Sarepta Therapeutics Inc (SRPT) 2012 Q4 法說會逐字稿

Welcome to the Sarepta Therapeutics fourth quarter and full year 2012 earnings call. My name is Sandra and I will 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 that this conference is being recorded. I will now turn the call over to Miss Erin Cox. Miss Cox, you may begin.

Thank you, Sandra and thank you for joining today's call. Earlier today, we released our financial results for the fourth quarter and full year of 2012. The press release is available on our website at www.sareptatherapeutics.com and our 10-K will be filed on or before March 18th. Joining me on the call are Chris Garabedian, our President and Chief Executive Officer, and Sandy Mahatme, our Chief Financial Officer.

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, safety, and clinical results from ongoing or future studies involving product candidates. The potential and timing for regulatory review and approval of Sarepta's product candidates, the potential pricing and market opportunity for our product candidates, our ability to manufacture candidates, our ability to protect our intellectual property rights, future financial performance, including revenues, expenses, and financing, potential funding from the government, and other sources and collaboration and partnering opportunities. These forward-looking statements involve risks and uncertainties, any of which are beyond Sarepta's control. Any such risks can materially and adversely affect the business, results of operations 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. Thank you for joining us. I'm pleased to provide you with an update and overview of our activities and accomplishments in 2012 and since our last quarterly earnings call, along with our financial performance in the fourth quarter and for the full-year of 2012. 2012 was a transformative year for Sarepta, where we achieved what many biotech companies aspire to do, which was to generate clinical data with our drug eteplirsen that demonstrates great promise in patients with the devastating and highly progressive disease, Duchenne's Muscular Dystrophy, and addresses the type of medical need that have inspired many of us to choose a career in this industry. We are very encouraged by our eteplirsen dataset and the promise it shows of a potential therapeutic for patients with DMD who are amenable to an exon 51 skip. We also believe that we have a road map for pursuing similar results and benefit in other DMD genotypes and have moved three additional DMD drugs targeting exons 45, 53 and 50 into preclinical development.

As we focus in 2013, we are committed to building out our capabilities to fully develop our broader DMD program, scale up manufacturing to meet the future commercial demands of these drugs, and continue to hire the staff required to carry out the execution of this program through product approval and commercialization. In addition to these achievements in 2012 on our DMD program, we significantly fortified our financial position, culminating in our $125 million follow-on secondary offering in December, which resulted in a cash on our balance sheet of $187 million at year-end. The proceeds allow us to maintain eteplirsen on a critical path toward approval and to invest in larger-scale production capabilities necessary to supply the drug for further clinical testing and eventual market approval of eteplirsen and the subsequent DMD drugs. Lastly, Sarepta also had a transformative 2012 as a result of some key corporate activities that included renaming and rebranding the Company, recapitalizing our share structure and expanding our reach to new investors, increasing our institutional shareholder base from 18% at the end of the second quarter to 36% at the end of the third quarter to 66% at the end of the fourth quarter.

Additionally, we have completed the relocation of our headquarters to Cambridge, Massachusetts, and have been recruiting high-caliber senior level talent. We added senior level positions over the last year that have included a new CFO, a new general counsel, a new head of regulatory, along with key positions to support commercial development, business development and clinical operations. I am confident that we have established a strong foundation from which we can execute on bringing potentially breakthrough treatments to patients with Duchenne Muscular Dystrophy, and other disease areas with our differentiated technology.

This past December, we provided a further clinical update from our Phase IIB extension study of eteplirsen and provided six-minute walk test data through 62 weeks or 15 months that continued to show stability in this walking measure. This 62-week day presentation was also the first time that we provided a more thorough analysis of our six-minute walk data by including various permutations based on the time points in which we captured repeated six-minute walk-test measures. Specifically, we captured two six-minute walk test measures at baseline, and each time point in which biopsies were scheduled, which were weeks 12, 24 and 48. Across four separate analyses of the six-minute walk test that included maximum scores, minimum scores, mean scores, and using only the first day, day one measure, the change from baseline in our modified intensive treatment analysis of those evaluable on ambulatory measures at week 24 and beyond, range from less to 5% decline to 2% increase or essentially no signs of disease progression on the six-minute walk test.

Additionally, all analyses showed an improvement over the placebo-delayed treatment cohorts of 57-meters to 62-meters, with signs of stabilization in the placebo cohort after (inaudible) was confirmed by biopsies at 48 weeks and through week 62. The Phase IIB extension trial, which is also known as Study 202, and is our long-term safety and efficacy study, we will be providing further clinical updates from this study periodically, including 74-week six-minute walk test data, as well as additional safety data that we expect to present in the first half of this year.

As we have previously stated, in the fourth quarter, we requested an end of Phase II clinical meeting with the FDA to review the results from Study 201 and Study 202, as well as earlier clinical and non-clinical eteplirsen data and to discuss what is required to gain approval of the drug. This meeting has been scheduled and will take place later this month. We continue to see a favorable safety profile for eteplirsen, which we recognize is critically important for a chronic therapy that may be used throughout the course of a patient's life. Through 62 weeks of treatment, there were no serious adverse events and no clinically significant treatment-related adverse events.

One patient had a transient elevation of urine protein on a urine dipstick test. However, this elevation resolved in 24 hours, resulted in no clinical symptoms, and the patient continued to receive treatment. We had also observed the transient elevation of a urine protein on a urine dipstick test that resolved in 24 hours in a patient who received placebo during the first 24 weeks of Study 201. Overall, there have been no study discontinuations, withdrawals, or hospitalizations and all patients continue to receive treatment. This safety profile is incredibly important as we prepare to speak to the FDA about the risk benefit tradeoff of an accelerated approval pathway. In a disease where there are no approved therapies and we are dealing with a rapidly progressive disease where no intervention typically leads to irreversible decline in function and ultimately death, we believe the safety profile combined with the robust and statistically significant biochemical and clinical benefits warrants consideration for accelerated approval.

