Sarepta Therapeutics Inc (SRPT) 2014 Q2 法說會逐字稿

Welcome to the second quarter 2014 Sarepta Therapeutics, Inc. earnings conference call. My name is Ellen and I will be your operator for today's call. (Operator Instructions). I will now turn the call over to Hannah Deresiewicz. Ms. Deresiewicz, you may begin.

Thank you, operator. And thank you all for joining today's call. Earlier today we released our financial results for the second quarter of 2014. 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, Sarepta's Chief Executive Officer; Sandy Mahatme, Sarepta's Chief Financial Officer; and Ed Kaye, Sarepta's Chief Medical Officer.

I would like to note that during this call we will make a number of statements that are forward-looking including, but not limited to, statements about the timing of and submission of information and data we are planning to provide to the FDA in support of our planned NDA filing including results from our ongoing Phase IIb extension study, potential biopsies, and the timing of the same, and ongoing safety data collected.

Our beliefs relating to the use, clinical benefit, and importance of eteplirsen safety profile for treatment decisions by healthcare professionals and families; our assessments relating to remaining on track to submit an NDA for eteplirsen for the treatment of Duchenne muscular dystrophy by the end of the year; our planned meetings with the FDA relating to CMC and the NDA filing and clinical trials we are currently planning and our optimism that the FDA will be flexible with trial designs and the use of a master protocol; our plans to submit an IND for our exon 53 skipping candidate, SRP-4053, later this year; the potential portion of the DMD population that we believe can be treated with our product candidate targeting exon 51, 45, and 53; our plans for a meeting with the EMA later this year to discuss feasibility of conditional approval based on the existing eteplirsen data set and expectations on receiving feedback; our plans to complete large-scale batches of eteplirsen in the first half of next year and to submit comparability data to the FDA shortly thereafter; the timing of and plans to submit protocol to the FDA for certain of our planned studies and expected time frames for feedback from the FDA, getting sites up and running, and enrolling and dosing patients; in connection with the Ebola outbreak, Sarepta's ability to help under certain circumstances, and potential government agency decisions including from the FDA and DoD that would be required for Sarepta to be in a position to assist in the Ebola outbreak; our beliefs with respect to potential dosing, safety, and effectiveness of our Ebola product candidate and potential time frame within which we could be in a position to ship drug product in usable form and the number of patients we would be able to treat in specific time frames; updated guidance on expected non-GAAP loss from operations and our belief that the interferences declared relating to eteplirsen and SRP-4053 do not affect our current plans to file an NDA by 2014 and commercialize eteplirsen or SRP-4053 in the US.

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 risks can materially and adversely affect the business, results of operations, and the trading price of Sarepta's common stock. For a detailed description of risks and uncertainties we face you are encouraged to review the Company's most recently filed annual and quarterly reports 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 Chief Executive Officer, Chris.

Thank you, Hannah. Welcome, everyone. Today we will provide a comprehensive overview of our broader DMD, Duchenne muscular dystrophy, program, including an update on the clinical, regulatory and manufacturing activities for eteplirsen and the latest on our follow-on exon skipping drugs for DMD.

We will also discuss our infectious disease programs including recent activity related to the Ebola outbreak and our discovery research activities as we prepare to build a pipeline beyond DMD based on our proprietary PMO chemistry.

To begin our update on our DMD program let me first provide a brief summary of our recent 144 week data which we announced on July 10. The top line data we released from our ongoing Phase II extension study, study 202, was a summary of six-minute walk test and pulmonary function outcomes and the safety profile for eteplirsen through 144 weeks.

We continue to be encouraged by the performance of the 12 boys in our study, all of whom were showing unexpected outcomes in the six-minute walk test and/or pulmonary function test compared to the natural history of this disease. These data were especially encouraging given the average age of these patients and our selection criteria which excluded boys who were less progressed on the six-minute walk test at baseline.

It is important to note that at the time they entered into this study all of the boys would be expected to have suffered significant loss of muscle and muscle fibrosis and were anticipated to decline during the course of this study based on the natural history of DMD.

The ten boys in our modified Intent-to-Treat analysis, which included all patients who were still ambulant and could perform the six-minute walk test, remained ambulant through 144 weeks and declined more slowly than would be expected compared to natural history studies and compared to other clinical studies with a similar DMD population over this approximately three-year time frame.

While the average six-minute walk test distance showed a decline on average across the cohort compared to the last time point at 120 weeks, we believe the modest overall decline that has been observed over nearly 3 years is further evidence of a continued treatment effect and will be used to support our claim of efficacy in our new drug application submission later this year.

Let me take an opportunity here to provide some additional color on the six-minute walk test data through the 144 week time point. While there was one patient out of six in the early eteplirsen treatment cohort that lost more than 50 meters since the week 120 time point, no others in this cohort experienced a decline of more than 25 meters from this last measure that took place 24 weeks prior.

In the placebo delayed treatment cohort all four patients declined numerically since the previous week 120 time point. However, none declined more than 40 meters and two of these subjects were below 300 meters at the last time point and remained below 300 meters but are still ambulant. One of these was the boy who broke his foot and was never able to walk more than 300 meters since breaking his foot prior to week 84.

While there has been a suggestion that the boys in our study had healthier baseline six-minute walk test values, this was not the case as we screened out patients who had baseline values over 400 meters, with three who qualified within the plus or minus 10% range of that cut off, or no more than 440 meters at baseline. In the natural history analyses and clinical studies that have been reported with cutoffs of 350 meters, these healthier patients were not excluded.

Furthermore, at the 36 week time point, the last time point before dystrophin was confirmed in all patients, we had five patients who had a six-minute walk test above 350 meters and five patients who had a six-minute walk test below 350 meters.

