Sarepta Therapeutics Inc (SRPT) 2013 Q3 法說會逐字稿

Welcome to the third quarter 2013 Sarepta Therapeutics earnings call. My name is Dawn, and I will be the operator for today's call.

(Operator Instructions)

Please note that this conference is being recorded. I will now turn the call over to Erin Cox. You may begin.

Thank you, Dawn, and thank you for joining today's call. Earlier today, we released our financial results for the third quarter of 2013. The press release is available on our website at www.sarepta.com, and our 10-Q was filed this morning. Joining me on the call today are Chris Garabedian, our President and CEO; Sandy Mahatme, our Chief Financial Officer; and Ed Kaye, our Chief Medical 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 for an accelerated approval by the FDA for eteplirsen, the potential for dystrophin as a surrogate to predict clinical benefit, the clinical significance of our 6-minute walk data to date, the amount and type of data and other requirements that will be necessary for the FDA's regulatory determination, the impact of manufacturing and development activities on NDA submission timelines, the potential pricing and market opportunity for product candidates, our ability to manufacture candidates, our ability to protect our intellectual property rights, future financial performance including revenues, expenses and financing, sufficiency of our cash reserves, potential funding from the government and other sources in collaboration and partnering opportunities.

These forward-looking statements involve risks and uncertainties, any of which are beyond Sarepta's control. Actual results could materially differ from these forward-looking statements, as any such risk can materially and adversely affect the business, results of operations, and the trading price of Sarepta's common stock. For a detailed description of risks and uncertainties we face, you are encouraged to review the Company's most recently filed 10-Q, and other 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 morning, everyone, and thank you for joining us today for our quarterly financial and corporate update for the third quarter of 2013. We also issued another press release this morning, providing an update on our FDA discussions related to the eteplirsen clinical program. And I will be addressing this topic on the call, and during Q&A as well.

Last Friday, at 4 PM Eastern Time, we had a meeting with the FDA that was intended to focus on finalizing our confirmatory study design with eteplirsen. We were very pleased with the FDA's involvement at this meeting, in that they extended our allotted meeting time from 60 to 90 minutes, and there were about 25 participants from the FDA, including Janet Woodcock, the Director of CDER; John Jenkins, the Director of Office of New Drug; Bob Temple, the Deputy Director of Clinical Science for CDER; and Ellis Unger, the Director of Drug Evaluation I; along with Eric Hastings and Ron Farkas, the acting Director and the Clinical team leader for the Division of Neurology Products. So we were very thankful to have the FDA's active involvement in this program on the eve of a holiday weekend, and believe it highlights the importance of this program within the Agency. While the express purpose of the meeting was to finalize our confirmatory trial design, the Agency provided unsolicited comments related to a change in their thinking on the regulatory status of eteplirsen, our clinical data, and our clinical development plans, as a result of new data that they have considered and interpreted since our last meeting in July. Specifically, they indicated that since the last meeting with Sarepta, and based on the recent failed Phase III trial of drisapersen GSK and Prosensa's exon-skipping drug candidate for DMD, as well as citing negative reports for PTC's therapeutic drug, ataluren, another drug using a different mechanism of action to attempt to produce dystrophin, along with recently published natural history data on DMD that their concern has increased. And it has raised considerable doubts about dystrophin as a biomarker, and about our supportive 6-minute walk efficacy data.

As a result, they have shifted their stance, from being open to considering an NDA for filing, to now considering an NDA filing for eteplirsen as premature. We do not fully understand nor do we agree with many of the FDA's comments and new perspectives, as we believe our dystrophin data has been well-characterized and compares favorably to, and is differentiated to other dystrophin-producing technologies including drisapersen and ataluren. And our 96 week 6-minute walk test data is not typical of what has been characterized in the broader natural history literature, and in clinical studies including the placebo and failed drisapersen ARMs of their Phase III study. With regard to our 6-minute walk test efficacy data, the FDA's decision to reconsider being open to NDA filing since our last meeting is based in part on recent national history data that has led them to believe that DMD boys that can walk over 350 meters at baseline of a study in their words quote, predicts general stability for such patients, end quote. Not the 75 to 83 meters that we had described for them based on historical data, and what has been reported in the greater than seven-year-old population of the Prosensa and GSK case study across both the drisapersen and placebo arms, respectively. That study also had a population that represented a similar exon-51 amenable population in our studies.

They stated that as a result of the new natural history data that quote, considerable doubt is also cast on the efficacy supports, end quote of eteplirsen, which was provided to them through 96 weeks from our Phase II extension study, and that quote, it may be productive to re-examine study enrollment criteria and endpoints, end quote in connection with a start of a confirmatory clinical study. These new perspectives and their request to re-examine study enrollment criteria, endpoints, and subpopulations will result in a delay in our clinical program, and the earliest we would expect to begin dosing in a confirmatory study will now be the second quarter of next year. Additionally, the agency has reiterated their demand for a placebo-controlled study because in their view quote, efficacy endpoints in DMD are effort-dependent and susceptible to bias, and the natural history is highly variable and has recently improved with steroid use and advances in ancillary care, end quote. Since the placebo-controlled trial would require a doubling of the sample size of our planned confirmatory study, and could pose problems obtaining IRB approval to obtain two surgical biopsies with general anesthesia in placebo patients in order to protect the blinding, this would significantly delay our ability to recruit an ambulatory age-appropriate exon-51 amenable population in the US. Recognizing the potential challenges of recruitment, the FDA suggested exploring additional subpopulations and endpoints, and were open to discussing novel approaches to designing a placebo-controlled study, although the type and extent of these endpoints and subpopulations remains open.

