Sarepta Therapeutics Inc (SRPT) 2013 Q1 法說會逐字稿

Welcome to the Sarepta Therapeutics first-quarter 2013 earnings call. My name is Dawn, 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 Erin Cox. You may begin.

Thank you and thank you for joining today's call. Earlier today we released our financial results for the first quarter of 2013. The press release is available on our website at www.sareptatherapeutics.com, and our 10-Q will be filed on or before May 10.

Joining me on the call today are Chris Garabedian, our President and Chief Executive Officer, and Sandy Mahatme, our Chief Financial Officer.

Please note that we have slides posted in conjunction with the webcasts that supplement some of the information we'll be discussing during today's call. These slides can be found on the Investor Relations section of our website. If you're following along, please turn to slide two.

I would like to note that during this call we will make a number of statements that are forward-looking, including statements about the safety, efficacy and potential of Sarepta's product candidates; timelines for clinical development activities; the potential and timing for regulatory submissions and meetings with the FDA; the potential and timing for regulatory filings, review and approval of Sarepta's product candidates, including under Subpart H Accelerated Approval; Sarepta's ability to establish and protect intellectual property rights; Sarepta's timing and ability to scale up manufacturing capabilities; Sarepta's estimates regarding its future revenue, operating loss and expenses, expectations regarding future success and adequacy of financing and reserves on hand; our ability to obtain, continued funding from government and other sources; and our anticipated 2013 financial results. For a detailed description of risks and uncertainties we faced, you are encouraged to review the official corporate documents filed with the Securities and Exchange Commission.

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

Thank you, Erin. Good morning, everyone, and thank you for joining us today for our quarterly financial and corporate update for the first quarter of 2013. I will be updating you on our recent business activities, and Sandy Mahatme will review the Company's financial results for the first quarter before we take your questions during the Q&A portion of the call. We have slides that are accompanying the call, and we will be referencing them during this update.

As you all know, 2012 was a transformative year for Sarepta, and we had a number of critical activities over the last few months to keep the Company on a critical path towards realizing the full potential of eteplirsen, our lead clinical candidate for Duchenne muscular dystrophy, as well as our broader pipeline of RNA-based therapeutics.

If you refer to slide three titled Eteplirsen Program Status, I would like to begin by giving you an update on the activities that we're engaged in with respect to our work on eteplirsen with the FDA to determine the feasibility of an accelerated approval NDA submission.

As we disclosed earlier this month, we received meeting minutes from the FDA summarizing our end of Phase II clinical meeting that occurred in the first quarter. One of our key objectives at this meeting was to gain feedback on the feasibility of an accelerated approval NDA filing with the existing eteplirsen data set.

As a reminder, the FDA has authority to grant accelerated approval under what is known as Subpart H of Title 21, Part 314 of the Code of Federal Regulations. This regulation states that the agency may speed up the approval of a new drug for a serious and life-threatening disease based on the drug's effect on a surrogate endpoint that is reasonably likely to predict clinical benefit.

At this meeting, we ask the agency if our Phase IIb clinical data, which showed statistically significant increases in novel districts in over 48 weeks, along with supportive clinical outcomes and a good safety profile, could support an accelerated approval NDA filing. They did not provide us with a decision on the feasibility of this filing, but they requested two summary documents from our existing data set -- one that focused on dystrophin as a surrogate endpoint and one that focused on a summary of all of our clinical outcomes.

They indicated they would consider the feasibility of an accelerated approval filing on our existing data set after a review of these documents. We recognize that the context in which the agency evaluates this question is very important and that they need to be thoughtful and measured in their approach before making a decision on a new surrogate marker for a rare disease.

Again to summarize the FDA's response, the agency explicitly stated that they had not made a determination regarding the acceptability of the proposed accelerated approval NDA filing and that they would consider this additional information and data before making a final decision.

Since we last updated you earlier this month or last month, we have made good progress with compiling these summary reports on dystrophin and clinical outcomes. And we are continuing this effort with great urgency and remain on track to submit the reports to the FDA this month.

An important aspect of the argument that dystrophin is a surrogate marker likely to predict clinical benefit is to support our preclinical and clinical evidence of dystrophin production, its quality, quantity and function and link this to our 6-minute walk test results and other clinical evidence that the patients in our study are not following the natural course of decline for this disease.

In a few moments, I'll review in part the perspective we will be sharing with the FDA on the 6-minute walk test natural history, particularly as it relates to the updated 74-week data, which we will be sharing with the agency for the first time. This analysis was presented a couple of weeks ago at an investment conference, but I believe it's important to highlight this as it is an important element to understanding eteplirsen's effect on clinical outcomes in the natural course of this disease.

In terms of next steps, once we submit the additional information that the FDA requested this month, the FDA will work with us to determine the timing and nature of the follow-up response as it relates to the feasibility of an accelerated approval filing for eteplirsen. At this point, we do not know what forum that meeting will take place or the potential timing, but we are confident that after the FDA receives these documents, we will quickly get from them their preference as to how we will address any questions they may have and the best timing and form of a follow-up meeting.

We've been very encouraged by the agency's interest and responsiveness as it relates to the eteplirsen program. So we're hopeful that we will be able to meet with them by the end of the second quarter and achieve resolution on next step in the weeks thereafter.

However, no follow-up meeting has been calendared, and there's no guarantee that this meeting will take place in the second quarter. But we remain hopeful where we sit today.

We also continue to advance our manufacturing efforts and have been preparing briefing documents on our CMC package and expect an end of Phase II meeting that focuses on CMC issues, chemistry manufacturing and controls with the FDA in the third quarter of this year. We will await a decision from the FDA on the feasibility of accelerated approval prior to formally requesting this meeting as it will have a different emphasis and scope depending if it is under the context of an accelerated approval filing or if it would be under a scenario where a confirmatory study is needed.

If we pursued an accelerated approval NDA filing, we are interested in discussing with the agency their flexibility on issues such as the amount and length of stability data they would need from larger scale batches of eteplirsen, the quality and quantity of comparability data batch to batch as we scale up to larger production runs, and their needs for process validation as we apply our process to larger scale production runs.