Two years later we have four patients above 350 meters and six patients below 350 meters. Only two patients have dropped below 300 meters and one of these, as I mentioned earlier, is the boy who broke his foot dropping below 300 immediately after recovering from his broken foot and remaining there from week 96 on.

Further, half of the patients, five boys, have shown stability or improved over this two-year time frame from this 36 week time point. Of these five boys two have declined less than 5% from week 36 and three boys have demonstrated an increase in the six-minute walk test distance on our primary analysis using maximum six-minute walk test scores.

Given the nature of this disease and the declines that are typically observed in boys at this advanced age, 12 years on average across the study, we are very encouraged that all of the boys who were in an ambulant stage at the time dystrophin was confirmed at 48 weeks have remained ambulant through the nearly three years since this study began.

Our pulmonary function tests, which include data from the two non-ambulant patients in this analysis, continued to show remarkable stability across the cohort. Specifically, pulmonary function has remained stable over nearly three years across this 12 patient cohort as measured by percent predicted of maximum inspiratory and expiratory pressures, or MIP and MEP as they're referred to.

The absolute pressures showed increases over this nearly three-year time frame, the increases of MIP and MEP and the stabilization of MIP and MEP percent predicted were generally consistent across the cohort including the two non-ambulant twins who have now been stable for more than two years in a non-ambulant state.

Lastly, the safety profile of eteplirsen continued to be encouraging through 144 weeks with no clinically significant treatment related adverse events, treatment related serious adverse events, treatment related hospitalizations, or treatment discontinuations. Given that eteplirsen has the potential to be a lifelong treatment and to be initiated in many patients at the time of diagnosis at a very young age, we believe this safety profile will be important to healthcare providers and families when choosing potential DMD therapies.

A full presentation of this 144 week data is planned to take place during the World Muscle Society meeting that will take place in Berlin, Germany from October 7th to the 11th. This is an important meeting for us, we will have a strong presence at the meeting. Sarepta is the co-executive platinum sponsor, we will have an exhibit booth, several abstracts accepted for poster and oral presentation. This meeting is also well attended by leading researchers and clinicians in the Duchenne muscular dystrophy field.

Turning to our regulatory activities for eteplirsen and our follow-on exon skipping DMD drugs, we remain on track to submit an NDA for eteplirsen by the end of the year. I would also like to recognize the effort by the DMD patient community in initiating a White House petition to ask the FDA to accelerate approval of DMD drugs for this highly progressive, irreversible and fatal disease that was met with the response in the form of a recent letter from Janet Woodcock, the director of CDER at the FDA, in which she acknowledged the FDA's collaboration with Sarepta as an example of the FDA's urgency and commitment to the DMD community.

We will be having pre-NDA meetings to cover CMC and the clinical/pre-clinical sections prior to the actual submission. We successfully submitted the IND for our exon 45 skipping drug candidate, SRP-4045, in the last couple of months and currently have an open IND for this drug candidate to conduct a dosing study. We will be submitting an IND for our exon 53 skipping candidate, SRP-4053, later this year and have already recently submitted our clinical trial application for this exon 53 skipping drug candidate to the EMA and plan to initiate dosing in our EU dose escalation study in the coming months.

We will also be meeting with the FDA later this year to discuss our placebo-controlled trial with our follow-on exon skipping drugs targeting patients amenable to exon 45 and exon 53 skipping. We are optimistic that the FDA will show flexibility in this study design and the use of a master protocol so that we can speed enrollment and boost the statistical power of the study by combining multiple exon skipping drugs as part of a larger study to build evidence across several exon skipping drugs that use the same chemistry, the same standard dose, and show similar pharmacokinetics and safety.

Our next two exon skipping targets, exons 45 and 53, each account for 7% of the DMD population, or about 14% in total. Combined with eteplirsen these first three exon skipping drugs have the potential to treat more than one quarter of all DMD patients.

Additionally, we continue to have productive dialogue with the FDA regarding our dystrophin methodology. As a reminder, the FDA indicated in its April guidance that if, after further detailed review, they were to find the currently available dystrophin biomarker data to be adequate, our existing dystrophin data set would have the potential to support accelerated approval.

The agency recently completed a site visit with Nationwide Children's Hospital in Columbus, Ohio and met with the leadership and staff of the histopathology lab that conducted our dystrophin analysis and quantification and we continue to work with the FDA to provide greater assurance of the quality and reliability of our dystrophin data in anticipation of a potential NDA filing decision and potential NDA review next year.

We have also continued pursuit of a fourth biopsy in patients in our ongoing Phase IIb extension study and believe that more than half of the boys will agree to a fourth biopsy which we are pursuing and plan to conduct in the next couple of months. Our hope is to have these data compiled and summarized as part of the NDA submission. However, depending on the timing of the biopsies and the completion of an analysis, we may plan to submit these data post-NDA filing but still during the review period and prior to any independent advisory committee panel.

As part of the NDA submission we will also be summarizing any additional safety data in new patients treated with eteplirsen from our confirmatory study in ambulatory patients.

While we expect to have only minimal exposure to eteplirsen in a small number of patients, we will provide safety updates during the NDA review as appropriate as we continue to enroll more patients in our ongoing eteplirsen clinical studies across a broader population of DMD patients.

Finally, we are turning our attention toward Europe to determine the feasibility of an MAA filing with the EMA for approval of eteplirsen in Europe. We will have our first guidance meeting with the EMA later this year and hope for initial guidance on the feasibility of a conditional approval based on the existing eteplirsen data set.

We will have many of the elements of a potential MAA filing completed based on our compilation of an NDA with the same data set. While we can't guarantee the definitiveness of any guidance from the EMA, we do expect an indication of the feasibility of an expedited pathway.