We did not get to address all of the issues that the FDA outlined in their pre-meeting comments, and we requested additional time with them on a rapid timeframe. They were quick to reply to our request for more time, and we will be meeting with them again this month to discuss the confirmatory study design, in which we hope to come to an agreement. We at Sarepta are committed to getting into getting eteplirsen to market as soon as possible, and will continue to work with the FDA to determine the quickest path to approval. We believe that eteplirsen is safe and efficacious, based on our interpretation of the Phase II data, and believe this setback does not reduce the chance of ultimate approval of the drug. To be clear, we will be pursuing a more traditional path of approval, while we concurrently try to persuade the FDA to reconsider the potential of an early filing strategy for eteplirsen. However, we know that many patients had put a lot of hope into our ability to convince the FDA that the drug deserves early approval, and had expectations that with the potential NDA filing in the first half 2014, that the possibility of an eteplirsen FDA approval could have come in late 2014 or early 2015. The delay of our clinical study and the request by the FDA to revisit enrollment criteria and endpoints, and to consider the possibility of subpopulations and combinations of endpoints pushes the potential timeline of an eteplirsen approval out two years or more.

Despite the FDA's increased concerns based on information they considered since our last meeting, we believe strongly that we have an active drug that is showing a strong biochemical response with the method in which we have quantified dystrophin. We have demonstrated stability on the 6-minute walk test in all ambulatory patients out to 96 weeks in the treated group of our Phase II study, and over 60 weeks in the placebo crossover group, or since the last time point before dystrophin was confirmed in these patients. Furthermore, we believe that our safety and adverse event profile is favorable, and tips the risk-benefit ratio in favor of making this drug available to patients in a timely manner. The guidance from the FDA was based on new data from a competitive product, that we believe is wholly different than our compound, where extrapolations are questionable, and also from recent selected natural history data that is inconsistent with expected decline in DMD patients in several studies and natural history publications to date.

No new eteplirsen data, beyond the 96 week clinical and safety update was provided, nor any eteplirsen data cited in connection with their determination on their NDA filing decision. We continue to believe the interest and excitement we have seen in this product among the DMD research, clinical, and patient community is justified, and we will be working diligently with the FDA to agree on the design of our confirmatory study. And in parallel, try to persuade them to change their perception on the acceptability of an early NDA filing. We know this is what the families of DMD boys would like us to do, and we are committed to not giving up on this pursuit. On that note, I would like to turn the call over to Ed Kaye, our Chief Medical Officer, who will give us a clinical update.

Thanks, Chris, and good morning, everyone. As you know, we recently presented 96 week data from our long-term Phase IIb extension study of eteplirsen at the World Muscle Society Congress last month. We continue to be very encouraged by the results of this study, and which eteplirsen-treated patients evaluable on the 6-minute walk test have demonstrated generally stable walking ability for nearly two years. Based on the natural history and our clinical experience, we would not expect to see stabilization in boys of this age. In the study, the boys are between 11 and 13 years old, and while the remaining 3, are 9 years of age. The 96 week data showed less than a 5% decline from baseline in walking ability for the continuous eteplirsen-treated patients evaluable on a 6-minute walk test. In addition, patients in the placebo delay treatment cohort demonstrated stabilization in walking ability from week 36 through 96, the period from which meaningful levels of dystrophin were likely produced, with a decline of about 18.5 meters over this time frame.

At 96 weeks, the safety profile for eteplirsen continued to be favorable, with no clinically significant treatment-related adverse events nearly for 2 years. There were no discontinuations, withdrawals or hospitalizations, and all patients continued to receive treatment. Since our last update, there was one serious adverse event involving a leg fracture, that was assessed as treatment unrelated. This occurred in one of the boys who went non-ambulatory early in the study. Because he was excluded from the modified intent-to-treat population, the injury did not have an impact on the 6-minute walk test results that I just reviewed. Thankfully, we understand he is recovering and doing well.

In addition to the presentation of these data at the World Muscle Society Congress, we have coordinated a number of activities at several important scientific and medical congresses, including the Child Neurology Society Annual Meeting, the Muscle Study Group meeting, and the Oglionucleotide Therapeutic Society meeting, all of which took place in September through November of this year. We are pleased to see growing excitement and interest in eteplirsen in our follow-on exon-skipping programs in the clinical and research communities. In the coming year, we will continue to look for opportunities to strengthen our relationships with a well-defined group of pediatric neurologists in the US, as well as enhance our relationships with global thought leaders in the field. As Chris mentioned a few minutes ago, we are in active and ongoing discussions with the FDA about the confirmatory study design. While we continue to coordinate and align our approach the Agency, we are also taking steps to educate the patient community and prepare families for potential study participation.

In October, we launched a new online research center called, Let's Skip Ahead to provide education to the DMD patient community on exon-skipping and the clinical trial process. This initiative connects Sarepta and the community, allowing us to identify and communicate with patients and their families about clinical trial opportunities. Participation in Let's Skip Ahead has already exceeded our initial internal projections, and we expect this program to be an important tool in our effort to rapidly enroll the confirmatory eteplirsen study. In addition, Sarepta joined forces with Parent Project Muscular Dystrophy on Decode Duchenne program, which fills an important need for assistance in accessing genetic testing. As many of you know, in DMD a genetic diagnosis is required to understand potential options including eligibility for clinical trials, and we recognize that there are barriers to obtaining genetic testing for many families. Through this program, PPMD will offer testing at no cost to eligible patients who are unable to access it, due to barriers such as lack or insufficient insurance coverage. We understand from PPMD that the program will go live soon, and we are thrilled to be able to provide support for this effort.

Finally, we continue to make progress with our DMD pipeline programs, and we are on track to submit two or more INDs to the FDA by the end of 2014. Due to some scheduling difficulties, we now expect to have a pre-IND meeting with the FDA for our exon-53 drug candidate in the first quarter of next year. This slight change in timing for the pre-IND meeting does not delay our plans to initiate the IND-enabling preclinical work this year, and we are still on track to submit an IND next year for this candidate consistent with our earlier guidance. With that, I would like to turn the call back over to Chris.

Thanks, Ed. I would also -- I would like to also highlight that we are continuing our scale-up manufacturing activities, and we had a productive CMC meeting with the FDA, where they demonstrated the flexibility we were hoping for on stability data, comparability and process validation. And we do not expect the FDA to be a barrier, in providing drugs to patients in our confirmatory clinical trial. While the FDA decision to reconsider the potential for an NDA filing in 2014 will require us to rethink the need for scaling up for commercial demand, we have not altered our plans at this time to prepare for large-scale production, in the hopes that the agency may reconsider being open to an early NDA filing on our existing data set. Now I will turn the call over to Sandy to review our third-quarter financials.