We recognize that the DMD community plays a key role in representing the unmet medical need in this patient population and we continue to be deeply grateful to the DMD community for their positive feedback, support, and advocacy. We understand the community's desire to gain access to eteplirsen as soon as possible. And I want to state again 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 any can. As we stated consistently as a drug developer, we have to ensure that we adhere to the standards set forth by the FDA to determine the appropriate path toward approval.

We have great respect for the role of the FDA in protecting the public health, and we also recognize the steps that have taken -- they have taken to expedite the development and approval of treatments for rare and serious diseases, for which there are no other therapies. The accelerated approval pathway is an important mechanism the FDA has used to facilitate earlier approval of drugs to treat serious diseases on the basis of surrogate or clinical end-points that can be measured earlier in drug development, followed by confirmatory trials to verify the anticipated clinical benefits. During our end of Phase II clinical meeting this month, we will discuss the design and end-points of a confirmatory pivotal study that will support full approval of eteplirsen. Additionally, we will discuss the feasibility of filing for accelerated approval based on the current dataset.

I would like to summarize the full eteplirsen dataset that we have summarized in our FDA briefing documents. There have been 38 patients exposed to eteplirsen across four studies, including Studies 201 and 202, our placebo-controlled 24-week study and our long-week efficacy and safety extension study. Of those 38 patients, 36 have received pre and post-treatment biopsies to measure dystrophin levels in their muscle tissue, and we have observed dystrophin increases in 28 of those 36 and in every patient, or 20 out of 20, that received the weekly dose of at least 10 mg per kg of eteplirsen. In both our placebo-controlled Study 201 and our open label extension Study 202, we met our primary end-point of an increase in dystrophin positive fibers at 24 weeks and 48 weeks respectively, and achieved an average of 47% dystrophin positive fibers, or essentially half of all muscle fibers measured. And levels that ranged from 30% to 60% across all patients at 48 weeks, across 5 genotypes, including 2 who were in a non-ambulance state when the dystrophin was measured in their muscle biopsy. There were no significant treatment-related adverse events, and the drug has been tolerated in patients receiving doses as high as 50 mg per kg for a duration of 62 weeks.

Later this year, we will have patients who have received at least two years of drug exposures at doses as high as 50mg per kg per week. If we were to pursue a 30 mg per kg dose for approval, this would translate to over 30 patient years of drug exposure at the 30 milligram per kilogram dose level. We believe this favorable safety profile is critical in considering an accelerated approval of the drug for Duchenne and the morbidity and sequeliae associated with the disease are rapidly progressive and irreversible. Lastly, we have a strong statistically significant difference on a clinical end point that has been acceptable to the FDA for approval of other rare diseases. While this benefit on six-minute walk is based on a small number of patients, the size of the treatment affect and the general consistency across the ambulatory patients that were evaluable beyond 24 weeks suggests that the dystrophin we are producing in the muscles would reasonably predict that the six-minute walk benefit and the stability we have seen in these patients over 62 weeks is reproducible in confirmatory studies.

Once we have met with the FDA, received their feedback, and understand their perspective, we will evaluate next steps for eteplirsen and make a decision on whether or not we will file for accelerated approval. We will communicate next steps for the eteplirsen program as soon as we have sufficient information and are confident in our plans. It's also important to note that we expect to have additional dialogue with the agency in the second quarter of this year, which will inform the eteplirsen registration program as it relates to the manufacturing or CMC section of an NDA. As we have previously stated, we continue to plan for the initiation of the confirmatory study in the latter part of 2013, with dosings to begin in the first quarter of 2014. Our scale-up manufacturing plans have begin in ernest and we have began producing drug supply at a larger scale or what we've described as midscale production batches for our confirmatory clinical trial with eteplirsen and development of our follow-on DMD drugs.

We are still on track for having stability data for submission to the FDA in time for drug release in the first quarter of 2014 to begin dosing our confirmatory study. We have also started planning for even larger-scale production to satisfy the potential commercial demand of eteplirsen and to prepare for the subsequent demand that we may need for any follow-on DMD drugs. And we are prepared to begin those efforts in ernest as soon as we have a better understanding of the regulatory pathway based on our FDA discussions. While we will be producing morpholinos at a larger scale for the first time, we have a lot of expertise and know how related to this chemistry and we have been producing the drug for clinical trials, or I should say, producing the chemistry and morpholinos for clinical trials for more than a decade, and we've been producing drug supply for our eteplirsen studies for several years with good stability and purity profiles and good comparability batch-to-batch. While there are always risks in scale-up, we believe this synthetic chemistry has favorable qualities for scaling up based on the drug properties we have seen to date and are confident in our ability to develop the same drug product at a larger scale.

Now, with regard to our earlier stage DMD pipeline, we announced last quarter in November a new collaboration to develop an exon skipping drug targeting exon 53, which will be our fourth product candidate for the treatment of DMD. The collaboration is with Professor Francesco Muntoni, a University College of London scientist as well as a Dubowitz Neuromuscular Centre, Institute of Child Health, and other scientists from the EU and US. The collaboration is supported by an EU Health Innovation research grant made available through the European Commission. The agreement includes IND-enabling activities and the initiation of clinical proof of concept studies in Europe for a drug candidate targeting exon 53.