Let me now turn to an update on our manufacturing progress. I am pleased to say that we now have eight batches of eteplirsen that have been produced at mid-scale and we have received notice from the FDA that we can proceed with release of drug product from these batches based on the process and specifications of our comparability data across our small-scale production process to our mid-scale production process. So we have ample drug supply to dose patients for our upcoming eteplirsen clinical trials.

We have a pre-NDA CMC meeting scheduled for later this year and we expect this same process will be the basis for our commercial production of eteplirsen. We will be completing large-scale batches of eteplirsen in the first half of next year and hope to submit comparability data from our large-scale production to the FDA shortly thereafter to support the anticipated full commercial demand in the US market.

Before I turn the call over to Ed Kaye, our Chief Medical Officer, to provide a clinical update, I would like to emphasize that we are pushing forward on all fronts to begin dosing the various studies ahead of us. We know that there are many families counting on us and anxious to begin dosing their children as soon as possible. I want to assure these families that Ed's team is working urgently to begin enrolling patients into these studies.

I will now turn the call over to Ed who will describe our progress on these fronts in greater detail, Ed.

Thank you, Chris. We have been very busy over the last few months working on the essential regulatory and clinical activities related to eteplirsen and our follow-on exon skipping drugs for DMD. First, let me describe our activities as they relate to our eteplirsen confirmatory study in ambulatory DMD patients who have genotypes that are amenable to exon 51 skipping.

We have a final protocol that was reviewed by the FDA in early June. Shortly thereafter, we submitted the protocol and informed consents of the sites that we selected for potential participation. Contracts were sent to sites for review in early July and we conducted an investigator meeting with staff from 36 of the sites in mid-July for a two-day review of all of the aspects of the study to ensure that there is broad awareness and understanding of the study protocol and that the trial can be conducted efficiently and with consistent high quality.

Right now the final protocol is making its way through either local, institutional IRBs or central IRBs depending on each site's standard operating procedures. We have reached out to 39 sites for potential participation with as many as 14 regional hub sites which will conduct clinical outcome measures, including the six-minute walk test and pulmonary function test.

In addition, we have planned for two of these sites to conduct the surgical biopsies. We have adopted this approach, or a hub and spoke model, to ensure that the best quality data is captured across training sites with a higher level of consistency while attempting to minimize the burden on families by having many more infusion sites for dosing on a weekly basis. Clinical outcome measures will be obtained every 12 weeks through the first year.

We have also completed our protocol for the eteplirsen study in the limited ambulation population which also includes non-ambulatory patients. The protocol has been submitted to the FDA with no comments after a more than 30-day review period. We expect to get sites up and running so we can start dosing this study in the November time frame.

Startup of a clinical trial is dependent on many components including building an electronic database, contracting for a central laboratory -- safety laboratory, standardizing protocols, and establishing central readers for the pulmonary function tests and echocardiograms, in addition to many other aspects of the study, all of this in order to comply with good clinical practice guidelines. The study has a target enrollment of approximately 20 patients.

The third additional clinical study with eteplirsen is in a younger patient population, DMD boys who are between the ages of 4 and 6. We have finalized this protocol and will soon be submitting this to the FDA for review. This study also has a target enrollment of 20 patients.

Our exon 53 study in the EU will include four sites in Europe including London, Newcastle, Paris and Rome and is part of the European Commission FP7 Innovation grant. The study will be in ambulatory boys amenable to exon 53 skipping to assess the safety and efficacy in this population with SRP-4053.

We have submitted clinical trial applications to all of the involved countries and are in the process of ethics committee reviews. It is expected that enrollment will begin in September with dosing to begin in October or November.

We're also preparing to meet with the FDA later this year on our follow-on exon protocol with our drugs that skip exons 45 and 53, SRP-4045 and SRP-4053. We have a study designed that acts as a master protocol so that we can enroll more patients into the study and also enhance the power to show a clinical benefit by combining outcomes across these two agents compared to a mass placebo group. We expect to get feedback from the FDA in the fourth quarter and in time to initiate this study in the early part of next year.

Now, I will turn it over to Chris to speak about our other programs in infectious disease in our discovery research efforts, Chris.

Thanks, Ed. Before turning the call over to our CFO, Sandy Mahatme, for a financial update, I would like to address the many inquiries we have received related to our Ebola drug, AVI-7257 and activities related to the recent outbreak, as well as provide some insights on our programs to treat Marburg hemorrhagic fever virus and pandemic influenza, along with a research update. All of which underscore the versatility of our PMO chemistry platform.

To be clear, these programs are all in early stages of development and in no way impact our efforts to get eteplirsen or our other DMD candidates to the boys who need them.

First, I would like to touch on the ongoing Ebola outbreak as we have received a significant amount of inquiries and interest over the past week from investors, analysts, government agencies, and the media regarding the status of our Ebola program and ability to potentially help.

We have offered to lend assistance to fighting the Ebola crisis that is estimated to have already infected more than 1,700 people and resulted in over 900 deaths so far this year. The confirmed reports regarding the use of a quote, experimental drug as an emergency treatment for two American citizens who became infected while providing humanitarian aid and medical assistance in Africa have put a spotlight on the handful of companies and organizations that have developed Ebola vaccines or antivirals, which includes Sarepta.

Over the past few weeks we have been in contact with government officials at HHS, the CDC, FDA, BARDA, the Department of Defense, the State Department, and the White House, as well as NGOs or nongovernmental organizations, including the World Health Organization about our willingness to help based on our existing inventory of drug.

By way of background we received Department of Defense funding from July 2010 through October 2012 for an Ebola therapeutic development program leveraging our proprietary PMO chemistry platform. During that time we generated some compelling primate and early clinical data in collaboration with USAMRIID, a BSL-4 lab, on our lead Ebola compound AVI-7537 that leads us and the DoD to believe in its potential to fight the Ebola virus.