Overall, we've made tremendous progress on moving the eteplirsen program forward since the beginning of the year, and we continue to work hard to achieve resolution as quickly as possible on the fastest path to registration.

Moving to slide four, I'd like to take a few moments to review the updated 74-week 6-minute walk test data from our long-term Phase IIb extension study with eteplirsen. I'd also like to give you some of our thoughts on how these data compare with the natural history in DMD in a moment.

We first announced the 74-week data in early April, and last month our lead investigator on the study, Dr. Jerry Mundell of Nationwide's Children's Hospital, presented these results at the Muscular Dystrophy Association Scientific Conference, which was very well attended by more than 500 treating physicians and Allied Health professionals. We think the most important takeaway from these updated data is that we continue to see a stabilization of walking ability across all eteplirsen-treated patients. This observation is particularly interesting in the placebo-delayed treatment cohort, which showed stability on 6-minute walk tests after being on the drug from the last time point before dystrophin was confirmed in these patients or beginning at week 36.

From weeks 36 to now through week 74, we saw walking ability in these patients stabilize with a less than 10 meter decline over this timeframe. To be clear, this is after the placebo patients have been on drug for 48 weeks and have now been stable for 38 weeks from the last time point before dystrophin was confirmed in their muscle biopsies, which were confirmed with statistical significance at week 48 or after 24 weeks on eteplirsen.

As a reminder, on this slide, you see an analysis using the maximum scores on the 6-minute walk test, which was our primary prespecified analysis and what we've reported most frequently. For this analysis, we took the maximum 6-minute walk test value when the test was repeated at clinic visits when a muscle biopsy was conducted at baseline at week 12, week 24 and week 38.

Moving on to slide five, you see a different analysis using the mean of the repeated test results. As we've previously said, we think this and other analyses of the 6-minute walk test results, such as using minimum scores or just their day one scores, when two measures were taken, confirm and support the robustness of the treatment effect seen in the prespecified analysis. This mean analysis is more appropriate as we continue to follow the long-term stability of these patients as it reflects a more appropriate baseline 6-minute walk test value compared to using the mean of the maximum scores and comparing to our natural history studies. And we're only collecting one value on 6-minute walk tests for subsequent visits. So using the maximum score from the baseline is less appropriate for this longitudinal analysis, and again, the mean provides a better comparison versus natural history from a baseline 6-minute walk test perspective.

So as we look at slide six, we have compiled the available 6-minute walk test data from the largest and most comprehensive natural history datasets currently available. These include peer-reviewed articles by Drs. Craig McDonald and separately, [Elana Mazzone], as well as placebo arm data from the PTC Therapeutics study of ataluren, which they have presented now at a number of scientific congresses.

Together these data suggest that age and baseline 6-minute walk test distance are important predictors of ambulatory decline, and we see marked declines on the 6-minute walk test from each of these data sets that we believe are highly consistent with the rate of decline of our placebo cohort through 36 weeks, especially when our inclusion criteria limited higher 6-minute walk test scores and in essence excluded the healthiest patients from our study.

Importantly, the Mazzone paper suggests that a baseline 6-minute walk test distance of 330 meters is an important predictor of a more rapid risk of rapid decline on 6-minute walk tests and might be considered as a cutoff for excluding patients from clinical studies with ambulatory measures, which I will mention in a moment further support eteplirsen's effect on stabilizing our placebo cohort.

When we look at the modified intent to treat cohort that received eteplirsen for a full 74 weeks, we see a striking contrast versus the natural history where these patients only experienced a 2 meter or less than 1% decline in walking ability after nearly a year and a half of treatment.

In addition, when we look at the placebo-delayed treatment arm after week 36, the time point at which we think these patients were likely producing meaningful levels of dystrophin beyond this point, we see only a 9 meter or about a 3% decline through week 74. Note, the mean 6-minute walk test distance at week 36 and the placebo-delayed treatment cohort was below the 330 meter cutoff that the Mazzone paper suggested as a predictor of substantial and rapid decline.

On slide seven, we show individual patient data on the 6-minute walk test. We're often asked about the variability in the 6-minute walk test results, so we thought it was important to disclose these data, which we did for the first time last week at an investor conference, and to orient you to the slide, we show in green a less than 10% change; in yellow, a 10% to 15% change; and in red, a greater than 15% change.

Let me add that Craig McDonald, an expert in natural history of Duchenne, has indicated that a 10% change would be clinically significant whether it's a decline of ambulation or a reduction of a decline to that degree.

As you can see, we generally saw stabilization or a less than 10% decline across the patients in the modified intent to treat cohort from baseline through 74 weeks. One patient in this cohort declined about 13%, but he was the oldest patient in the study overall with a baseline age of nearly 11 years, and we think it's encouraging that he showed good stabilization between weeks 36 and 74.

In the placebo-delayed treatment cohort, we saw a consistent deterioration of more than 15% across all patients from baseline to week 36. However, all of these patients demonstrated stabilization or a less than 10% decline after week 36 and through week 74. The key takeaway here is that we saw a generally consistent effect across every patient in the study after dystrophin was confirmed in robust and a statistically significant manner and a stabilization that would not be expected based on the natural course of this disease based on multiple datasets that have been evaluated.

Note that the mean age of both cohorts is now over 10 years at 74 weeks and close to 11 years in our original eteplirsen-treated group, which was about a half year older than the placebo patients, both of an age that we would not expect to see this type of stabilization, especially when you look at their baseline 6-minute walk test values prior to producing dystrophin.

So overall we think we have strong evidence that this drug and the dystrophin it's producing is stabilizing clinical function on the 6-minute walk test, which is the most well-studied and characterized clinical outcome measure in DMD and has been used as the primary endpoint in other studies of dystrophin-producing DMD drugs, and has also served as a basis of approval as a primary or co-primary endpoint for other rare neuromuscular conditions approved by the FDA.