Thanks, Chris. Good morning, everyone. This morning's press release provided details for the third quarter of 2013, in both an adjusted or non-GAAP basis, as well as a GAAP basis. The press release is available on the SEC and Company websites. The non-GAAP results we will discuss on this call provide a more accurate picture for our ongoing operations, and the impact of operations on our cash balance. Beginning in the first quarter of 2013, we have presented non-GAAP results, primarily due to the significant non-cash impact that valuation of our outstanding warrants has on our net results. These results also exclude the impact of stock-based compensation, and our relocation to Cambridge which is substantially complete. Please refer to our press release for a full reconciliation of GAAP to non-GAAP.

In the third quarter of 2013, we reported an adjusted or non-GAAP operating loss of $21.3 million or $0.63 per share, compared with an operating loss of $6.1 million or $0.27 per share in the third quarter of 2012. The incremental operating loss is a result of $3.4 million decrease in contract revenue, and $11.8 million increase in operating expenses. Revenue for the third quarter of 2013 was $4.2 million, down from $7.6 million in the third quarter of 2012. The decrease was largely due to the August 2012 stop work order, and subsequent termination of the Ebola portion of the Ebola-Marburg US government contract. Adjusted research and development expenses were $19.9 million for the third quarter of 2013, compared to $10.6 million in the third quarter of 2012, which is an increase of $9.3 million.

General and administrative expenses as adjusted in the third quarter of 2013 were $5.7 million, compared to $3.1 million in the third quarter of 2012, which is an increase of $2.6 million. During the third quarter, we completed our previously announced at-the-market equity offering raising $125 million in proceeds by issuing approximately 3.4 million shares. All shares under the offering were sold during the third quarter of this year. We ended the third quarter of the year with cash, cash equivalents and invested cash of $281.4 million, as compared to $187.7 million at December 31, 2012. Turning to our full-year 2013 guidance, we expect our net operating loss for the year to be in the range of $80 million to $90 million. Our operating expenses for the third quarter were higher than the second quarter of 2013, as we had begun to gradually make investments in manufacturing capacity.

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

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

Thank you.

(Operator Instructions)

Our first question comes from Brian Skorney from Robert W. Baird. Please go ahead.

Hi, good morning. Thanks for taking the question, and sorry to hear about the disappointing notification from the FDA. I guess, Chris, it sounds like a lot of what you are saying, you are still thinking about a potential for an early filing. Did the FDA leave any opening to reconsider this decision on the acceptability of an early filing? Or give us some color around what you think the path forward is here, and how hard and fast, the FDA is about say no to an early NDA?

Yes. So thanks, Brian. With the FDA, it's an ongoing dialogue, okay? And these culminate in meetings and pre-meeting comments, and meeting minutes, and the conversation can evolve, okay? When we receive the pre-meeting comments which typically we get a day before the actual meeting, oftentimes the meeting allows for a good conversation and dialogue. In fact, it is intended to discuss what is in the pre-meeting comments.

So we, again had 90 minutes in the meeting, and we used that time to really describe how differentiated our project is from drisapersen. Both the chemistry, for example, we highlighted how we have data that shows our chemistry has multi-fold better exon-skipping, that our sequence versus their sequence all things being controlled has multi-fold activity. We talked about the higher dose we used in our studies, five- to eight-fold higher dose in our clinical study. And we shared contrasting data on RT-PCR, dystrophin as best as we could do apples-to-apples, side-by-side. We hope that does influence their conclusions from drawing extrapolations from the failed drisapersen trial.

We will have to see if the continued dialogue we have with them, is enough to have them reconsider being open to an NDA filing. I mean, our teams have been working diligently over the last few months since we had that initial guidance from the FDA, that they would be open to an NDA filing. So we will continue compiling those documents and NDA modules, in the hopes that we can convince them over the next weeks to months to reconsider. So I think, we believe the door is opened for them to reconsider this. But at this time what we have disclosed is all we can provide us an update at this moment. But we do believe, just like the FDA kind of changed their position from July to now, we think, as we are able to describe more of the data, that they may change their position yet again.

Got you. And then, do you know, has the FDA received and reviewed the GSK Prosensa data in any formal manner? I mean, what level of analysis have they done that have sort of driven this decision and the comparison between the two?

Yes, it is a good question, because I think their conclusions clearly, were driven in large part by the failed study. They did mentioned that they have seen some dystrophin data that was not in the public domain. We obviously had access to what was in the public domain. We discussed that, shared it, tried to put context around it. And we told them that whatever additional dystrophin data they may be looking at, we would love to have a dialogue with them about it. So that we can put it in the right context vis-a-vis our data, and what we understand is the right way to quantify the dystrophin.

When we had a discussion around the clinical data, they did indicate in the meeting and in comments after the meeting, that they have requested the data from GSK. As of last Friday, they did not have that data in-house, but they hoped to receive that data sometime in the near future. And then they would start analyzing that data, is how they described it, to determine if there is more insights that can be gleaned, in how our drug is performing in our study. But they have not yet done that analysis, nor as of Friday have they received that data.

Thank you. Our next question is from Liisa Bayko from JMP Securities. Please go ahead.

Thanks for taking my question. Sorry about the news on this. Can you just maybe talk about Chris, you mentioned that you had used the 90 minutes, to talk about chemistry and safety and some sort of differentiated features there. Do you feel like that resonated with the agency? Can you just maybe talk about their response?

We hope so. There were slides that we presented, and we obviously provide those for them to look at following the meeting. It's hard to say. I would say generally, the FDA likes to consider the discussion in a meeting, and reflect that in the meeting minutes. Now we always try to get feedback immediately after having a dialogue, presenting data, but it seemed they preferred to reserve the judgment and reflect that in the meeting minutes.