In five independent studies we typically saw survival rates ranging from 60% to 80% in primates challenged with lethal viral inoculums compared with 0% survival in untreated animals. AVI-7537 has also been shown to be safe and well tolerated in a completed phase I single ascending dose study that featured AVI-7537 in combination use with another compound that was later shown not to contribute to efficacy and subsequently dropped from the Ebola program.

To be clear, we would need an agency and organization to request drug from Sarepta in order to prepare to treat any infected patients. We have been in touch with our funding agency at the Department of Defense and it has indicated a willingness to help and to release any drug in our possession that was part of the advanced development contract, and technically remains owned by this agency.

We would also need to obtain, from the FDA, authorization for emergency use of the drug and obtain drug release. Based on preliminary discussions with the FDA should a request for use of our drug be made, we believe that the agency would be willing to work with us to facilitate patient access. Based on our nonhuman primate studies in Marburg and Ebola we believe a dose of 16 mg/kg per day for 14 days may provide protection in an infected or exposed patient with Ebola.

While we have had minimal testing of our active Ebola drug product in healthy volunteers beyond our single ascending dose study, we expect the drug to be safe for administration potentially up to 16 mg/kg per day for 14 days as we have tested this dosage with our Marburg drug which is comprised of the same drug components and backbone chemistry and this was tested in healthy volunteers with no safety issues observed up to these doses.

Given the dire circumstances and expected outcome for any person who becomes infected, the risk-benefit ratio for this application should be more than justifiable for administration of our drug. At a dose of 16 mg/kg per week for 14 days we do not have enough drug product in vials on the shelf to treat even one patient. But we do have drug substance or API, active pharmaceutical ingredient, on hand to treat a couple dozen average sized adults. If the FDA required the drug to be shipped in final form it would take several weeks to complete, fill and finish, and final testing in vials.

If the FDA allowed shipment of API to a qualified pharmaceutical compounding agency or organization we should be able to ship drug in API form within a week once we receive the appropriate approvals. If there is a request for more drug product to treat a larger number of patients using additional materials we made under the DoD contract, we could prepare to produce enough Ebola drug to treat more than 100 additional patients within a few months.

To be clear, a single production run with existing materials would not interfere, de-prioritize, nor impact in any way our plans for drug supply for our eteplirsen clinical trials or our plans for commercial supply if eteplirsen were to be approved next year.

In summary, Sarepta has made clear to those on the front lines of this Ebola crisis that we are willing to help in any way we can and that we are ready to move swiftly the moment we get a request to provide our drug in an emergency situation. In the meantime, our thoughts and prayers go out to the infected patients in Africa and elsewhere who are fighting this infection, and to the families of the two Americans who were infected and recently brought to Atlanta for treatment and observation.

We have been encouraged to date with the efficacy of -- safety of our drug for Marburg virus, AVI-7288. As a reminder, we have seen a significant survival benefit between 83% and 100% in nonhuman primate lethal challenge models utilizing both intravenous and intramuscular routes of drug administration even when initiation of treatment is delayed up to four days after exposure to the Marburg virus, a similar hemorrhagic fever virus as Ebola.

And as I stated earlier, data from a phase I multiple ascending dose study demonstrated a favorable safety profile up to 16 mg/kg per day for 14 days which is above what we believe will be the therapeutic dose in humans.

At the beginning of July our contract with the Department of Defense to continue development of AVI-7288 expired. We reached an impasse on the appropriate path forward to licensure. The original streamline development path set under the contract in 2010 no longer seemed viable with increasing requirements placed on the program. While the contract with MCS has expired, this is the agency as a part of the DoD funding this program, we do not view this as an end of Sarepta's Marburg program.

We continue to discuss avenues to advance the program with the Department of Defense and with other partners who share our strategic vision and in a manner that is consistent with our corporate goals. In particular, we are focused on development paths that parallel those commonly seen in drug development for urgently needed medicines and that are designed to efficiently and expeditiously produce an approved drug.

To be clear, the expiration of the contract is not related to any questions about the safety or efficacy of our drug. We believe AVI-7288 for Marburg is still one of, if not the most, advanced drugs in development for Marburg.

Additionally, our influenza drug, AVI-7100, has completed a phase I single ascending dose safety study in healthy volunteers. To date we have dosed up to 8 mg/kg with no safety issues. We expect the Data Safety Monitoring Board or DSMB to meet in mid-August to review the unblinded data and provide a recommendation regarding proceeding to the multiple ascending dose portion of the study.

As a reminder, this study is funded and being conducted by the NIH's NIAID division. Despite challenges associated with developing drugs with an unpredictable commercial market and the reliance that this creates on government support and the potential for stockpiling, we do believe there is value in continuing to advance our infectious disease pipeline in the interest of public health and national security. We will continue to explore the potential to partner with various agencies and seek to establish public/private partnerships with other organizations.

The recent Ebola outbreak is a reminder that technology like ours needs to be developed so that we can better be prepared to respond with appropriate drugs to address future outbreaks of known or unknown infectious disease pathogens.

Our early research efforts continue to progress, we have several initiatives underway to advance our research platform. First, we have two large research labs that are operational in our Corvallis, Oregon site and at our Cambridge, Massachusetts headquarters and we continue to expand the chemistry and biology groups to advance our proprietary morpholino chemistries with applications against new targets.

We have also leveraged our small-scale synthesis to provide our proprietary morpholino chemistry to advance external research collaborations with academic partners. And we also continue to explore possible business development collaborations with industry partners in offering our proprietary chemistry platform to pursue other targets outside of our core areas of focus.