Now I'll briefly address the safety results highlighted on slide eight. As we previously reported, we continue to see a favorable safety profile for eteplirsen, which we recognize as critically important for a chronic therapy that may be used throughout the course of a patient's life.

Through 74 weeks, there were no serious adverse events and no clinically significant treatment-related adverse events. As I mentioned before, one patient had a transient elevation of urine on a -- proteinuria on a urine dipstick test. However, the elevation resolved within 24 hours, resulted in no clinical symptoms and the patient continued treatment uninterrupted.

We also observed the transient elevation of urine protein in a patient on placebo during the first 24 weeks of a similar manner in the study. Overall, there have been no study discontinuations, withdrawals or hospitalizations, and all patients continue to receive treatment.

Before we move on to our other programs, I want to mention a few additional activities of note, which are highlighted on slide nine. As we previously reported, our scale of manufacturing plans are on track, and we have began our efforts to produce eteplirsen at a larger scale or what we have described as midscale production batches for our confirmatory clinical trial with eteplirsen and development of our follow-on DMD drugs.

We now expect to execute on our plans to further scale up to even larger production in the coming months. We view this effort as mission-critical to prepare to satisfy the potential commercial demand for eteplirsen if we choose to pursue an accelerated approval NDA submission, and we've made a strategic decision to initiate the beginning of these activities in the coming months.

As I said before, we have a lot of expertise and know-how related to this chemistry as we have been producing drug supply for our eteplirsen study or other drugs for several years and over a decade for other indications with good stability and purity profiles and good comparability batch to batch. While there are always risks in scaleup, we continue to be confident in our ability to develop the same drug product at a larger scale.

As you know, we are also moving forward with plans to initiate a confirmatory clinical study of eteplirsen later this year with dosing in patients to begin in the first quarter of 2014. We continued to evaluate potential study designs that will meet the FDA requirements for an adequate and well-controlled trial in what is in reality an ultrarare disease population. We expect to have additional interactions and potential follow-up meetings with the FDA to specifically discuss the confirmatory study design and expect meetings to occur throughout the third -- meetings and interactions to occur throughout the third and fourth quarter to finalize our study protocol for the confirmatory study.

In parallel, we will continue to meet with clinical sites and contract research organizations to put in place the plans needed to enroll qualified patients quickly and initiate this study on schedule.

With regard to our broader DMD program, we recently finalized an exclusive worldwide license agreement with the University of Western Australia. The UWA Research Group has done groundbreaking work in DMD to sequence the dystrophin gene, and they have been key collaborators for us over the years. This new agreement gives us access and intellectual property to even more of UWA's sequence optimization work, and it enables us to significantly develop our DMD pipeline to address even the rarest of exon deletions that we can target in DMD.

I want to emphasize here that this agreement represents a major milestone toward achieving this vision of the broader DMD program, which is to develop a deep pipeline of exon's skipping therapies that address all of the boys and young men who can benefit from this technology.

I also want to note that our preclinical activities for our DMD program addressing exons 45, 50 and 53 remain on track, and we continue to expect to initiate the first clinical study in patients -- I'm sorry, first preclinical studies for these drug candidates this year and next.

We also continue to make good progress with our government-sponsored infectious disease pipeline programs. We announced earlier this week that we initiated a multiple ascending dose Phase I study in healthy volunteers for our drug candidate AVI-7288 for the treatment of the highly lethal Marburg hemorrhagic fever virus. This study will generate important safety data to move this drug forward towards a potential approval for use as a countermeasure to a possible bioterrorism threat. We continue to expect to complete this new Phase I study by year end with initial data available in early 2014.

Overall, we're very pleased with our success to date with AVI7288, which has shown strong antiviral activity, survival and a good safety profile in preclinical and human PK studies. This program uses our next-generation PMO plus or positively charged morpholino chemistry, and we think the results to date demonstrate the versatility of our platform technology to address serious infectious diseases in the future and potentially other therapeutic areas as well.

I'm also pleased to share with you that we announced today the news that the first patient has been dosed in our Phase I study of AVI-7100, our drug candidate for influenza. The Phase I double-blind placebo-controlled dose escalating study will assess the safety, tolerability and pharmacokinetics of single and multiple doses of AVI-7100 in healthy volunteers. This study is being conducted by the NIH and the NIAID, the National Institute of Allergy and Infectious Disease division of the NIH under a clinical trial agreement we executed last year.

This clinical trial agreement builds upon the development of AVI-7100 that was previously supported under a contract with the US Department of Defense, which enabled a preclinical development through completion of a first cohort of a Phase I single ascending dose study to provide initial human safety data.

As we continue to see regular news reports highlighting the potential public health impact of a resistant or more virulent and transmissible flu strain, we believe our drug platform is uniquely positioned to address potential pandemic applications, and we are encouraged with the continued progress with this program.

Finally, before I turn over the call to Sandy to review our first-quarter financial results, I would like to take a few moments to briefly offer my perspective on Sarepta's financial health.

As noted in the press release, our cash position remains very strong with about $175 million on hand of cash or cash equivalents and invested cash as of March 31. As you can see clearly, we are thoughtfully managing our spend as we ramp up clinical activities, including the scaleup of our manufacturing capabilities, preparations for our confirmatory eteplirsen study and the onboarding of critical new hires across key functional areas. In line with our full-year guidance, we continue to expect our cash burn to substantially increase toward the end of this year as these and other activities reach critical mass.

Importantly, all of these efforts continue apace across clinical, regulatory and our scaleup of manufacturing within the guidance that we shared earlier this year.

With that, I am going to conclude my prepared remarks on our corporate update and turn the call over to Sandy Mahatme, our Chief Financial Officer, to give you a financial update for the first quarter. Sandy?

Thanks, Chris. Good morning, everyone. Please go ahead and turn to slide number 10.