I also mentioned, and it was in the press release, that we did request a follow-up meeting to discuss confirmatory study. That is another opportunity to answer any questions they may have had from our Friday meeting, and that could be reflected in minutes as well. So it is an ongoing dialogue, but it is unclear how persuasive that was. And we probably won't have insight into that until the minutes come out.

Okay, great. Thank you. And then, as you look now to your next meeting, could you just remind us when do you anticipate that sort of meeting to discuss more details about Phase III will be?

Yes. Well, we said this month. We don't give specific dates of when those meetings take place, but I will say that we requested more time with the agency to discuss these very important issues and with a sense of urgency. And they are responding, and meeting that urgency and getting time on the calendar. I mentioned there were approximately 25 participants from the FDA. You can understand scheduling, right, can be difficult, across all those important people. So ultimately though, they have been very responsive and we are pleased with their willingness to give us more time this month.

Thank you. And our next question comes from Robin Karnauskas from Deutsche Bank. Please go ahead.

Hi, thanks for taking my question. So actually I have two, if I can. So I guess with, regarding the design of the trials it sounds like placebo-controlled is out. Do you have suggestions for them that you think they will agree to, and what kind of patient subpopulations do you think are on the table? And then second question is, do you think that if you continue to push for accelerated approval that, that could damage your relationship with the FDA? I know the FDA, I appreciate that the patients really need this drug, but I also, I am also concerned about the FDA might be turned off by pushing for something that they said no to already?

Yes. Well, so, Robin, first I would say, let me answer your last question first. So they said no recently, but they weren't saying no as of July. Right? They were open to an NDA filing. So that gave us encouragement, and that we started plans to pursue that. So all we are doing, and all we can do is respond to the FDA messages and comments.

So there was a change in that belief and perspective since the July meeting. So we don't feel that we -- we have been very thoughtful, and considered all along the way -- in fact we indicated that we would simply, initially only talk to them about dystrophin as a surrogate, and we raised that earlier this year. And we had ongoing dialogue with which we shared publicly, about all the steps along the way of how that conversation has evolved. So we have never pushed something, that they have been very clear about. Obviously, today's communication is recent, and we are digesting their perspective. At the same time, we believe it is appropriate for us to have a response, because we think that some of the conclusion that they have come to related to dystrophin, our comparisons to drisapersen, the natural history are not complete. And we want to be in a position to be able to have that full conversation with them.

So with, regarding the trial design, you may have misspoke but you said placebo-controlled is out. To the contrary, they are restating their desire to have a placebo-controlled study. We have been clear with them along the way, the challenge with a placebo-controlled study as you are aware, we don't at this moment have the freedom to operate in Europe to entertain sites in Europe. So we are looking at US, North American sites. That is a limited population. When you're looking at the ambulatory population and you are looking to enroll -- 60 patients is what we have proposed treated with eteplirsen, that was going to be difficult and challenging.

As we look at a placebo-controlled, you are looking at moving to a two to one randomization. You need more treated patients, so we would be looking at approximately an 80 to 40 sample size. So that is doubling the number of patients we need to find and recruit. We also think that this increases the challenge of getting IRB approvals and informed consent, because we intend to capture dystrophin in a confirmatory study. And this would be subjecting placebo patients to open, surgical biopsies, two of them, with general anesthesia, putting patients at risk. And this is where we were trying to push for an untreated cohort. So again, what they are saying is they are recognizing the potential challenges of the feasibility of getting an ambulatory number of patients to do a placebo-controlled. So they are proposing well, you could potentially seek to include other subpopulations in that study that would still be placebo-controlled.

So you can imagine a younger population that would be randomized to placebo or eteplirsen, or a non-ambulatory patient randomized to placebo or eteplirsen. And they are talking about, they understand that is confounding in terms of endpoints. But they talked about combining endpoints, or looking at other endpoints in a non-ambulatory -- or they talk about motor function tests. And it is not clear, they have left it open, in terms of the types of other endpoints they would consider. But they are pretty clear they want to see a placebo-controlled, because of the recent natural history data that has in their minds, called into question the actual decline of 6-minute walk in these patients, and the general stability that they believe exists from the natural history they are citing.

Thank you. Our next question comes from Ritu Baral from Canaccord. Please go ahead.

Thanks. Just to piggyback off of a Robin's question a little bit, what other endpoints would you consider? I mean, FDA doesn't seem to like biochemical endpoints like dystrophin, just like 6-minute walk because of the effort-based nature, like a lot of functional endpoints. What are you left with in DMD, that has been in any way shape or form decently characterized?

Yes, Ritu, that's a great question, because it is why we picked the 6-minute walk test. It is why every company that has been doing DMD trials has focused on the 6-minute walk test. The FDA has used this as a basis for approval as a primary or co-primary endpoint in other neuromuscular conditions, obviously it is well-known in the PAH population. But the DMD studies that have been done by, with PTC's ataluren, the previous study was a 6-minute walk. Their new Phase III study is being done with 6-minute walk. The drisapersen trials have all been done with 6-minute walk. And is -- was the primary clinical outcome measure that we followed. So that we believe, is the most validated, reliable and predictive endpoint. And so we are disappointed that is being called into question. And we don't believe there are better validated endpoints in the DMD population.

Obviously, pulmonary function is something we have been capturing, anything beyond that has not been very well-characterized. And although they did not provide a reference for exactly the natural history data that they were citing, we believe it came from Craig McDonald's most recent publication, of which even the conclusion of his own paper was that his findings confirmed the clinical meaningfulness of the 6-minute walk test as the most accepted primary clinical endpoint in ambulatory DMD trials. So we have really tried to follow those before us and what is in the literature. So it is hard to say. And obviously we have to begin those conversations with the FDA about what they think might be acceptable other endpoints in these other subpopulations.

And could you give us an idea of how timelines might be affected the inclusion of (inaudible) biopsy or without? I mean, just sort of bracketing would you expect that would add a 6 months to enrollment time, 12 months, just a general idea?