We also continue to make good progress on two additional DMD candidates, targeting exon 45 and exon 50. We expect to hold IND meetings with the FDA on at least two additional exons by the end of 2013. I'm also pleased to report that we have now selected lead sequences in all three of our follow-on DMD drugs, and we will be preparing them for preclinical studies to begin later this year. These products will now be referred to as SRP 4045, SRP 4050, and SRP 4053, the last two letters corresponding to the target exon that is being skipped.

Now I will provide a brief update on our active government-sponsored infectious disease programs for the treatment of the life-threatening hemorrhagic fever virus of Marburg and our influenza drug candidate AVI-7100. Our current drug candidate for Marburg, AVI-7288, has shown excellent efficacy when administered intravenously at 15 mg per kg in multiple non-human primate studies. We reported unprecedented data in a delayed time to treat study last year where we showed 100% survival with a 14-day course of treatment after 40 days despite initiating treatment 48 hours after infection, and 83% survival when initiating treatment 96 hours after infection. On March 4, we announced new data from a non-human primate study that showed comparable efficacy but with intramuscular delivery. Those results reinforce the strong efficacy of AVI-7288 while showing that the drug can be delivered via convenient IM injection, an alternative delivery method that has the potential to greatly enhance the practical utility of this drug in a mass casualty situation.

In addition, these data demonstrates the versatility of our platform as it provides proof of concept with a new generation of morpholinos. In this case, our PMO plus, or positively charged morpholinos, and a new effective method of drug delivery. We also completed PK study with our Marburg drug in non-human primates that reinforced the efficacy results we've seen from previous studies. But when compared to our human PK exposure levels, suggested that a lower dose in humans may result in the efficacious exposure levels that were observed in non-human primates at higher doses. These data tell us that exposure to AVI-7288 and our morpholino PMO plus drug chemistry does not scale on a strictly mg per kg basis and provides support that a therapeutic window in humans at lower doses may be efficacious, allowing for a potentially greater margin of safety. This will be important as we proceed with our multiple ascending dose or MAD study in healthy volunteers in the first half of this year.

We expect to complete dosing of all cohorts in our Marburg MAD study by year-end with final results ready for communication in early 2014. Altogether, these findings provide significant proof of concept for the antiviral activity of another morpholino chemistry and could serve as a model for activity in other serious infectious diseases and potentially other therapeutic areas beyond infectious disease.

I am also incredibly pleased that we announced that we were able to revive our influenza program by entering into a clinical trial agreement with the National Institute of Allergy and Infectious Diseases, part of the NIH to conduct a Phase I study with AVI-7100. This drug candidate has a novel mechanism of action and potentially broad spectrum activity against influenza viruses including Tamiflu-resistant virus strains. The agreement establishes a formal collaboration between NIAID and Sarepta to allow NIAID researchers to proceed with a Phase I double-blind placebo-controlled dose-escalation study to assess the safety tolerability and pharmacokinetics of single and multiple doses of IV formulation of AVI-7100 in healthy volunteers.

While the development of AVI-7100 was initially supported by the Department of Defense, we are pleased that another agency, NIAID, has also seen the potential of this drug with a goal that is focused on the civilian population. This is important as we believe our drug platform is amenable to potential pandemic applications like flu and other infectious diseases that continue to generate news reports due to breakouts or more lethal or resistant strains like Dengue, tuberculosis, and West Nile virus to name a few.

Beyond our current clinical programs, we continue to identify new applications for our technology platforms and are more advanced in morpholino chemistries. We are working with several academic researchers that are expert in a variety of disease areas and are receiving a tremendous amount of interest in the properties of morpholinos based on the success we have had with the programs I've described in Duchenne's and Marburg, specifically. While we are not ready to disclose which programs are being prioritized for our pipeline, we are focused on areas in other rare and neuromuscular diseases, other infectious disease areas, including antibacterial applications, and other disease areas beyond rare and infectious disease. As we develop solid preclinical proof of concept data for a particular disease, we will make a determination of whether to pursue a particular program internally to bring other drugs into our proprietary pipeline or whether we would identify the right industry partner to pursue a particular disease area.

As I have described, we have a lot ahead of us at Sarepta in 2013, and we have provided a range of guidance that allows for preparing the Company for success. Our operating loss is expected to be in the range of $85 million to $115 million, and this includes a scenario in which we would pursue an accelerated approval filing. Importantly, the large majority of increased expenses in 2013 over 2012, is related to our manufacturing scale-up. This large increase is driven by two factors. Firstly, in collaboration with the contract manufacturers, we are manufacturing all of the drugs that will be required for eteplirsen's clinical program, along with the drug supply that is needed to conduct the preclinical program across exons 45, 53, and 50 to support studies that will be conducted through 2014. Secondly, the ramp-up to large-scale manufacturing will establish a capacity that will create significant value in the coming years, as this large-scale production capability will be used to supply drugs to meet the market demand upon commercialization and will be adapted and expanded to supply drugs for other exon targets in the US, Europe, and elsewhere.

Another way to look at this investment is that every vial we produce of eteplirsen, will be used for confirmatory clinical trials that will create more value for the broader DMD program or will result in a commercial sale which will generate future revenues for the Company and provide a path toward profitability. While our investment in manufacturing will increase significantly this year, we have maintained a lean efficient organization while attracting a stronger talent base with our recent success and the move of our headquarters to Cambridge, Massachusetts. We have a lot of important events ahead for the Company and for the remainder of the year, and we have built the right team to execute on all the activities required for success. We look forward to providing you with progress updates in future quarterly calls and in other investment and medical conferences throughout the year. That concludes my corporate update and I would like to turn the call over to Sandy Mahatme, our Chief Financial Officer, to give you a financial update for the fourth quarter and full-year of 2012.

