're going to be continuing to work with [our site], our CRO, on the transfer of those data, the analysis, et cetera. And again, we will communicate our plans for disclosure of those at the appropriate time.

And just maybe some thoughts regarding the broad aspects of the platform and the platform technology because I know at least in the past there has been pre-clinical results in a variety of indications, I think, one indication is hemophilia. I know you have your hands full, but are you starting to think at all about more -- about broadening it to other indications outside of DND?

Yes, we're thinking about it in two ways, Ren. So one is in the rare genetic disease area, right. There are other applications with the encouraging biochemical response we got in Duchenne, we do think there are other rare genetic diseases that this type of technology could be applied to and could help us fill a pipeline for the future at Sarepta. It is a little bit of a function of bandwidth.

Our DMD follow-on products are almost a pipeline in itself. And so we're evaluating which additional targets can we include beyond DMD for internal drug development and which would we might want to consider a partner. But [I also think that the] platform itself has a lot of applications beyond rare genetic disease as we've shown in the infectious disease space and in areas that we would not be prepared or ready or don't have the bandwidth to pursue on our own.

So, if you think about the oncology area, right, this is a platform that could play very nicely there, we could consider partnerships on the platform for specific disease areas like that with specific partners.

So we are focused right now on DMD activities internally and as it relates to business development are focusing a lot of attention right now on the prospect of an ex-North American partner. But we have thought about preparing the right business development decks with the new data that we've had generated over the last few months and soliciting interest in a platform deal.

So I'd say it is something that's of interest to us and stay tuned as we plot out the strategy with that and look forward to future communications regarding other business development activities.

And just one last question regarding manufacturing, you'd mentioned previously about mid-scale manufacturing versus large scale. Can you just help us think about quantitatively, the difference between mid-scale and large scale?

What I'd say is that we -- mid-scale production, we've not disclosed the details around our manufacturing plan, but it's simpler to state that our small-scale production was producing enough drugs for a 12-patient study, right. A mid-scale production campaign would be four to five fold greater rate scale in terms of active drug product and a large scale would be five to six times mid-scale production. So, if you think -- if mid-scale is five to six times greater than small scale and large scale is five to six times greater than mid-scale, then you're talking kind of a 30 fold rate, 30 to 36 fold greater capacity with large scale production than we currently have with our small-scale production.

Perfect. Thank you very much for answering the questions and good luck.

All right. Thanks, Ren.

We have no further questions at this time. I like to hand it back to Chris Garabedian for closing remarks.

Okay. Thank you, operator. Again thanks all for listening. We have a big year ahead and many critical activities to move our eteplirsen activities forward. We have strengthened our cash position and feel we are well positioned to execute on these critical activities into next year. So, thank you for your interest in Sarepta and we'll talk to you on the next call.

Thank you, ladies and gentlemen. That concludes today's conference. Thank you all for participating. You may now disconnect.