This morning's press release provided details for the first quarter of 2013 in both an adjusted or non-GAAP basis, as well as a GAAP basis. Management believes that non-GAAP results are useful in evaluating the current underlying trends in our operations and highlights the impact of our operations on our cash balance, while also providing information relevant in comparing current results with prior periods. We will be presenting non-GAAP results on this call, primarily due to the significant non-cash impact that the revaluation of our outstanding warrants has on our net results.

These results also exclude the impact of stock-based compensation and our ongoing corporate relocation to Cambridge.

Please refer to our press release for a full reconciliation of GAAP to non-GAAP results.

In the first quarter of 2013, we reported an adjusted loss of $13.3 million or $0.42 per share compared to an operating loss of $6.1 million or $0.27 per share in the first quarter of 2012.

The incremental loss is a result of a $6.7 million decrease in government contract revenue and $0.5 million increase in operating expenses.

Revenue for the first quarter of 2013 was $4.5 million, down $11.2 million versus the first quarter of 2012. The decrease was due to the August 2012 stop work order and supplicant subsequent termination of the ebola portion of the ebola Marburg US government contract due to a lack of available US government funding.

These decreases were partially offset by revenue from the intramuscular administration contract with the US government for the Marburg virus which started in 2012.

Adjusted research and development expenses were $13 million for the first quarter of 2013 compared to $14.5 million in the first quarter of 2012, a decrease of $1.5 million. General and administrative expenses in the first quarter of 2013 were $4.8 million compared to $2.8 million the first quarter of 2012, an increase of $2 million.

The non-GAAP net loss for the first quarter of 2013 was $13 million or $0.41 per share compared to the net loss for the first quarter of 2012 of $6 million or $0.27 per share.

On a GAAP basis, the net loss for the first quarter of 2013 was $42.1 million or $1.32 per share compared to a net loss for the first quarter of 2012 of $17.7 million or $0.78 per share. The difference between our GAAP and non-GAAP results was caused primarily by $26.9 million revaluation loss on our outstanding warrants.

We ended the first quarter of the year with cash, cash equivalents and invested cash of $175.2 million, which is a decrease of $12.5 million from the balance of $187.7 million at the end of last year. This cash was used to fund our ongoing operations.

Beginning in the second quarter, our projected cash burn for the remainder of the year is expected to ramp up as we anticipate a number of near-term costs related to scaling up of our manufacturing capacity and get preparing for a Phase III clinical trial for eteplirsen.

With that, I would like to turn the call back over to Chris. Chris?

Operator, we can open up the call for questions.

(Operator Instructions). Christopher Marai, Wedbush Securities.

Hi, good morning, guys. Thanks for taking my questions. Congratulations on the quarter.

I appreciate that you have licensed additional rights to exons getting candidates from the University of Western Australia. I was just wondering what your estimate is of your freedom to operate with respect to those follow-on exons in the worldwide environment and the US, specifically?

Yes, so, actually it's one of the reasons why we believe it was an important agreement to finalize, and you know the original license that we had with the University of Western Australia patent estate was kind of the initial filing, which was good, but the rights we had were to eight identified exon targets, not the full complement of all of the rare exons that we would want to have protection to commercialize. And since the license of that original patent, there were was another patent that provided even more optimized sequences, provided a broader footprint geographically, and we think most of the sequences that we would want to bring into development for subsequent exons would come from this second, what we call the DMD2 patent estate from EWUA. And so we have now license to both of those patents. The second one includes a broader geographic footprint and even more optimized sequences. In subsequent sequences that might even be further optimized that can be linked back to those two patent states would be covered as well.

So we believe this really is what we needed to be confident in our freedom to operate around the globe in countries that we specified. I had listed them out at the investment conference a week or so ago of what that covered, and we gave that information specifically.

So, again, we think is what is needed where the sequence patents is essentially how the real estate is divided up among the DMD space.

As we reported previously, you know, we had an opposition challenge in Europe on eteplirsen and you know did not prevail on the exon 51, exon 46 with European patent opposition. Just as an update, they have now posted the summary of that patent opposition hearing, which does start the clock for the potential for requests for appeal. So we are evaluating our options on that internally currently, and we have four months to actually file if we decide to appeal this. We have two months from the posting of that to file a written appeal request, and then the summary briefing of the appeal would be within four months of that. But, again, we think that was an important agreement to give us the confidence and the freedom to operate globally for our DMD program broadly.

Great. Thanks. And then insight into the timeline with respect to pre-IND meetings with the FDA to discuss some of the other exon skipping candidates that you mentioned (multiple speakers).

Yes, it's a good question. So we are planning two pre-IND meetings to occur this year, and we are not ready to disclose the timing of those. But I think it's fair to say that as we approach the end of the year, we should have good insight in terms of the agency's view on the pre-clinical packages needed for not only our second exon skipping drug that would be brought into the clinic, but subsequent exon skipping drugs. We expect that we will be less burdensome based on the both emerging eteplirsen dataset and whatever commitments we make on the second exons skipping drug from a preclinical package.

So these pre-IND meetings become important because it really starts to set the stage for how the agency might be viewing the burden of proof for subsequent follow-on exon targets after the first, second, third, and we hope that that will lead to a more streamlined development program that would not take the more onerous route of not leveraging the safety, dose information dystrophin data that we've been producing both preclinically and clinically from eteplirsen to date.

Great. Thanks. And just finally one quick one and I'll jump back in the queue here. Are we anticipating any additional data from the extension study at World Muscle this year or any other conferences that you could highlight for us? Thanks.

Yes, we are likely to have a clinical and safety update on our extension study, you know, at World Muscle, and we will be determining if there are appropriate communication points prior to World Muscle. But we have submitted an abstract related to this extension study, and so whatever data we can compile and analyze and incorporate in that at time, we will do so.

Ted Tenthoff, Piper Jaffray.

Great. Thanks. Can you hear me okay?

Yes, Ted, I can hear you.

Great. Thanks. My question is on manufacturing. I know you guys have been focused on that and appreciate the update. Can you give us a sense of kind of where scale is now? What are the hurdles? Maybe a little bit more in terms of where things are going and what needs to still be done to really get you to the level where you can either meet requirements for the confirmatory study and/or commercial launch.