Yes. We have done some feasibility surveys, we have identified, we have talked to a lot of sites. We also have a little bit of information on the drisapersen US study that they enrolled 53 patients, that were pretty much the same patients we would be looking for. And as you know, that can be confounding where you have safety exposure to these patients, as well as a potential if there were any dystrophin being produced, you need to understand what they had at baseline. And also the idea of subjecting those drisapersen patients who have already received biopsies, even if they were on placebo to subject them again to two more placebo -- or to two more biopsies and the chance of getting a placebo, we understand the challenges of that, even from an IRB perspective.

So we know there aren't that many patients that would be available for the selected ambulatory endpoint we are looking for. And we believe we would have been challenged with let's say, a six month or nine month enrollment of the 60 patients we had proposed. Now to find twice as many patients would not just take twice as long, it could be impossible to find that many patients, and it could take three times as long or more. It is hard to say based on the feasibility. We thought we were going to have a hard time finding 60 patients. So the requirement or seeming inflexibility of allowing alternative designs that don't require a placebo control in the exon-51 amenable population, really calls into question exactly how we would accelerate the enrollment.

The FDA again, as I mentioned that they understand that that may raise feasibility issues of enrollment, and that is why they have introduced the concept of new endpoints subpopulations. They even introduced the concept of combinations of endpoints to be combined mathematically. Again, it is not clear, these are just ideas that are on paper right now, they have not been discussed, and they been left fairly open-ended at this point. So I think we had to disclose what we did today, and we expect continued dialogue with FDA on this confirmatory study design. And as we get more clarity and more confirmation of that, and the potential timing of the start of that study, and timing of enrollment based on the number of subjects, we will provide that.

Thank you. Our next question comes from Tim Lugo from William Blair. Please go ahead.

Thanks for taking my question. I guess, given the FDA's seemingly questions around the 6-minute walk test is there -- is there 170 week data that you think would changes their mind? Is there a threshold, where the Phase IIb patient's stability you think would push them to maybe change their current stance? And can you remind me if there was the additional biopsy done for any of the Phase IIb patients, and was any of that data presented at this meeting?

Yes. So first, on your first question, we believe we already have a level of evidence through 96 weeks, of which none of the natural history that they cite has followed patients through 96 weeks. It was only based on 48 weeks. And when you look at the literature, almost every other natural history study shows a decline in a similar population or exon-deletion population in natural history. And the only two-year longitudinal was published this past year by Elena Mazzone Eugenio Mercuri that shows a 33% decline, or over a 100 meters lost over a two-year time frame.

So we will be getting -- so in the third year of the study, we moved from every 12 weeks to every 24 weeks of 6-minute walk. So we will have120 week data point to provide the FDA. And again, if that shows continued stability that would be beyond anything that has been characterized in most of the natural history data that is available. So it is hard to predict if any of that would produce a different perspective, but we thought they were already there, based on our July meeting where they again, were open to an NDA and were going to weigh in on dystrophin after filing. And we talked about approval on the 6-minute walk test, and they said yes, they do have the flexibility based on the clinical data. So, Ed, do you want to comment on why we believe our 96 week data is different and differentiated from the natural history?

Thanks, Chris. I think if we look at the natural history, and based on our population again, remember these boys are older than had been studied in the drisapersen study. And natural decline is way out of expected. The other I think, strong aspect of the data is, if you look at the placebo-treated boys, they did start to decline -- they had a significant decline. And then when the dystrophin would be expected to be present based on the biopsies, we can see that they stabilized. So I think it is a very unexpected data, and I think the longer we have -- I think at the end of the day, I think the science needs to speak for itself. And at some point the data will be strong enough -- and I think we really have to present it, and realize that we have been sitting on this data for two years, analyzing it. And I think we need to give the FDA an opportunity to really look at the strength of the data and to totality of the data, to let them see what we are seeing in the data.

Yes, and let me just reemphasize the point that Ed just raised. The comments from the FDA were focused on the patient who are above 350, okay? And again, we dispute that the broader natural history data, particularly in this amenable population shows no decline. But we have the four placebo patients who started above 350, they declined precipitously to below 350. So when they started at week 36 before we had confirmed dystrophin, they were below 350, and we were able to stabilize them once we produced dystrophin, and they have been stable now for over 60 weeks. So we even have within our study a sample that refutes the claim of the greater than 350 argument.

So Tim your other question was about the other biopsy data from the drisapersen study is that correct? Tim? Okay. In terms of the database shared they did not reveal exactly what data they had captured from the drisapersen that was driving their decisions around the notion that their drug was producing dystrophin and failed nonetheless. So operator, next question?

So we have Chris Marai on line from Wedbush Securities. Please go ahead.

Hi, good morning, Chris. Sorry to hear the news from the FDA. A quick question regarding your discussions on safety and the safety data set. Had the FDA indicated anything regarding that to you as a concern, given the limited number of patients that you have exposed to eteplirsen to date?

No. We have obviously provided our safety updates on -- to the FDA. We reported publicly the safety through 96 weeks, and that did not come up in this discussion. And we have had the long-term animal tox, all those long-term clinical study reports have been study reports have been providing to the FDA previously. And so, but more importantly we think safety should be considered vis-a-vis the drisapersen data, because we understand the toxicity profile of drisapersen required them to terminate dosing from all their studies, because they could no longer put a drug that could cause toxicities with no clear benefit. We believe that we don't have that issue to date, and that should have been considered, before making the decision to say NDA is premature. But we will continue to have that dialogue as Ed described. We hope to have the opportunity to share more of that. And Ed, do you want to comment on our views about safety and the risk benefits?

Yes, I think we have been lucky with this compound. And again, a lot of the difference is of course, is that it is a charge-neutral compound, it doesn't combined with other proteins. And so, in regards to some of the common side effects that have been appreciated with other chemistries with [anti-systolic] nucleotides such as thrombocytopenia, proteinuria, hepatic enzyme increases and thrombocytopenia, we really have not seen these type of features. And I think that gives us an advantage that we can dose for a higher amount of drug and hopefully get increased exon-skipping, without any concerns about the safety profile in the doses we have tested so far.