Thanks, Chris. In the fourth quarter of 2012, we reported an operating loss of $10.4 million, compared to an operating loss of $9 million in the fourth quarter of 2011. The incremental loss is a result of a $6.3 million decrease in government contract revenues offset by a $4.9 million decrease in operating expenses. Revenue for the fourth quarter of 2012 was $7.3 million, down from $13.6 million in the fourth quarter of 2011. The $6.3 million decrease was due to the August 2012 stop work order and subsequent termination of the Ebola portion of the Ebola Marburg US government contract, due to a lack of available US government funding. The Ebola termination did not impact the Marburg portion of the contract. Revenues from the Marburg portion of the contract also decreased due to the timing of activities throughout the normal progression of the contract. These decreases were partially offset by revenue from the intramuscular administration contract with the US government for the Marburg virus that started in August of 2012.

Research and development expenses were $12.8 million for the full quarter of 2012, compared to $18.7 million in the fourth quarter of 2011, a decrease of $5.9 million. The decrease was primarily attributable to the termination of the Ebola portion of the government contract and reduced spending in the Marburg portion of the government contract due to the timing of activities. This decrease was partially offset by increased spending related to the intramuscular administration contract. General and administrative expenses in the fourth quarter of 2012 were $4.9 million, compared to $3.9 million in the fourth quarter of 2011, an increase of $1 million. The increase was the result of additional personnel costs associated with key positions hired in the second quarter of 2012.

Now I would like to turn to an overview of the full year results. For the full year 2012, the operating loss was $29.7 million compared to an operating loss of $35.9 million for the prior year. The $6.2 million improvement was a result of the $14.5 million decrease in research and development expenses and a $1.4 million decrease in general and administrative expenses that were partially offset by a $9.7 million decrease in revenue from government contracts.

Revenue. The revenue for the full-year of 2012 decreased by $37.3 million, from $47 million in 2011, primarily due to the Ebola stop work order and the completion of the H1N1 influenza contract with the US government in June 2011. Our research and development expenses were $52.4 million for 2012, compared to $66.9 million for the prior year, a $14.5 million decrease. The decrease is primarily due to reduced costs related to the Ebola portion of the Ebola Marburg government contract, the completion of the H1N1 contract in 2011, and a reduction in our overall non-DMD proprietary research.

General and administrative expenses for 2012 were $14.6 million, compared to $16 million for 2011, which is a decrease of $1.4 million. The decrease was primarily due to reduced professional service costs and severance costs, compared to the prior year. The net loss for the fourth quarter of 2012 was $62.1 million, or $2.36 per share, compared to a net loss for the fourth quarter of 2011 of $1.4 million or $0.06 per share. The net loss for full year 2012 was $121.3 million or $5.14 per share, compared to a net loss in 2011 of $2.3 million or $0.11 per share. The increase in the net loss for both fourth quarter and the full-year was primarily due to the change of valuation of outstanding warrants to purchase common stock. In addition to prior equity financings, we issued warrants that are classified as current liabilities and are adjusted to fair value on a quarterly basis with the change in fair value being included in net loss. The amount that is included in net loss is a non-cash item and we're not required to spend any cash to settle the warrant liability. The warrant liability is primarily affected by changes in our stock price during each financial reporting period which causes the warrant liability to fluctuate as the market price of our stock fluctuates.

In the fourth quarter of 2012, the increase in our stock price resulted in the warrant valuation increasing which resulted in other expense of $51.8 million. In the fourth quarter of 2011, the decrease in our stock price resulted in other income of $7.4 million. For the full-year 2012, the change in the warrant valuation resulted in other expense of $91.9 million, while in 2011, the decrease in the warrant valuation resulted in other income of $33 million. We ended the year with cash and cash equivalents of $187.7 million, an increase of $147.8 million from the prior year. This increase was primarily due to $118.1 million from a public stock offering in December, $36.2 million from our ATN facility, $20.6 million from the exercise of warrants and $3.8 million from stock option exercises. These sources of funds were partially offset by $29.7 million of cash used for operations during the year.

Now, turning to 2013 guidance. We anticipate that revenue is will be in the $18 million to $24 million range and that loss from operations will be in the $85 million to $115 million range. The guidance is based on the assumption that we will continue to receive funding from our current government contracts for Marburg. If we do not receive this funding, our guidance will change. Additionally, as Chris indicated, our operating loss guidance is largely based on continuing development and scale-up of manufacturing for eteplirsen and our follow-on DMD drugs. With that, I would like to turn the call back over to Chris.

Thank you, Sandy. Operator, we can open up the call for questions.

We will now begin the question-and-answer session.

(Operator Instructions)

Bill Tanner, Lazard Capital Markets.

Thanks for taking the question. Thanks, Chris, for the update. A couple of questions on the upcoming conversation with the FDA. I think earlier this year, you said the FDA really had not seen much other than the press releases and, obviously, now you have submitted a briefing document. I'm curious as to whether there have been any conversations with the FDA in the ensuing period, or are you really waiting for the official meeting? And then I had a followup on that, please.

Yes, we don't comment on what may take place in terms of conversations that we may have with the agencies leading up to the formal meeting. So, basically, I think, we're going to communicate after we have the formal meeting and after we have an understanding of the conclusions of that meeting and will be any comments that we make will be following that.

Okay. And then because you have it red-letter bolded in your press release, it sounds like you're expecting a definitive path forward after the meeting with the FDA. So, appreciate it hasn't even happened, could you help us understand a little bit, maybe as to what the expectation should be and maybe the timeline that it's going to be a definite thumbs up, a thumbs down, in terms of applying for accelerated or still more back and forth? Just maybe help us understand the timeline along which you will be able to communicate and how definitively you might be able to do that.