So, Ted, what I have tried to do is provide updates that we are still on track for our plans to start dosing the confirmatory study in the first quarter of 2014.

You won't hear me give a blow by blow, week to week activities on our manufacturing. If anything were to trip up that timing, then we would communicate that expeditiously to let people know. So all things and activities are on track.

To provide a little more color, you know, we are doing the process of the scaleup currently, and that contains a lot of elements. For example, you know reduction to practice runs where you we can learn, right, if there's any tweaks that required before we go for those specific test runs at the, let's call it, midscale production batch.

And so we learn from that to make sure we mitigate any risks when we actually do the production runs that we would want to use for the clinical trial material. This is akin to training for an Olympic event, right? You know what you need to do, you know what the event is and what it looks like it. And so you prepare -- you try to practice, you know you try to improve, learn from any mistakes you find along the way. But at the end of the day, when you do those production runs, you don't know what you get until you do it.

So we will not have that final insight on whether it's yield, whether it's stability, purity profile until we do those runs, which would be toward the latter part of this year obviously to start to getting the stability data that we would submit to the FDA to have drug release in the first quarter of 2014.

But that's the extent of the kind of insight that we are ready to give. But, again, rest assured, we believe we're on our time line, and that if we learned anything that would move us off of that timeline, we would communicate that accordingly.

That's helpful color. I appreciate it, Chris.

Bill Tanner, Lazard Capital Markets.

Thanks for taking the question. I have a few.

Chris, just as it relates to the information that the Company did provide to the FDA, can you give us a sense of the scope of what was provided as compared with that submitted initially? And I guess wondering to the extent to which the topics were winnowed down to maybe a smaller, more manageable number of them and just trying to determine, is it possible that there will be another reiteration, or do you think that you'll actually get the decision after the FDA reviews these data?

So, Bill, let me clarify. So we have not submitted those two documents as we sit here today, but I can provide some color on what we provided previously and what we're providing coming up.

We are in the stages of finalizing those documents, and you know we decided that the importance of these documents was more important than getting it in a week or two earlier. And so we've really gone even deeper than we had previously of combing through the literature, talking to other experts on their thoughts and advice of making the most compelling arguments for dystrophin as a surrogate and how our clinical data would support that. You see some of that evidenced in the communication around the natural history studies and what we would expect from this age cohort and the 6-minute walks that we started at prior to dystrophin production.

So we believe the two issues have been sufficiently narrowed in that I describe it as two sides of a coin. One is to show that the dystrophin that we are producing is functional and is of a quantity and quality that is meaningful based on the Becker patient and studies that have been done with the natural phenotype of Becker, of which the dystrophin we are producing, the truncated dystrophin is akin to the Becker dystrophin that exists in those patients, as well as the preclinical studies those that have been done in animal models of a DMD. There's dystrophic mice, dystrophic dogs, both of which have used eteplirsen or other treatment modalities to show that dystrophin is produced, you know, of this kind. It produces functional benefit in the animals. And then, of course, our own clinical data that suggests the clinical benefit that is produced from the dystrophin we are creating.

And then the other side of the coin is to make a stronger argument on our clinical outcomes, and 6-minute walk and other measures where we see a stability that we would not expect to see from the natural course of this disease.

And so when you even look at things like pulmonary function or cardiac function or muscle strength, if you just looked at all of these patients now are approaching 11 years of age on average and you know they're doing pretty well or better than we would expect them to do based on natural history. So we need to make that argument as compellingly as you make the dystrophin argument. And we think each argument bolsters the other.

So, if we make a stronger case on the dystrophin, then you can look at the clinical outcomes through a lens that would be more supportive. Likewise, if we strengthen our clinical outcomes argument, then you start to look at the dystrophin data through a lens that says these are probably linked and would reasonably predict this clinical outcome.

So that is what we've narrowed our focus on and are concentrated on, and we think these two reviews are coming together very nicely. And we think this will provide the agency with the sufficient information they need to make a decision. Obviously there's no guarantees. It is the FDA's prerogative to always request more information or delay the decision, etc. But we don't believe that would be the case because the FDA has been very responsive. We think they understand the urgency of this program of making sure that they are clear, so we can be clear when we're communicating to the DMD community of our intentions to try to get this drug to the market as soon as we can. This all I can provide at this point.

That's helpful. And then just as it relates -- I mean obviously there's really no data to support restoration of dystrophin and having prior to yours perhaps and having a clinical benefit. So what is your perception of the FDA's view point on the need for there to be some correlation obviously with -- it would seem like there should be some. I guess the question is, how tight do you think they're looking at that needing to be or how convincing taking into account that you have got small numbers of patients and you have got different ages and heights and things of that nature?

Bill, you know, we know that there have been other dystrophin-producing drugs that are still currently in active late stage development, of which we have not seen the type of robust, consistent dystrophin levels that we've produced in a controlled manner. And so we think that we have the most compelling argument, right, that we are producing meaningful levels of dystrophin, and that the clinical outcomes we are seeing, right, are indicative that the dystrophin levels we are producing are meaningful, right?

Now I think we have other drugs that are moving forward without that level of evidence. And so I think we are blazing the trail for establishing dystrophin as an important marker in this disease.

I think no one disputes the fact that restoring dystrophin is going to be essential to changing the natural course of Duchenne muscular dystrophy. It's the main essential protein that's lacking.

So we think we have sufficient evidence to do that. We think the FDA will see this after they review these more extensive documents, and we are helpful that they see it the way we see it. But, you know, we will have to see based on their questions and their review of this and their comments to come to that decision.

Robin Karnauskas, Deutsche Bank.

Hey, great. Thanks. Philippe here for Robin. Congrats on the progress during the quarter, first of all. And our question is, just can you help us understand if [forcensa] approved prior to your drug, what impact could it have on orphan drug exclusivity for your drug?

We don't think that it would have an impact. These are different molecules. These are different composition of matter. We have a different backbone chemistry.