Okay, great. And then, out at World Muscle I spent a lot of time with Doctor McDonald. And he had highlighted there have been some analysis looking at percent predicted decline in some of these boys. With respect to your Phase II data, have you shared any of that data with the FDA at this time point? Or have a shared any other potential data that you have on strength measures, or do you have any other data on strength measures and the like?

Yes.

And has that been shared with the FDA at the time point?

Yes, So, obviously we did not have predicted as an outcome measure or a baseline criteria. That is a derived measure. They had all of the data that they needed to calculate percent predicted, but we have provided all of the data you have described, for them to have done their own percent predicted, but all of the other endpoints we said previously, they requested patient level data on all the clinical endpoints. If you recall, we gave them a white paper on all of our clinical outcomes, as well as an overview of the natural history on those outcomes. And then we provided a 96 week update on all of those outcomes as well. So they have all of the data that they need.

The other thing about the reference, again they didn't cite Craig McDonald or his papers by name or as a reference, but we know where that 350-meter data came from as they described it. And it is important to note, to highlight that natural history data, that was based on the ataluren patient population's placebo arm. Well, ataluren is stop code on nonsense mutations. There were three of those genotypes in that study. Eugenio Mercuri presented data at World Muscle in a symposium that showed that the stop code on nonsense mutations have a milder phenotype than the exon deletions, particularly exon deletions of exon-51, -53 and -45.

We know that they have characterized that study as having Becker muscular dystrophy patients in that database. But that was done on kind of clinical manifestations and not on any kind of genotypic basis. So we think all of the other natural history that is much more relevant is in the exon deletion or broader DMD population, of which we have described that the number of studies that show the decline in the over seven-year-old population. We also think the drisapersen failed study is very informative. This is exactly that exon-51 amenable population that we are enrolling, and including in our study in our studies. So, that is probably the most informative. And so there, if you look at the greater than seven-year-old population, they declined 76 to 83 meters, 83 meters in the placebo arm, 76 meters in the drisapersen treated arm. So we think that there were a lot more 6-minute walk data that they could have and should have referred to characterize our data. Now in fairness, the FDA said they would like to analyze the GSK data once they receive it, to understand if they can draw the same conclusions that we have. But they had not yet done that, when we spoke to them on Friday.

Thank you. Our next question comes from Brian Klein from Stifel. Please go ahead.

Hi, thanks for taking my question. So now that the FDA has seemingly called into question the 6-minute walk time as an appropriate endpoints, how can we gain comfort about the validity of any of the other potential endpoints that you have suggested, including things like a composite endpoint or other measures of muscle function?

Yes. Well, we have been struggling with that as well. This is why we put so much emphasis on the 6-minute walk test, right? There seems to be broad consensus across the industry. There seems to be precedent at the FDA. And so, to introduce new and less validated endpoints, we have to understand what the FDA is thinking about this, and have that dialogue with them. Again, we proposed to them what we thought was an actionable, reliable study design, in which we were going to have kind of a matched natural history expectation to compare against, an untreated cohort to compare against.

They can do matched controls with the drisapersen arms as another, a third comparison. And so, all of those we felt were sufficient in a rare disease like this, that is difficult to enroll, in which we don't have validated endpoints beyond what most would say, is validated in a 6-minute walk test. Again, this is why we requested further discussions with them in a timely manner. And we look forward to -- and also as Ed described, to share our view on this and why we proposed what we did. But it is unclear is exactly how we would look at other endpoints, and how we would power those studies and subpopulations on endpoints that are not as well-characterized as the 6-minute walk.

Great, thanks. And just real briefly, did the FDA comment at all about your proposal to do staggered biopsies in different patient groups? Thanks.

Thanks. No, they did not comment on the staggered nature. Again, their questions about dystrophin have increased and we would like to continue that dialogue with them, because we think many of those concerns are unfounded. And so, part of the request is that before we do any further biopsies, including the original fourth biopsy that they had requested in the last meeting in July, they are saying we need to understand better the assay, and to get comfort around validation of an assay before we consider dystrophin further. And so, this is complicated, because we really don't think we could feasibly start a study and capture biopsy sample surgically from these patients, without knowing how we are going to measure it, or what we are going to do with those muscle biopsies.

One proposal was that we could figure out later, just get the biopsy samples, and we will figure out -- and we appreciate the FDA thinking creatively about this. But we think that would be hard to get the IRB approval to subject, not only DMD boys, but the placebo patients to two surgical biopsies before we even knew what we would be doing with those biopsies. So look, this is an ongoing dialogue. We are trying to provide the material information that we need to in a timely manner, but this will -- we will have continued discussions, and I expect continued clarity on the confirmatory study as we get it.

Thank you. Our next question comes from Ted Tenthoff from Piper Jaffray. Please go ahead.

Great, thank you very much. And -- very disappointed for the Duchenne community on the setback today from the FDA. It seems like a real reversal on their position. Actually, just a housekeeping question if I may how, many shares are outstanding as of right now, including the 3.4 million? And can you be a little bit more precise, in terms of what the exact number of shares issued under the ATM is, and the average price?

Yes. So we have about 37.6 million fully diluted shares. We issued 23.4 million shares, and the average price under the ATM was about 37.3 I think -- $37.30.

Okay, thank you.

Thank you. Your next question comes from Edward Nash from Cowen and Company.

Ed?

Mr. Nash? Are you there? Okay, I am going on to the next person. We have Bill Tanner on line from FBR Capital. Please go ahead.

Thanks for taking the question. Chris, I appreciate obviously expeditiously wanted to get the drug to the market or into the clinic I guess, or commercialize. But I am wondering about the commitment to a second quarter 2014 start, given that it seems like there is a lot of a discussion yet to be had as it relates to the design of it, and it seems like you probably have one shot to get this right. So, I'm just kind of curious of the feasibility of that -- of being able to do that, and actually getting to an answer in a relatively timely fashion? And I have a follow-up, please?

Yes, Bill. Well, so, that is why we said it is moved to at least the second quarter. We think the reason we put the second quarter as a reasonable, is that we do believe the FDA understands the urgency here, and wants to come to a resolution on the confirmatory study as quickly as possible. So and to that end, again I just want to clarify, they proposed a lot of different ideas, and I don't want this to be perceived that the FDA -- they are trying to offer alternative, okay, to just relying on the 6-minute walk.