Sure, so we said pretty consistently that this meeting that will take place later this month will allow us to determine if an accelerated approval filing is feasible. Okay, so we're going to take the results of that meeting and the discussion and dialogue and the meeting minutes that we would get from that and make a decision as a Company of whether or not to pursue an accelerated approval filing. The timing of that will be dictated more from our discussion with them around CMC issues, and we expect that meeting to take place in the second quarter of this year. Again, that will be based on how much stability data do they need at the time of filing. We have a lot of data on the batch records of a scale that we have been producing eteplirsen at over the last several years, that may be sufficient for a filing that may need to be supplemented with mid-scale batch records, and eventually large-scale batch records.

Until we really have a good understanding of the flexibility that the FDA may have around our CMC section of an accelerated approval NDA, that would dictate the timing. Under a full approval NDA, if we decided not to pursue an accelerated approval, we don't believe that the manufacturing becomes a gating mechanism, and we are comfortable that at the time that we would file the confirmatory study results, that we would have a full CMC section prepared at that time. So, again, the decision of whether we file under accelerated approval will be made following this upcoming meeting. The timing of that will be made after we have a better understanding of the CMC discussions.

Got it. And just one last question. I don't believe we have seen data since the 62 weeks, so I guess the presumption is any data that had been collected since then are consistent with what you've publicly disclose previously?

Well, we're not commenting on any followup, but it's fair to assume that either we haven't evaluated that data or it's consistent with what it has been previously. Obviously, if we had the data and it was different, then that would be something we would disclose more immediately. We have been saying all along that we expect to have a clinical update in the first half of this year, and that continues to be the guidance.

Okay, thanks very much.

Chris Marai, Wedbush Securities.

Hi, good morning, guys. Congrats on a great year. I was wondering if we can discuss expectations around the 74-week data. I think Bill was sort of alluding to the fact that you may have this data on hand currently, and so, I was wondering what would constitute favorable results in your eyes, since we're going to see data in all 10 voids over 48 weeks of dosing, one might expect that there's a deterioration in the benefit across all voids, especially if you compared it to a placebo control. Could you guide us to what you're thinking about? What you're thinking about might be positive or very positive data in that dataset?

Sure. Chris, again, we're very encouraged that for 62 weeks, we showed the stability from baseline and the stability from the 36-week time point before we expected dystrophin to be present through 48 and now 62 weeks. We hope stability or the slow progression maintains, right, we don't know how long that could be maintained or if it would be maintained indefinitely. We do know that it is a small sample size, that effort-dependent test where there may be variability and importantly, we have moved to only taking a six-minute walk test measure once in any subsequent time points. Unlike what we did at baseline 24 to 48 weeks, where we took two measures, where we had dystrophin and six-minute walk tests, and we understand a more consistent measure of six-minute walk.

It's why it was our primary end point. It's why the statistical analysis plan that we focused on was on 48 weeks. While we look forward to presenting the follow-on data, the expectation optimistically would be to maintain the stability on these walking tests moving forward. So, right now, we are focused on the upcoming FDA meeting and making as strong a case that we can with the dataset that has been provided to them in the briefing documents.

Great and then is it safe to assume this data has been provided to the FDA? Judging by timing, you likely have it. And then in terms of presentation, will we see data on individual patients?

Yes. So we're not sharing what and what hasn't been included in the briefing documents. Suffice to say, the primary analysis is going to be of greatest interest because that, like any drug study, you propose what you expect an outcome to be and then the data needs to support the thesis, and that thesis was described at 48 weeks, based on the dystrophin and supportively on the six-minute walk test. Regarding future presentations, again, at this time, we're not any thoughts or opinions about what we would provide beyond what we have provided historically, and the 62-week presentation is an example of what we would expect to present, minimally on subsequent time points. Again, this is a small study. And sharing patient-by-patient data is not something that we believe is the responsible thing to do, possibly over time, that -- we can consider sharing that but at this time, we're keeping it to the way we've been describing this data previously.

Interestingly, Pharma came out with a position saying it was irresponsible for sponsors to put out individual patient data from studies. We think this is even more the case in a small sample like this where many of these patients are known in the community, they speak openly about being in studies and so it is a different level of knowledge of patients that we would not typically see in a larger sample size, but again, we're sticking to our guidance. We will be providing periodic updates on the clinical outcomes, measure of six-minute walk, and we expect to have 74-week data the first half of this year.

Okay, great. One real quick followup, will you have other end-point data at that time point or just a six-minute walk test?

We're not providing any guidance at this time, Chris.

Okay. Thanks very much.

Joseph Schwartz, Leerink.

Good morning. Thank you. I was wondering if you could give us some insight into how you're thinking about the optimal time for to you put product up on stability, longer-term stability testing from whatever commercial manufacturing scale supply you are assembling now.

Yes, well, Joe, this is a common practice that when we do a production, we take drug product from the runs and put it on stability as a matter of course. And so, and then, we'll do testing on that at various time points that will generate data that we can submit to the regulatory bodies. So that is standard practice and that is what we intend to do for any lots, whether that be mid-scale, large-scale, moving forward. So, the comments earlier were centered around the willingness of the FDA in terms of the amount of stability, length of the stability that would be required for a registrational package. It, is that the question you had?

Yes. It does seem to me, anyway, that it would, the stability data's a real limiting step for you to access the market in a practical sense, so that is why was curious about your thinking about when you will be able to determine how much is required and, how are you assembling the commercial, the wherewithal to manufacture commercially now? Can you talk about the progress that you have made organizing the means to supply sufficient quantities of commercial product?