So when you look at the guidelines for similarity on orphan drug exclusivity as it relates to two compounds, other than mechanism of action, we really don't see similarity on many of the other criteria. So you have obviously a different composition of matter, a different chemistry backbone. They look at things like are the datasets suggest that these products are different or the same.

Well, I think the fact that we were seeing very similar toxicities with the - just a person at 0.5 milligrams per kilogram from their reported dose escalation study, and we are now at 100 times that dose at 50 milligrams per kilogram in our current clinical study without any of the same lab signals and toxicities. I think it is hard to argue that these are not different, right?

So, you know, and then efficacy datasets is another thing, and then there's even the idea that would it benefit patients to make the drug available in a serious disease like Duchenne. So that's not something that is at the top of our list as a potential concern.

Ritu Baral, Canaccord Genuity.

Thanks for taking the question, guys. Mine is on the Phase III for confirmatory study. Just given the recent conferences where you have had a lot of access to the KOLs and the patient community, could you bracket for us the low end to the high end of a potential size and duration of this trial? If you could just give us an idea of what the range might be?

And also, Ed, specifically you and I have talked about all the different potentials for the comparator arm or comparator data set of the trials. If you could give us your current thoughts. And the third part of that question is -- and this is for Sandy potentially. What do you think the biggest levers are in that trial design for costs and duration of the trial -- duration to data?

Yes, let me try to address most of those questions. Ed is not on the call today. But basically on the size, we've said repeatedly that we think a 60- to 80-patient treated study is sufficient. If you look at, let's say, the PTC study that was 180 patients, they had two dose arms. So they had 60 patients treated versus the placebo, a 60-patient arm, with two dose cohorts, right?

Now percent is on a [2% to 1%] randomization, so 120 to 60 patients. So we think with the data we have to date to guide our powering on both dystrophin and 6-minute walk results and the consistency that we're seeing and the lack of variability, that that is a sufficient treated population.

Now the question you raise is the control arm is the question that we want to resolve with our discussion with the FDA. Obviously it can range from a placebo arm to a non-exon 51 amendable population that would have the same inclusion criteria, but would avoid the challenges ethical considerations of doing a placebo study with kind of a known active agent like eteplirsen? And then there's always the natural history comparison because we have an emerging data set on the natural history of this, which is getting easier to compare as I just did in the call today on greater than seven years of age and start cutting these data more specifically to compare to a treated cohort.

The size of the overall study, if we had a control arm, then that -- depending on if it's one to one, right, that would be a 60 plus 60 or 80 plus 80. If it's 2 to 1, it would be a 60 plus 30 or 80 plus 40 population.

So those details will be worked out in time. You know, I will let Sandy comment, but I just wanted to highlight that the biggest cost driver of the confirmatory study is the drug costs. And that is what we are incurring this year essentially, and why our burn is what it is this year is because we are producing much of the drug needed for the confirmatory trial that we would begin dosing in Q 2014.

Sandy, do you want to add anything on how it's really not a major cost driver beyond the drug costs?

No, Chris, you're right about that. It's primarily the drug costs that we are focusing on, and we have been in talks with various CMOs in the US and the EU, as well as in Asia agent both in our sub units, as well as in API. And we are looking at various arrangements such as joint ventures or maybe even buying suites in these various manufacturers, putting our employees and the facilities that these CMOs own so that we can get more control and ownership over the process. And we're certainly putting the financial resources in there to ramp up the manufacturing, which obviously would then drive down the price.

As we have guided previously, this year we are spending between $85 million to $115 million. A majority of that, whether it is the accelerated or non-accelerated scenario, is in drug costs and manufacturing operations.

So here the whole goal is to make sure that not only did we have manufacturing but also in the backup facilities and production efficiencies, which really goes to your question. So we cannot really guide specifically on what production efficiencies we can get to drive down the cost, but every month or six weeks that goes by, we feel better and better in terms of the progress we've made in terms of both manufacturing, as well as manufacturing efficiencies, which is where we hope that we can contribute in terms of containing the costs related to the Phase III trial.

Got it. So you're focused on getting six months to a year supply for those 80 patients on treatment that you're anticipating for the trial?

Well, it's a campaign, right? So you have constant drug production runs. But the setup costs and the initial runs, which would be usable in the clinical trial rate, are a big part of that. But obviously it's not to say we wouldn't be incurring manufacturing costs moving forward. I mean this is a campaign that will continue to increase. As the scale increases, the cost of manufacturing will increase. But we get to a point where every vial that is produced from mid-scale or large-scale is either going to drive value with an essential part of our clinical program, or it's going to drive value in terms of a commercial sale in the marketplace. So we see every investment in manufacturing as one of the best returns on investment that we can make at this point.

Heather Behanna, JMP Securities.

Hey, guys. Thanks for taking the question. Just a follow-up slightly on the manufacturing vein. Can you give us any color on discussions you've had with FDA or internally just on which dose you will use moving forward?

Yes, we have made our case for 30 milligrams per kilogram based on the fact that the biochemical data supports that 30 milligrams per kilogram is producing as much and actually numerically more at 48 weeks than the 50 milligram per kilogram dose. Again, the stability we see even in the 30 milligrams patients now is very good and sufficient, and so again, that is our stance.

Again the confirmatory study design has not been finalized at this time, and so we expect further discussions with the FDA. But as I stated earlier, Heather, you can only accomplish so much in these FDA meetings. We have a very ambitious set of questions and topics that we'd like to cover. The FDA knows this. They are encouraging that there will be opportunities to discuss all of these issues over the coming months and quarters. So we expect to do that. And as we get more specific perspective on the dose, we will provide that to the market.

Brian Skorney, Baird.

Good morning, guys. Thanks for taking the question.

Just in regards to some of the questions the FDA has had in your initial meeting, I'm just wondering how focused are they on the ability to adequately quantify dystrophin on Western blot and the actual relative differences in quantity and intensity produced in healthy patients, back for patients with an in-frame deletion ending with axon 51 and eteplirsen-treated patients?