These efforts in research that are in place are focused on a number of therapeutic areas including other muscular dystrophy applications, other neuromuscular indications, other rare genetic disease targets outside of the neuromuscular space, potential applications in the immune inflammatory and cancer areas with targeted T-cell delivery, and a variety of infectious disease applications across both bacterial and viral targets that are commercially viable needs.

In addition to these research efforts we have also been hiring positions across our commercial development and medical affairs functions and have an experienced senior level team in place who have experience from leading companies in the industry. This team is helping Sarepta lay the foundation to become a successful, commercial company in the hopes that eteplirsen might obtain FDA approval next year.

Now, we will shift to a financial update and I would like to turn the call over to our CFO, Sandy Mahatme. Sandy.

Thanks, Chris. Good morning, everyone. This morning's press release provided details for the second quarter of 2014 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 of our ongoing operations and the impact of operations on our cash balance and they exclude the impact from the valuation of our outstanding warrants and stock compensation expense. Please refer our press release for a full reconciliation of GAAP to non-GAAP.

In the second quarter of 2014 we reported an adjusted, or non-GAAP net loss of $24.5 million or $0.61 per share compared to a non-GAAP net loss of $14.6 million or $0.46 per share in the second quarter of 2013. The incremental loss is primarily the result of an increase of $9.9 million due to increased R&D and G&A expenses. Revenue for the second quarter of 2014 was $2.6 million, down from $3 million in the second quarter of 2013.

The $400,000 decrease was primarily due to decreases in revenue from our various government contracts. The government contract under which the Marburg drug candidate was being developed expired in July of 2014 and the Company is currently evaluating options to continue advancing its Marburg candidate and other infectious disease research and development efforts.

Adjusted research and development expenses were $18.3 million for the second quarter of 2014 compared to $12.2 million in the second quarter of 2013, an increase of $6.1 million. Adjusted general and administrative expenses were $9 million for the second quarter of 2014 compared to $5.3 million in the second quarter of 2013, an increase of $3.7 million.

Our cash, cash equivalents and short-term investments balance was $284.2 million as of June 30, 2014 compared to $264.9 million as of December 31, 2013, which is an increase of $19.3 million. The increase is primarily driven by the net proceeds we received from our public offering in April 2014 offset by the use of cash to fund our ongoing operations in the first half of 2014.

Now, turning to our 2014 guidance. Based on feedback from the FDA we are making significant investments in our manufacturing capacity in order to support a potential commercial launch on a more condensed time line while also supporting multiple clinical trials for eteplirsen and follow-on exons. In preparation for a potential US launch we are onboarding additional contract manufacturers to assure US supply and are also preparing for large-scale manufacturing.

As a result of these additional investments we now expect our non-GAAP loss from operations will be between $135 million and $145 million which is approximately $25 million higher than our previous guidance of $110 million to $120 million. Further, we are investing in the startup of our manufacturing facility in Andover and in significant advance payments for long lead time items including custom raw materials that are required in our manufacturing processes.

We anticipate these capital investments and advanced payments for next year's inventory to be approximately $25 million for the rest of this year. We continue to maintain a strong balance sheet as we prepare for a potential product launch and for future revenue generation.

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

Thanks, Sandy. As you can see, we are quite busy at the Company across clinical, regulatory, manufacturing and pre-commercial activities. All with a clear focus and priority to execute on our DMD program and deliver meaningful treatments to the boys who need them. With that, Operator, we would like to open up the call to questions.

Thank you. We will now begin the question and answer session. (Operator Instructions). Our first question is from Tanya Joseph with Bank of America Merrill Lynch. Please go ahead.

Hi, good morning. I am wondering if you could provide us with any incremental details on the proposed study design for the follow-on exon confirmatory study. And in addition to that, is the timing of this proposed, what I'm going to call master protocol study, consistent with the open label historical control study? Is that fair for us to assume? Thank you.

Thanks, Tanya. I will let, Ed speak to the timing in a moment. The study design was not finalized yet but it is going to be very similar to the other studies you have seen which looks at the six-minute walk test as a primary endpoint, capture of distrophin at various time points, 24 weeks, 48 weeks. It will be a placebo-controlled study, unlike our historically controlled study.

And again, we believe as you go beyond the eteplirsen amenable patients the numbers that you will need to have an adequately powered study becomes more challenging. And we believe that the way this technology behaves is that the pharmacokinetics and safety we've seen to date across three drugs and pre-clinical studies are almost identical and we expect a standard dose and these drugs to behave the same way.

And so, we think that combining and pulling these two next drugs to enhance the statistical power of our analysis would be beneficial. Of course we could always look secondarily at the individual drug performance to see if there's any differences across them. But this is where we just need to work out the final details. But it will look similar to other studies we have done in the DMD space. However, the timing is a little delayed to our eteplirsen studies.

Yes, and I think it is important to remember that what we are trying to do is really to expedite this program. And so we're looking at the long-term picture and how can we do this as quickly as possible. And obviously we are trying to maximize all of the potential powering of the study.

So by combining two drugs together it does give us an advantage. We obviously have to have discussions with the FDA, we are in the process of doing that. I think we have had a very good collaboration with the FDA to try to be innovative and come up with innovative trial designs. So we are looking at this at beginning at the beginning of the year, but I think we are maintaining our timelines pretty well.

Thank you. So just to confirm, is that the beginning of the year apply to the open label study as well?

(multiple speakers) No, the open label is going to be initiated earlier than that.

Yes, the open label study we are very well advanced on that. We will be very close to screening patients and that is well on its way. So that will be definitely -- third quarter this year.

That's for September, October. Got it. Thank you very much.

The next question is from Tim Lugo with William Blair. Please go ahead.