Now, they indicate that they would still accept 6-minute walk in an appropriately powered study, but highlight they understand that the feasibility of enrollment could be hampered because of their requirement of a placebo-control. So, this is where we don't believe we can easily or at all, potentially find enough patients to do the placebo-controlled that they want in a timely manner, or may not be able to fully recruit that many patients to power it. So what they are doing is saying, all right, let's talk then because we want to come to an agreement on a confirmatory study. So we will have more clarity on that, and we think they are willing to work fully with us to nail down the details of that confirmatory study. And we think and hope that we can still start dosing in the second quarter.

Now, this is -- as anybody in the industry knows, this is not an easy task. Right. This has been months planning with our CRO, with identification of sites, in crafting a protocol. We actually had two protocols we have developed, one, with the placebo, one without, with the expectation that, what would happen if they didn't understand the feasibility of enrolling a placebo patient. So this would introduce the idea potentially a whole new protocol, and that takes some time to develop. So we think second quarter is still reasonable, based on the responsiveness that we have seen from the FDA so far.

Okay. And then, I must say, it was a pretty impressive roster of attendees that you listed at the beginning of your prepared remarks. And so, I guess, just one interpretation would be that it is somewhat of a show of unity as it relates to Agency's opinion. So I am just kind of curious and maybe it is an unfair question, how convinced to do you think of how strongly you think the case can be made for the FDA to reconsider? I mean, I understand if it was one or two of the division directors it is one thing, but it certainly seems like again, it was a fairly impressive roster of attendees?

Well, how I would respond to that, Bill, is I don't have real insight into the mechanics and inner workings of the FDA. I will say we obviously know the division of neurology products is the one really reviewing all of our data, and answering our questions. And they are the ones who put together this update for us, but we believe that the involvement and the mention of the involvement of the hierarchy is important, in that at least they are aware, they are paying attention to this. And we think it is a good thing that they also are hearing Sarepta's argument, and that our disagreements and disputes on some of the conclusions they are drawing that led them to reconsider or call the NDA filing premature. So we don't know if this will influence all of those that were in the room, when we meet with them next, or when the minutes come out or in subsequent discussions. So we are just appreciative that they are paying attention to this program. They understand the urgency, and that they are involved. I don't know if there is full alignment or agreement with an agency and among all those people I named, that will bear out over time.

Thank you. We have Yaron Werber from Citi on line with a question. Please go ahead.

Great. Thanks for taking my question. I definitely appreciate it. So I mean, I wanted to kind of follow-up on two things. The first one is, just again to follow-up on Bill's question on the second quarter of next year. I mean, one of the things that I imagine, obviously you want to do it and it is critically important for patients is to make sure you maximize the chance for success for the next study. I am just, FDA kind of noted that they have obviously growing concerns about your assay or your quantification method, and you noted that they are -- the biggest challenge the drug seems to have pivoted -- the biggest challenge, is how do you show it? So, would you consider you'll probably need to validate some of these new endpoints, wouldn't that be the case? Wouldn't it make sense to do a Phase II first -- and then I have a follow-up -- just to maximize the chances when you run a Phase III you can really power it correctly? And then I have a follow-up, if you don't mind.

Sure, Yaron. Look, one of the reasons we pursued an early approval based on what we believe is very encouraging and compelling data, both biochemically, clinically and from a safety standpoint, was because of the urgency of this disease, okay? That is why we are all in this industry, right? Is to try and get drugs approved to treat patients. And we believe we have a drug that can benefit and help patients, okay? So we are trying to work as expeditiously as possible. We want to be smart, we want to be creative, we want to be thorough, but we believe we can do all of those things as we progress toward a confirmatory clinical trial.

If you look back at the history of drug approvals, orphan drug approvals, many of them were approved on a single studies. Some of them are open label studies. There is a wonderful white paper written by Frank Sasinowski who was Chairman of NORD, National Organization of Rare Diseases at the time, that highlighted the flexibility of the FDA and their understanding of the urgency.

We know that Congress passed legislation with FDASIA, saying that the FDA should utilize their capacity to approve drugs under accelerated approval surrogate markers for diseases like Duchenne. PPMD had a nice paper highlighting that Duchenne really fits into FDASIA's intent of the type or rare disease, in which the FDA should show that flexibility and look at accelerated approval. So, we don't believe we are doing anything that isn't supported and highlighted by precedent, by legislation, and so we think a confirmatory study at most, is what would be required for approval of this drug.

Okay. And then thank you for that. And then just a question so in terms of manufacturing, just give us a little bit of a sense, where are you? And are you going to take the mid scale into the next study or -- what is your latest thoughts in your -- ? (Multiple Speakers).

I'm sorry, was there a follow-up there, Yaron?

And how much capacity would you have?

Yes, all right. So we have mentioned previously, that mid scale is what we have been focused on to generate drug supply for the clinical program. We highlighted that we had a very productive meeting with the CMC division at the FDA, and believe that FDA will not be rate limiting -- and there is no guarantees of course -- but that we believe that -- they have not posed any barriers for us to start dosing that confirmatory study. We had planning for large scale production, in the event that we submitted an NDA to have commercial scale and commercial supply come off-line by the end of next year. We will have to evaluate as we continue our discussions with the FDA, whether we will have to put that on hold or whether we will continue that pursue that pursuit. But we don't have to make that decision at this very moment, because the real production runs for the large-scale begin in earnest next year for the large-scale batches. So that is where we stand on the manufacturing and our efforts next year.

Thank you. We have Joseph Schwartz on line from Leerink. Please go ahead.

Great, thanks. Thanks very much. Sorry to hear the news. I was wondering, since the FDA has expressed a desire to explore additional subgroups or subpopulation and endpoints, how reasonable do you think it is to go straight into a Phase III, versus even what you were saying before about there might be difficulties finding enough patients for that? And the FDA has said, that they might be open to mathematically pulling across different studies. Why not do some more Phase II work, in order to qualify these additional subpopulations, endpoints, and just make sure that a big investments in Phase III is likely to succeed?