Yes, so, Brian, you know, we have collected dystrophin in a very specific way. As a reminder, we had to submit this protocol, right, going back to the summer of 2011 for error view with this division where we outlined this as our primary endpoint and how we were going to be collecting the dystrophin, et cetera.

So, you know, we are summarizing for them again why we selected the methodology we did, but we believe that it was selected with an informed view. This was after talking to a lot of experts in the field. This was after looking at the precedent that was established by those before us.

You know, PTC, forcensa, GSK who were using immunohistochemistry to help them identify the dystrophin that they were producing. And we do believe that the information gleaned from a specific muscle tissues that you can look at staying specifically for dystrophin and looking at percent positive fibers, as well as intensity, as well as the localization and how the uniformity of that across the samples. This is a lot of great information to have when you're trying to interpret a muscle biopsy sample across the musculature of a human subject.

We have supported data that were showing the appropriate length of the protein by RT-PCR, and we have a supportive evidence on Western blot that the protein is being produced. We think all of this in totality provides the evidence that is needed to show that this dystrophin is meaningful, and we believe the literature, the preclinical models show that it's functional, and we believe that the clinical outcomes shows that it's reasonably likely to predict clinical benefits.

So I can't say for sure what each mind of the agency within the division are thinking specifically, but we believe we have outlined very clearly our methodology, how we have quantified that. We know that the research community and those that are on the forefront of looking at new markers, new assays, new ways of testing dystrophin. We admire and respect all of these efforts, and we expect that the field will evolve and grow.

Unfortunately we have to base the basis of our potential approval on what we've collected, and we collected what at the time was state-of-the-art and the most meaningful. And so unfortunately, you know, the FDA, you know, will have to evaluate the data that we have in front of us. And, you know, they've actually been loathe to quickly adopt newfangled approaches. It's not saying in the future they won't say a new assay or a new way of quantifying is a better way than what the standard of practice had been. But that's not the state we are in as we sit here today.

I know there's a lot of chatter out there about different ways and the forward-looking approaches to this, and we will be right at the forefront. We expect to be industry -- maintain our industry focus and expertise on dystrophin and look at these methodologies. But, you know, that's the big question. Can we make a compelling case on the methodology that we used for this study?

Tim Lugo, William Blair.

Thanks for taking the question. Can you give us an update on your plans for the nonambulatory patients? Will you be sharing data from the two patients from the Phase IIb and your white paper from the FDA? Will you include these patients in some sort of Phase IV or in maybe some sort of offshoot of the confirmatory study?

Tim, that's a good question. We actually believe that we have good evidence in our existing study with the two patients who rapidly lost ambulation shortly after enrolling in our study.

And just to put that in perspective that both of these twins were below 250 meters after four weeks after enrollment in the study long before we would expect dystrophin to be produced, and the Mazzone study I referred to earlier had those patients who were below 250 meters had the highest risk of losing ambulation over a year- to two-year timeframe from his natural history study.

So we have now continued to treat those patients. They were two of the boys who showed increasing dystrophin from week 24 to week 48. We've shared some of the pulmonary function data that we believe suggests stabilization on a measure that starts to more rapidly progress once you lose ambulation, and we have other upper arm extremity tests and 9-hole peg tests and other things that are nonambulatory measures.

So we believe where we sit today, we have one of the most robust nonambulatory datasets that exists in DMD today on these two patients, and we expect that there will be other experience study. Whether there'll be a companion study to our pivotal, that's not determined at this point. It could be that of any patients whether on placebo or some other control group were to lose ambulation, we would likely continue them and continue to follow them on treatment and look for those outcomes.

So we think there's a lot of different ways beyond what we have already collected to date to support the nonambulatory population. But going back to the proof of concept, there's no reason to suggest that we wouldn't be producing dystrophin in the same way based on the results we've had to date in any DMD boy who is amenable to an exon 51 skip and that that dystrophin that we're producing wouldn't lead to some level of functional benefit. And it's harder to determine the right measures of functional benefit in these other populations outside of 6-minute walk test in the type of population that we identify for our study.

Joe Schwartz, Leerink Swann.

Great. Thanks and congrats with all the progress.

I wanted to ask, how you expect your deliverables to be able to show a concurrence between the doses of eteplirsen administered with the functional changes being achieved in the dystrophin production? And in some respects, there seems to be a lack of correlation. But we obviously have less data than you. So do you expect that this will be a strong argument in your deliverables?

You know, it's not something that we have ever suggested that we would be able to show some type of tight linear correlation. Now you're adding another criteria, which is dose.

So I think it's hard enough to suggest that, for example, 30% dystrophin positive fibers will translate to a benefit over an untreated patient of, you know, 50 meters. But if we show 45% dystrophin positive fibers, that goes up to 65 meter benefit.

You're dealing with a sampling bias of a tissue sample that's representing the full musculature, and you're using an effort-dependent test that is highly variable based on other phenotypic characteristics and age and demographics in trying to correlate those two things in a very linear type fashion.

So that's not an expectation that we have even set. But we do believe that there is a threshold and that we're above that threshold for which we would expect clinical benefit to manifest itself based on the levels of dystrophin we're producing. And that, we believe, is the level of evidence we need to provide.

It's unfortunate in diseases like this where there's no clear biomarker and there's no easy way to detect dystrophin levels other than muscle biopsies at this point, and we know there's new approaches that might make it less invasive and easier to do that, and we look forward to those new methodologies. But when you're dealing with a disease like this, you can either throw up your hands and say, well, we can never approve drugs that might be really active against these diseases because we just don't know enough information, and it's not as tightly correlated. So there is no pathway to approve these drugs. Or we can say, let's work with the information we have, and is there sufficient evidence? And, again, we like the accelerated approval pathway that the FDA has at their disposal, which is reasonably likely to predict, and that would be confirmed in a larger clinical outcomes-based study. And so this is where we have to or, Joe, we have to lead ourselves because we don't have that level of information for this particular disease.