Thanks for taking my question. Maybe I missed this in the opening comments. But has there been an update on looking for an additional biopsy from current patients, I believe previously it had been mentioned that this could occur by year end?

Yes.

Yes, so we have talked with the sites and they have sent out a request of how many patients. And as of last night eight of the 12 patients had said they would be interested in a biopsy. So we are pursuing that, we have completed an amendment for that protocol yesterday. And we are just in the process of trying to arrange all of the details to get that done so that we can --.

Again, this is just another way of trying to get the FDA comfortable that we have dystrophin. Very interested on the long-term production of dystrophin and so this is a unique opportunity for us to really understand what is going on with dystrophin. So yes, it is well on its way.

And this is being done in coordination with the FDA, I believe that was maybe discussed earlier, the methods and, I guess, collection protocol for the fourth biopsy?

Yes, we have had a number of discussions with the FDA. We submitted the protocol because we want to make sure they're comfortable with the process and so far things, again, have been going well.

Great. Thanks.

The next question is from Brian Skorney with Robert Baird. Please go ahead.

Good morning, guys. Thanks for taking my questions. I guess to start off, just on the eteplirsen confirmatory study, it sounds like the protocol has been approved by the FDA. Is there a predetermined threshold for success in the study? Is there a timeline for when a primary endpoint would be read out? Any sort of color on exactly what the FDA believes you need to hit or what your expectation for success in this study would be would be helpful?

Yes, Brian, we shared this previously and it is consistent with the April guidance letter we received from the FDA. The FDA did not put specific guidance around the time frame nor around the specific endpoint that would be compared to historical controls.

Essentially, it was enroll this group of patients, and we will follow them on an open label basis, and whether that is determined at a year or 18 months or two years, whether that is going to be comparing six-minute walk or pulmonary function or a constellation of outcomes or other outcomes to historical controls, that remains open and at the FDA's discretion as we continue to have dialogue around this open label study.

However, we as a company decided to put in a untreated cohort into this study with a specific endpoint, six-minute walk, that will be evaluated at a specific time point, 48 weeks. But to be clear, the FDA is not holding us to that outcome to determine if the drug is showing utility or not. We believe it is appropriate to do because we think we can show something but the FDA, again, is not going to hold us.

If we fail to show the six-minute walk benefit compared to our untreated cohort at 48 weeks we will simply continue to follow these patients on an open label basis until we have sufficient evidence to show they are behaving differently and, if the FDA agrees, then historical controls. Again, this would be to confirm the benefit should eteplirsen get an Accelerated Approval next year.

It is also we have, of course, a secondary endpoint of the pulmonary function so we'll be looking at that very carefully and that is obviously a new endpoint that as we have discovered these boys have been stable over now three years. And we will be obtaining biopsies.

So I think there is a lot of information that we will have that we can present to the FDA. And I think the FDA is really looking at what is the totality of the data. And so we are going to have biopsies, we will have pulmonary function, we'll have six-minute walk test data and hopefully that will make them comfortable that this is having a therapeutic effect.

Got you. And then just on the USPTO interference proceedings that were declared in the quarter. Can you give any color on what sort of claims Prosensa was given seniority on in the interference? Are these just broad antisense for DMD claims? Or are there any oligo-specific or [enimer] links that are part of these interference? Any sort of detail on that would be helpful.

We're not going to comment on the details of the interference. But to be clear, this was initiated by the USPTO, not an action initiated by Prosensa. And to be clear, the interference declaration doesn't impact any of our development or submission plans. Our patent claims are issued and remain valid through both the interference proceeding and subsequent appeals.

And again, Prosensa's patent claims are pending and will not issue into a patent that can be enforced unless it prevails at the conclusion of both the preceding and subsequent appeals. And then there's other steps beyond that, they have to convince the USPTO that its applications are patentable. Again, we just simply disclose that this interference was declared by the USPTO and we'll provide information that is relevant and as we understand it as time goes on.

Okay. Thanks guys.

Thanks.

The next question is from Christopher Marai with Oppenheimer. Please go ahead.

Hi, good morning, guys. Thanks for taking my questions. First, just with respect to some changes at the management level, I was wondering who is now managing the preclinical program given the CSO departure. And I remember, going back in interactions, maybe four years ago Dr. Peter Sazani was quite capable in that respect.

I was wondering if he is still with the firm and also how much involvement he has with respect to the preclinical sections of the NDA? And then also is there any loss of continuity with respect to the NDA and FDA discussions following the CSO departure? Thanks.

Great. Thanks, Chris. Actually we have a good team of senior leaders in charge of research and preclinical at the VP senior director and director levels. Yes, so, Dr. Pete Sazani was previously in charge of our preclinical program, he was essentially the architect of all of our preclinical studies, was the point person with the FDA on all of our preclinical and dystrophin discussions through the April guidance. Every meeting we had at that point was managed by Sazani, and again, or former CSO did not have any involvement through that guidance.

What we did was we had Dr. Sazani reassume all of those, the oversight of all of the preclinical. He had hired that team previously, he is back in charge leading that team and involved in some other activities with the Company across medical affairs and other communications.

Related to the path moving forward, related to our NDA, again, most of that work, the study reports, the sections of the NDA were manage, facilitate, basically put together by Pete Sazani and his team and they will continue to review and prepare. Frankly, most of that section has been completed and is going through a formal final review.

So this is why we communicated very clearly, we don't anticipate any interruption, lack of continuity, across our plans with FDA and with our path toward an NDA submission later this year that resulted from our CSO departure.

Great. Thanks. And then with respect to the confirmatory trial for eteplirsen, you mentioned 39 sites. I was wondering are these all DMD centers of excellence? How are you training them? Obviously six-minute walk test endpoint is important and we know of difficulties in getting consistency across that endpoint in prior trials.