Yes. Joe, I don't know if you listened to the comments at the beginning of the call, but we described in the quarter we are going to be meeting with the FDA to talk about our manufacturing plans moving forward, and how we would potentially supply the commercial demand in the event that we would pursue an accelerated approval filing. That discussion will be important. The FDA has been flexible in the past around these types of issues, depending on the drug, the data that has been generated to date, the disease being treated and so we think this is a scenario that would allow them and encourage them to be flexible about, again, the amount of stability data needed so that it's not a rate-limiting step or not as much of a rate-limiting step. Keep in mind that we expect that if the drug were made available, the demand would be very strong, particularly if we had limited supply and that this is not drug that is going to be sitting on the shelf for months, let alone, six months to a year or more. But again, we think the properties of this drug are such that we would expect similar stability, a similar purity profile and essentially the same substance in vials regardless of small-scale, mid-scale, or large-scale batch production records. Obviously, want to have some data to support that, but I think that will be something that will be encouraging to allow for supplemental data to come, post hoc. We'll have more information after a CMC discussion with the FDA that we intend to have in the second quarter.

All right. Great. Thank you.

Ted Tenthoff, Piper Jaffray.

Great. Thank you very much for take the question and my congrats too on really a transformational year. I appreciate too the clarity of the timing on the meeting. A couple of questions.

Firstly with respect to the other exon-skipping drugs that you're going to be advancing into the clinic. Can you give us an update there in terms of what are some of the additional steps that need to be done prior to IND filing? Is this again an issue of the manufacturing that is holding that up there? Is it a matter of pre-clinical tox works? Are you still in the process of coming up with sequence, sort of where are you in the process along with those? And then I have a housekeeping question if I may as well.

Sure. In my prepared comments, I discussed that we provided guidance that includes manufacturing for our follow on exon so we are prepared to provide the drug required to keep those on a critical path and through the pre-clinical studies. We also mentioned, I mentioned that we have identified lead sequences on these follow on exons, for exon 50, exon 45, and exon 53. We also mentioned that we will have at least two pre-IND meetings on these follow on DMD exon targets and those pre-IND meetings will provide further clarity of what our going assumptions are of what would be required for clinical testing. Obviously we have a lot of good information from our discussions around eteplirsen and what was required. We also had our former PPMO discussions around what would be required pre-clinical. We have a lot of information going into the assumption. We think now with a very robust eteplirsen database, there may be more flexibility than we realize, but we have to have that discussion with the FDA first in these pre-IND meetings to determine that.

We are assuming at this point that we would need to do the full pre-clinical package, but there may be situations, for example the rodent work that's already been done with the surrogate exon 23 and the DMD mouse model would not likely to have to be repeated. The question is, do we need to have another nine-month primate study or would a shorter-term primate study suffice. Maybe they wouldn't even require an additional primate study. There is a lot of questions we want to clarify in a potential pre-IND meeting. Suffice to say, we feel we're on track with these follow-on exons. As we indicated, we expect to have at least one IND filed by mid-'14, which will be ready for clinical tests. The more of those we can have ready by that timeframe, the better and we will have to see if that is feasible.

Great. And then a follow up question on the warrants, obviously there was a lot exercised last year and you're not filing the K for maybe a couple of days still. What is the outstanding warrant situation and where roughly are those exercise prices?

I will have Sandy share what was remaining from our previously reported warrant exercises.

As of the year-end, we had about 3.5 million warrants outstanding and the average prices is approximately $9.

Sorry, you broke up there. An average price of?

Sorry. The average price was approximately $9 and we have about 3.5 million shares, warrants outstanding.

Excellent. Thank you very much.

Those have an expiry of 2014, Ted.

Okay, great. Thank you.

Liisa Bayko, JMP Securities.

Hi, thanks for taking my questions. The first question is on break-through status. Is that anything you're considering and it seems like at least the feedback from FDA to the parent meeting that was recently held indicated that, consistent with our thinking, that this is the ideal candidate for breakthrough status. How might that help your prospects with accelerated approval?

Yes, obviously, we have been following the communications around breakthrough and the announced awards of breakthrough and again, the language on the breakthrough designation do seem to support that eteplirsen would qualify, based on early clinical signal, from an early stage study. The awards to date have been all with products that have a quite robust clinical data set with very compelling clinical data on larger datasets, the pharmacyclics and the Vertex compound is what I'm referring to. We know there have been several that have been declined on breakthrough, and it's not clear what criteria would lead the agency to decline a product. And whether something beyond what is stated such as manufacturing, et cetera, are part of that decision criteria.

We, again, are meeting with the FDA later this month. And this is something that we have prepared ourselves for. If we decided to pursue a breakthrough designation filing, I've communicated previously that we would make that determination in the first half of this year, and again, a thing that could accelerate that strategy would be our direct communications with the FDA. So, again, stay tuned. We're not changing our guidance with respect to that we will have our strategy determined in the first half of this year, and stay tuned.

Okay. Great. And then I understand there is really two critical meetings towards a determination of accelerated approval or not. The first part is the clinical. Can you tell us from that meeting, what you're looking for from FDA to feel like an accelerated approval path based on the clinicals?

Yes. And we've shared this thinking previously. There is two objectives primarily of the meeting, is to gain feedback on a confirmatory study design that we are intending to start dosing in early '14. And then secondly, to assess the feasibility that our current 38-patient database and 12-patient study would satisfy the requirements to at least consider a package for review under an accelerated approval pathway. There is a few things that make up that determination.