Reni Benjamin, Burrill & Company.

Good morning, Chris. Thanks for taking the questions. Just go to the natural history slide. You mentioned that 330 meters of baseline may be a good cutoff when enrolling in the study. Is there an upper limit that you have found may also be a good cutoff, and can you remind us of the range of a baseline 6-minute walk on the substantial treated patients?

Yes, so basically we enrolled patients that could have qualified for the study having a baseline of 200 to 400 meters at baseline. This is their first day one, what we called our screening visit, and we allowed on that first screening visit a variable of plus 10%. Meaning, they could have been below 440 meters and still qualified for the study.

Now, when we use maximum score, the reason the average values at baseline are higher when we use maximum mean scores is because the second day they could have been above that or above 400 on average. And we had a few patients who qualified above 400. I think one -- I don't call specifically who might have been above that 440 mark on day two. But, again, all of them were within that, let's call, it 250 to 450 range. That's the broader range including the day two scores.

I think on the upper end, I think we would look -- you know a little suspect at kids who are above, let's say, 450 meters, right, at least on a consistent basis over a couple of scores if that is not a healthier than normal DMD.

We would also -- you know, as we know from the natural history studies, including boys that are less than seven years of age and I think both PTC and forcensa have made comments to this effect as well that they're still improving. They're still growing.

So doing studies in a population that includes patient below 7 can be very confounding because you don't -- I think it's a lot more variable to interpret a potential treatment effect when you have got a large swath of patients that might naturally be improving whether they are own drug or not.

And so we believe the population we selected is exactly who we intended to, which is those that would not be healthy, would not be young, would not be expected to be improving and would be on a decline.

So, again, we think both our early treated group, right, which averaged in the 380s on 6-minute walk and then the placebo growth group which averaged below 330 at the time we were producing dystrophin. Both of those are levels of evidence, of stability that you would not expect to see in those populations.

Kim Lee, Janney Capital.

Thanks for taking the questions. The first one is, in your previous discussions with the FDA, what other things or concerns if any were brought up besides the requirement for showing a dystrophin special clinical outcomes? Is there any other color you can provide there?

What were the FDA thoughts on exclusion of certain data like data from twins? Thanks.

Yes, I mean look what we highlighted the most salient, relevant points that we feel related to the FDA discussions. Again, we were encouraged that they were not making an issue of the sample size, and it was more on, let's understand the quality and quantity of data that was collected from that sample size.

So we were very encouraged by that. And again, they gave us a flexibility statement on the safety is that if they did accept this for an accelerated approval filing, that we could then supplement that NDA filing with some initial experience from any confirmatory study if we needed that to form the basis of an approval. So, again, we've shared what we think are the most relevant outcomes of the FDA meeting.

And, again, we described and explained the twins we think very sufficiently, and of course, they want to see all the data, right? They want to make their own interpretation as though, look, they do this when they do a review, and we expect that they're going to do a similar type of assessment not to the same extent as they would after an NDA filing. But I expect they're going to review our data with a measured eye, and so we explained the twins as best we can, and we don't think that would impede their decision on whether this is a feasible dataset for accelerated approval filing. And, again, we think there's advantages. If there is a silver lining, it is we're collecting some excellent information in a nonambulatory population as a result of these two boys.

So, again, we are looking at this, you know, very favorably and believe the FDA will be look at this appropriately and pragmatically.

Debjit Chattopadhyay, Emerging Growth Equities.

Good morning, guys, and thank you for the questions. I just have two questions.

First, I mean what differences are you seeing with the other axon drugs versus eteplirsen in terms of therapeutic dose and efficiency of exon skipping?

And number two is, if you compare the current Phase IIb patients and sort of looking at the natural history of DMD and compared them with the most severe Becker muscular dystrophy phenotypes, so how do they stack up versus the second group, the severe phenotype of Becker's muscular dystrophy? Thank you.

So, Debjit, can you repeat the first question, again?

Well, I was just wondering if in terms of the other exon skipping drugs, what you seeing that's different?

Yes, okay. So, on the other exon skipping drugs, again, we are in preclinical development, and there are not -- there's no plans for specific exon targets today. The preclinical work, any functional data would be done in the dystrophic mouse model. The NDX, which is a surrogate, it's an exon 23 skip.

So what we have is we've optimized the sequences from exon 45, 53 and 50 and have identified those lead candidates. And so what we can extrapolate at this point, this early stage, is that the exon skipping efficiency is in the range we would like to see it. And that would be predicted based on what we know about eteplirsen and the sequence we have with exon 51, that these would be -- would have a similar ability to produce the dystrophin levels we're seeing with eteplirsen at a standard dose, at a similar dose of, let's say, 30 milligrams per kilogram per week.

So we won't know for sure until we actually dose patients, collect some dystrophin from those new exon targets to know if that is the case.

Regarding your second question, Becker muscular dystrophy has a very milder course. And oftentimes there's a wider range to Becker. So some would be described as a mild Duchenne patient, and that ranges from an almost normal individual healthy individual, which can live most of their life without even knowing they have a muscular dystrophy, never requiring a wheelchair and living kind of a full life expectancy.

So what we see right now in these 10 boys who are still ambulant is a stability that if we can continue that on an ongoing basis, that would be very encouraging. If we started this drug in an earlier healthier population, we could really have an opportunity to change the natural course of Dushan and make it more akin to what we would see in Becker muscular dystrophy, which is a much milder phenotype, which allows ambulation to continue largely into adult life.

Thank you. I'll now turn the call back to Chris Garabedian for closing remarks.

Okay. Thank you, operator, and thank you everybody for your interest and calling into this quarterly update. We are prioritizing this program and our interactions with the FDA, as well as the activities on clinical, regulatory and manufacturing. We understand the urgency of doing everything we can to get this product to the patients who need it as quickly as possible, and we believe the FDA is a partner in trying to help us figure out how to do that in the best way possible.

So, thank you. We look forward to giving you periodic updates along the way, and thank you for your interest in Sarepta.

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