And then additionally, what type of inclusion criteria beyond age and baseline six-minute walk test are you potentially including for that confirmatory trial? For instance Gower's maneuver percent predicted. Thanks.

Yes, thanks, Chris. Obviously we are very aware of some of the challenges that have been found in other trials in DMD. And so that was the whole focus that we had as far as for our hub and spoke model. So we have contacted 14 centers of excellence, and these are located throughout the United States, and specifically they have a great deal of expertise in the six-minute walk test.

We have also screened all of these sites, we have a group of expert physical therapists that went to the sites, made sure that they had the ability and they had backup for their physical therapist, they could perform it in the same way, also for pulmonary function. And we're trying to control all of these as much as possible using the same equipment for the pulmonary function, make sure that everyone is trained.

We have two centers of excellence for the biopsies. Again, as you recall quite well that had been a problem in other studies where the quality of the biopsies were not very good. It will be processed at one site, we have a computerized reading. So a lot of work has been done to really make sure that all of the sites are trained.

Because it is challenging for families to have to travel a long distance for weekly infusions and we certainly appreciate the difficulty of this. We have included a number of sites throughout the country closer to where families are located so that that can reduce the burden. But I think having these centers of excellence that do it, do all the clinical outcome measures, that really helps reduce it.

And I think we are obviously looking in a very similar to what we have learned from the phase IIb and the population is going to be similar and we have revised it slightly. But again, trying to just get the most homogeneous population and I think we have been able to do that.

Great. Thanks for taking my questions, guys.

Thanks.

The next question is from Debjit Chattopadhyay with ROTH Capital Partners. Please go ahead.

Good morning, guys, and thank you for taking my questions. A question regarding the fourth biopsy, do you think the timing of the biopsy is going to be dependent on the FDA accepting the prior biopsies in terms of the way they are evaluated and conducted before you go on with the fourth biopsy?

And then a question regarding the European strategy. You just mentioned you are in discussions, or will be in discussions, with the EMA. How does that affect the patent position of Prosensa versus yours? Thank you so much.

Debjit, let me answer your second question first and then Ed can comment on the fourth biopsy. Look, as it relates to our patent freedom to operate issues in Europe, obviously we need to first speak to the regulators to even understand what is feasible about potential approval of eteplirsen in Europe and that is what we intend to do.

Obviously, once we have a line of sight and clarity on whether or not eteplirsen could be approved on the existing data set then obviously we would look to figure out how to resolve those issues in a variety of ways. Our first goal though is -- let me put it another way.

If we were handed a free license tomorrow in Europe for eteplirsen it would not change the activities of the Company as it relates to talking to the EMA, finding out what it would take to get eteplirsen approved before we proceed with if they need an additional study in Europe would our confirmatory studies in the US suffice. What is the timing that we would potentially be launching eteplirsen, potentially?

So again, we're continuing these activities and at the appropriate time we expect we would resolve to not see this drug barred from Europe. I will let Ed speak to the fourth biopsy.

Yes, so the fourth biopsy is going ahead. I mean, this is very valuable information and clearly the FDA is very interested in trying to understand dystrophin and how this could be used as a biomarker. So we have had discussions about improved ways of looking at and measuring dystrophin, getting them comfortable. It would be done in another laboratory.

So this is going ahead and we're also looking for the panel. Remember that we not only have to convince the FDA but our expectations, of course, would be an advisory committee panel. And these physicians also are very interested in dystrophy. So we really want to make sure that we can demonstrate in multiple laboratories that we show dystrophin and that it is at a reasonable production and that we have long-term expression. So this is going ahead.

One more question, in terms of the confirmatory trial design, supposing something goes wrong with the NDA, accelerated NDA filing and FDA's rejection of that, how does that change your strategy for the confirmatory trial being that it is such an open-ended trial with no clear guidance as to the endpoints and timing from the FDA?

Debjit, this is exactly why we took our own initiative to put in a harder endpoint and a untreated cohort. Because that gives us an insurance policy to have a study design that in any event that this is not approved next year that we have a good case to be made for a treatment effect versus, again, a population that natural history suggests behaves similarly as our eteplirsen amenable patients. And also, one that would have the same inclusion criteria that we would use for the eteplirsen treated patients. So that is why we did what we did in the event that you described eteplirsen isn't approved next year.

I would say in terms of timing, I'm going to have to limit to one questions for the remaining -- we still have a queue up. So I appreciate the questions, Debjit.

Our next question is from Chad Messer with Needham and Company. Please go ahead.

Great, thanks for taking my question. I was wondering if you could update on your latest thinking about possible ways you could be approved. Obviously the door is open here for dystrophin to be used as a surrogate endpoint, it sounds like you have got a little bit more work to do to convince the FDA there but that is certainly possible.

In the past you have discussed that six-minute walk was also a potential path to approval. Just wondering if you still view that as the case? And if there is any differences in your eyes or any affect of being approved on one or the other would have?

Yes, I would just say the guidance that we received in April, April was very clear. We outlined that in a press release and a conference call and they laid out the two pathways that they could approve eteplirsen under the Accelerated Approval pathway.

As you mentioned, one was an intermediate clinical endpoint from our current study 201/202 ongoing extension study, not related on any new efficacy data from subsequent studies that will be ongoing. Or, and/or dystrophin as a surrogate endpoint on the existing data set upon a more detailed review. And as Ed described, we're getting a fourth biopsy.

So we believe that guidance is still intact. We don't believe that is impacted at all. In fact our 144 week data, now we have almost three years of data, these boys are still ambulant. I just described earlier in the prepared remarks why we think this is supportive of an efficacy claim. Ed, do want to comment further that we could be approved on either pathway?