One is the safety database, second is dystrophin and the robustness of our dystrophin analysis as a surrogate marker. And then the third is, does that dystrophin surrogate marker reasonably predict the clinical benefits and is the supportive data and the six-minute walk test results something that they feel is the signal that is needed to support that the dystrophin production would reasonably predict this clinical benefit we're seeing. Obviously, these are very nuanced conversations but we hope that we'll get a fairly straight forward and unambiguous response so that we can make a good determination as a Company. And that is probably the most color I can provide you at this time.

That is really helpful. Thanks. And then once you do decide yes, we're going to go for an accelerated approval or not. Let's go with a yes, we're going to go ahead with this approach. Once you make that decision, how much time do you think it will take to actually get the application in? How prepared are you?

Well, Liisa, as I mentioned, the first meeting is the one later this month will help us determine the feasibility of whether or not we will file under the approval. The timing of such an NDA will be determined by our CMC discussions with the FDA.

Correct.

And that we expect to have in the second quarter.

Right. So, once you pass that mark and you say, okay, we checked the box on both CMC and clinical and we are going to proceed forward, let's go in -- how prepared are you actually to submit the filing? In other words, would that be a two-month process, six-month process, I'm just looking for some guidance on how long it would actually take.

It's hard to predict. Yes, Liisa, you can look to many industry comparables. I think that can range from three to six months. It's a huge endeavour. Obviously the further the delay of a filing because of any CMC issues would mean that we can be working on all of those sections over that time period before we even submit, are ready to submit. We could end up with a rolling NDA submission where we submit sections that are ready prior to. And it's hard to provide guidance, but it, if we had all of the data that we needed in hand, then I think you could see something more rapid. But, I would say three to six months is reasonable to assume based on comparables across the industry.

Okay. Great. One final question. I know we have got the NDA meeting earmarked as the next important meeting for the DMD community. Could you let us know if that is a place we should look for your next clinical update of the Phase IIB open label data?

Yes. We haven't determined what venue and how we will disseminate that data. So again, there are many smaller meetings across the globe that occur. There is many of our collaborators present at these various meetings. So again, we're not providing any guidance of where that venue would be at this point, and again, it could also still be communicated in a press release, but all we've communicated is that we expect an update sometime in the first half of this year.

Thanks a lot.

Kim Lee, Janney Capital.

Good morning. A quick question here. How much stability data do you have right now or maybe how much would you have by the end of the year when you plan to start your confirmatory trial?

Yes, we have stated that we would have three months stability to submit to the FDA for drug release for clinical trials. Again, based on our experience and those that we've talked to, that should be sufficient for a drug release for a clinical study that would be supplemented with further stability data as we get it, so that is what we would have for the dosing to begin in the first quarter of next year.

Okay. So does that mean you have not started this stability testing yet? Or would you have any data by your CMC meeting with the FDA.

We're not providing significant guidance on that, at this point, Kim. I did mention in my prepared remarks that we have begun production at this mid-scale, but we're not providing any guidance on when we might have stability. Again, the CMC meeting is not calendared at this time. So, I don't even know if we could say that we would have. But again, there is briefing documents for these FDA meetings that have to go in, what would we have at that time. Again, we don't believe that that is going to be a critical component of understanding the flexibility that the FDA may have moving forward.

Okay. Great. And then one last question here. How much safety, based on what other companies similar to you have done in the past, how much safety data do you think you will need for a potential approval?

Are you talking accelerated approval or full approval?

Accelerated?

Yes, well again, in my prepared remarks, I communicated the robustness of what we believe our safety database is and that we would have more than two years' exposure as early as this fall, as early as August that we could compile by the fall. That translates if we were to pursue a 30 milligram per kilogram dose to more than 30 patient years of exposure at that dose level. Again, you can look at comparable drugs that have even received full approval with the databases of safety, with that many patient year exposures at the time of approval. And so, again, we don't believe full approval safety database would be problematic if we were to pursue what we have been describing as a 60- to 80-patient treated study in a confirmatory study. Again, the FDA is important in this dialogue, and we're going to have a lot of upcoming meetings with the FDA. That determine what shapes our view of what is going to be required.

Great. Thanks.

Bill Tanner, Lazard Capital Marks.

Thanks for the followup, Chris. I apologize if you have touched upon this. Can you remind us the pre-clinical safety work done and if you can comment on the adequacy of that and what kinds of flexibility the FDA may have.

Yes, well again, the pre-clinical safety is very strong and robust and consistent with the safety profile we're seeing in the clinic. We have completed our long-term animal tox, the nine-month primate, the six-month mouse, the juvenile rodent studies and those, that data has been at the FDA for a while now. The study reports have been finalized and, again, we think it's further kind of exclamation point of the safety profile of the drug. The FDA was particularly concerned with kidney toxicities and wanted to have us do full analyses of specific kidney markers when we constructed these long term studies.

We have not seen these kidney toxicities again. We reported that both in our short-term studies and now our long-term studies and these have been in poster form at various scientific meetings that Pete Sazani, our Head of Pre-clinical has been an author on. So, again, the safety profile supports the -- that we're not seeing the dose limiting toxicities up to 320 mg per kg in primates, we've studied up to 900 mg per kg in mice, and again, we're very confident with our safety profile and we believe it will enhance the view of our safety profile. I think at the end of the day, the FDA is going to be most concerned with our clinical safety database.

And, Chris, is the FDA's concern about the kidney tox, is that an A priority concern about eteplirsen or is that a reflection of I guess some concern about a competing compound, do you know? Do you already have an opinion?