Yes. So they didn't suggest a mathematical combination of cross studies, they were saying you could potentially enroll patients of various status, younger patients, older patients, non-ambulatory patients that might require us to look at different endpoints, than the 6-minute walk test. And that maybe there is a way to combine these endpoints. Again, we think that is challenged, because these are generally unvalidated endpoints, and how to mathematically combine them and then power a study, but we can have that discussion with the FDA.

So look, you can -- if you followed both GSK, Prosensa's communications around their studies, as well as PTC's communications around their previous failed study with ataluren, they all talked about difficulty of powering studies for a 6-minute walk benefit, right? And those were large studies, those were 180 patient studies in size, and they were still complaining about the inability to power a study. We believe we have an active drug that can produce a 6-minute walk benefit that does not require that large of a study. And so, we think it is the most prudent to do the right-sized study, well-powered, on a validated endpoint. And again, that is what we have tried to propose to the agency, and what, we will continue the discussion.

And then you talked about, or the FDA suggested that you should have an adequately validated quantitative assay for dystrophin. What are your activities there? And how much is that a rate limiting factor to start the next study, versus can you take the biopsies, and then figure out exactly how to analyze them at a future point?

Yes, we need to have that dialogue with them -- just again, we -- Ed, why don't you describe -- there is emerging data on dystrophin analysis and the right methodologies? And Ed was recently in London, and was talking to some investigators in DMD. And this is unpublished data, but this is an example of what is emerging. And Ed, you want to describe what you learned?

Yes, certainly. I had an opportunity to talk about -- again, I think in academic community people have been concerned about what is the reliability of dystrophin positive fibers. And so, in order to try to consolidate that and try to learn more information, a group of investigators which included Nationwide Children's, which did our 201, 202 study. Francesco Muntoni who also did our intramuscular study in our Study 28 including, and also Prosensa -- so they got together, sent out samples. And what they were able to demonstrate, that fact if you use the same protocol very similar to what we have been doing, you can have very reliable data in regards to immunofluorescence for the dystrophin positive fibers. The next, most important was the intensity. So I think, we will obviously share this data once it becomes published with the FDA, to demonstrate that I think that it is -- this is not a very challenging assay, if it is done in a consistent way.

Thank you.

Okay, I have -- we only have time for a couple more questions. So one each, from the next in the queue.

So we have Debjit Chattopadhyay from Emerging Growth. Please go ahead.

Sorry to hear the news, Chris. In terms of the confirmatory study, if they do accept 6-minute walk test as valid clinical endpoint, do you think they could get away with a 48 week event endpoint, or do you need to go to 96 weeks? And the stability data have been suggested for 356 meters cut-off, how we know there were no Beckers patients in that study population? Thank you.

Yes, so, related to the 48 week data, they did comment on this, I think based on the failed studies of the other dystrophin producing technologies. And they mentioned, and I will just read, a duration of 48 weeks may not be long enough to identify efficacy in a slowly progressive disease such as DMD. We believe our drug is active enough to show a benefit over 48 weeks. You can imagine that we showed, in our ambulatory population the modified intent to treat a robust P value after only 24 weeks of treatment and before dystrophin was present at 36 weeks, we believe that if you followed a cohort out to 48 weeks without treatment, versus 48 weeks on treatment, that we would be able to power a study sufficiently. And again, so we believe 48 weeks is sufficient.

The other benefit of the open label design that we initially provided, was that they could continue to follow those patients indefinitely against the untreated cohort, or compared to natural history studies. So we think 48 weeks is sufficient with our drugs to show a benefit. And Debjit, did you ask, how did we know if there weren't more Becker patients in the ataluren natural history analysis? Okay, sorry. Yes, we don't know again exactly the criteria they used to define Becker, but just we think it is not the most amenable patient population to compare our drug, and the exon deletion population, exon-51 deletion in particular, against the three genotypes that had stop code on nonsense mutation. I think we have time for one more question, operator?

We have Kim Lee on line from Janney Capital. Please go ahead.

Good morning, thanks for taking the questions. Apologize if I missed this, but what are your plans for the rest of the drugs in the pipeline? And what are the implications you think of, the results from the FDA on, with regards to the rest of your pipeline and clinical endpoints and study designs? Thank you.

Yes, Kim, that is -- it's a great question, because our entire program was largely predicated on dystrophin as an acceptable surrogate biomarker. And so, we were going to do that with the eteplirsen study, because we can enroll enough patients to show that clinical benefit correlated to the dystrophin that we are capturing. Again, with the FDA calling into question dystrophin as a biomarker, we don't believe that is something that can be a firm decision. Because it would render us unable to get other drug approved for the rare exon, because we would not be able to power studies on a 6-minute walk or these other endpoints. I just described how difficult it is to enroll patients with eteplirsen amenable exon deletions. So this is why we need to work with the FDA closely, to come to an agreement and assessment of how to capture dystrophin in a way that they believe is validated. So that we can have streamlined approvals of the other exons. So it is difficult to say, where I sit today of what those development paths look like for the follow-on exons, and how the FDA will approach the potential regulatory approval of those other exons.

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

Okay. Thank you, operator. Ultimately, well, today represented a disappointing setback in the eteplirsen path toward approval. We believe strongly that this product will serve a significant need for DMD patients, and are committed to working with the FDA to get it approved in a timely a manner as possible. We continue to develop our follow-on exons through preclinical toward clinical development. We want the DMD patients and families and broader DMD community to know, that we appreciate their efforts, and the support that we have seen from them in highlighting the rapid progressive and irreversible nature of this disease, and the urgent need for promising treatments, as it keeps us focused on our goal of getting drugs approved to treat every DMD patient who can benefit from our exon-skipping technology. Thank you, everyone for listening into our quarterly call, and we appreciate your interest in Sarepta.

Thank you, ladies and gentlemen, this concludes the third quarter 2013 Sarepta Therapeutics earnings call. Thank you for participating. You may now disconnect.