We think -- yes, it might be partly due to the kidney toxins we are commonly seeing for RNA therapeutics, but I think it's more for the reason that we're clear through the kidney. We know from other conjugated morpholinos that it is the dose limiting toxicity as we've found with our the B-peptides that has been reported and in the literature and so I think it was more driven on the morpholino conjugates and the fact that we're cleared through the kidney and we're using pretty high doses as well. We believe there's more of the reason not necessarily related to other chemistries.

Got it. Thank you.

Okay.

Ren Benjamin, Berlin Company.

Hi, thanks for taking the question. Congratulations on the progress. Chris, can you give us a status update on the patents around the world. When we may see an appeal let's say in Europe and related to that, is there a European or rest-of-the-world strategy based on the discussions with the FDA as they come out that you guys are formulating?

Yes, Ren, regarding the patent positions, obviously, we have composition matter on eteplirsen in the US and Europe. We have licensed to the Wilton patent estate that covers all of the exon targets that are of interest to us with of a variety of sequence and reasons to work within. We've reported frequently on our patent opposition that went to hearing in November 2011, in which we invalidated 9 of 11 specific claims on targets that comprised approximately the top 11 exons but we lost on 2 of those. Exon 46 was one of those, and again, commercially not as critical because exon 44 can treat many of those exon 45 dilution patients. We did not amend claims around exon 51 so we have been waiting for the summary of that patent opposition hearing and it has not posted, which unfortunately is what starts the clock on a potential appeal and at this time, we're still awaiting that decision. But, again, we believe that we have good arguments on an appeal and we don't state our specific strategy. There is no other pending opposition or litigation and, again, we've stated frequently we are comfortable with our freedom to operate in the US and Europe outside of the two exon targets in Europe that I mentioned.

Regarding the rest of the world strategy, we're really just focused on gaining US approval initially. We are planning to speak with the EMA about our dataset. And particularly also around our development strategy for our follow-on exon and that will inform us for our European strategy. We are aware of other countries around the globe that use the FDA and/or the EMA as reference where we might be able to use data to file in those other countries. At this time, first things first. We're focused on the US and the FDA.

Perfect. Thank you.

Chris Marai, Wedbush Securities.

Hi, Chris. Thanks for taking a followup. A real quick question here. You mentioned that you're producing at what you guys describe as mid-scale manufacturing. Can you guide us to what your thoughts are on what mid-scale constitutes? Is it 5X, what you did for the last trial, or 10X, or 100X, how should we go about thinking about that mid-scale manufacturing? Thanks.

Yes, sure. I think importantly, the way to think about it is that it's a capability that we are developing. So, while we can talk about what is one mid-scale batch produce in terms of drug product, obviously, that is going to be driven by the yields that we'll be producing on a consistent basis of which we need to determine those yields and we have some ideas from the small batch yields of what that would do at scale. I think it's important to look at it as a capability that can be reproduced, that can be expanded within one CMO or expanded to other CMOs, and which becomes a simple issue of buying the equipment and having the space to expand that capacity. But, we've stated previously that it's about five to six folds greater than our small batch of production that we have been doing on a consistent basis.

To put that into context, that has been the scale that has been producing all of our drug products beyond just even the eteplirsen 12-patient study. We have had that capability in-house for a while, and we have been using it with external CMOs as well but that has providing a drug for not only eteplirsen, our other exon targets for pre-clinical development as well, as well as our other programs, including our infectious disease programs across what was Marburg, Ebola, flu, all of our previous drug programs that had been conducted using even a different morpholino chemistry. And, again, it's important to say we are scaling up because the volume of drug that we expect we're going to need for follow-on studies, for commercial demand, is going to be much greater than we have needed historically. And, again, we've said that large-scale would be five to six greater than mid-scale. And there may be a day we talk about super large-scale. Again, suffice to say we are focused on this, on getting manufacturing scaled up the right way so that in the future, it does not become a rate limiting step for further programs.

Great. Thank you. That is very helpful.

All right, operator, we just have time for one more question.

Joseph Schwartz, Leerink.

Great. Thanks so much for fitting me in again. I wanted to ask sort of the flip side of what I and others had asked regarding the manufacturing. And that is how are you thinking about the likelihood that rationing might be required for this drug? I know it might be difficult to answer with any precision at this stage before meeting with the FDA. But then by that same token, how do you think that they might be thinking about the need to ration and then how would that process work of selecting patients?

Yes, Joe, it is premature to talk about that. We have a lot of discussions ahead of us with the FDA. We do know that the FDA has shown a precedent and flexibility in situations where there is a high unmet medical need, like Duchenne where the difference of a year or 18 months or two years could be significant for patients, so the idea that it may be better to get drug out there sooner even if we don't have enough supply to fulfill the full commercial demand. So, we need to discuss that possibility with the FDA and would not want to guide or comment.

Obviously, that is always a difficult decision process, and that would be something that we would do in collaboration with the FDA. I think they have used a lottery system for previous, what you are describing as rationing. This needs to be a dialogue. This is a spectrum of disease, right, and we know that it's very progressive. So, it's really hard to determine how that selection process would go, but all we would be committed to is to try to make it as reasonable and fair as we possibly can. But, again, we'd have to have that discussion with the FDA before we can provide any type of guidance on that.

Great. Thank you.

This concludes the question-and-answer portion of today's call. I will now turn the call over to Mr. Chris Garabedian for closing remarks.

I just want to say thanks, everybody, for listening in to this year-end and quarterly call update. We appreciate the interest, appreciate the questions. We got a lot ahead of us, and we look forward to communicating more progress updates throughout the year. Thanks for your interest.

Thank you. Ladies and gentlemen, this concludes today's conference. Thank you for participating. You may now disconnect.