Yes, I think there is a clear interest in the six-minute walk test and it certainly has been used as a primary endpoint. And I think not only the FDA, but the EMA is certainly comfortable with this as an endpoint. And also remember there has been a great deal of interest in the pulmonary function. It has been considered for other neuromuscular diseases as an endpoint and the FDA has even mentioned this as a potential clinical outcome measure. So I think we have a lot of different ways to demonstrate that this is working. I look at this as we have multiple pathways that we could use to try to get this. So I think there's a lot of flexibility which is unusual for a program at this stage.

The next question is from Steve Brozak with WBB Securities. Please go ahead.

Hi. Good morning and thank you for this update. A lot of questions have been asked and answered so I will just go down and cover one. You have taken great pains to talk about in this call and other calls the patients and the clinicians that are obviously actively interested, you just spent a good deal of time talking about the manufacturing and the regulatory. Obviously you have tied everything up very well. But the question I have is are there any other areas that we should be focusing on in terms of a transition from obviously clinical development to what is the logical next step which is commercial. What are the other things that you might want to start to talk about and that we should start to monitor? And I will have one follow-up after that.

Obviously as we prepare for an NDA submission we have to also prepare for success. And that means that if we submit an NDA by the end of the year and we have a filing accepted by, let's say February of next year, and if we get priority review, that would put a PDUFA date at August of next year. So we are looking at a year from now, the possibility that we could be launching eteplirsen or getting approval in the US market. And so we have been building our a commercial, an outward facing medical affairs function over the last year. And we have hired some very senior-level talent who has experience launching products, experience in the rare disease field, experience in preparing reimbursement, access distribution and we are just not getting ahead of ourselves by talking publicly about a lot of these efforts. But as we get closer to that NDA filing we will be providing updates how we are preparing for the commercial launch of eteplirsen in the US. Yes, look, you see our guidance has increased this year and this is consistent with companies that are preparing for success to get ready to launch a commercial product and start generating revenue in the near-term. There is a lot going on at the Company across all of the different functional areas including our pre-commercial activities.

And the last part on the manufacturing, again, I appreciate the deliberation that you took in terms of manufacturing. How temperamental is this, or how much of a mass treat are you comfortable with on the manufacturing side? Obviously that is one of the major things that you spent time on this morning. Is there anything else we should look at as far as that goes?

No, I think for us the mid-scale production and the quality and the success of that mid-scale production, as I mentioned eight batches now where we have the consistent quality and stability to be able to use this drug in our clinical programs. That was the big hurdle and I think we -- in a pinch, we could expand that mid-scale production and be able to prepare to launch commercially off of that capability. So we believe de-risked the supply issue significantly, however, it is not stopping us from scaling up to the next level and now we have more know-how of more experience and applying those learnings to the large-scale we believe gives us a good chance to succeed at the large-scale production. At that point that should provide the sufficient capacity, not just for eteplirsen but then to easily adapt that to our follow-on DMD drugs. Obviously we have been producing our PMOplus chemistry for the infectious disease programs, so there is additional know-how there. We are confident in the manufacturing. Look, going back a year or two ago we were concerned about an early approval and having enough supply. We don't have that concern as we sit here today to have enough drug supply upon a commercial launch if that were to occur a year from now.

Great. I look forward to the next update and congratulations on everything you have said today. Thank you.

Thanks, Steve.

The next question is from Brian Klein with Stifel. Please go ahead.

Great. Thank you for taking my question. Just in terms of enrollment of the confirmatory study, can you provide us what your expectations are there? And will the full enrollment be completed before any potential Accelerated Approval? Thank you.

Thank you for the question. Obviously we have a lot of work that was done prior to the initiation of the study, so we have been contacting sites and have done surveys as far as the number of patients that are available. We have our SKIP-NMD, people of been signing up and so we have a lot of information, clearly we have suggestions from the sites. We don't have exact numbers because it has just started. But what I can say is there has been an enormous amount of enthusiasm and also the fact that on very short notice we were able to get 36 out of 39 sites coming to Boston, eager to anticipate. And what has been said, the investigators spoke to me directly and said they have never had so much inquiry from patients on any other study that they have done. So I think there's a lot of interest in this and hopefully that will translate into a fairly quick accelerated inclusion of patients into the study.

And Brian, to answer your question, in the event that we get an Accelerated Approval we believe that all of the patients that would qualify for our clinical studies who are interested in getting access to eteplirsen through a study earlier than they would otherwise get access to the the drug under an approval a year from now. That enrollment will have peaked out, but obviously whatever the enrollment is at the time we got approval we understand that that could quickly shift to folks just wanting to get on the drug post approval. So if you recall from April guidance, one of the criteria was to make sure we were enrolling both the eteplirsen open label confirmatory study and our follow-on exon confirmatory study placebo-controlled at the time they approve the drugand we believe that will be easily met at the time we would potentially get approval next year.

Great. Thank you.

The next question is from Robyn Karnauskas with Deutsche Bank. Please go ahead.

Hi, guys. Thanks. I just want to take a big picture step back question because we have been focused on eteplirsen. I know a lot of people are waiting for the next products and you mentioned that you are looking about putting (inaudible) into the clinic. Can you help us understand what are your constraints for moving forward in the clinic with other non- DMD products as far as timing and costs since you don't know whether you're getting Accelerated Approval yet? And then how far can you develop those programs before you would have to finance if you don't get approval early? Thanks.

There's two answers to that question, the follow-on DMD drugs are moving forward nicely so those are the backups, if you will for eteplirsen. One, comment on that is since eteplirsen was the first product that we brought into development we didn't necessarily do all of the detailed optimization work to identify the most efficient and effective exon skipping sequence. We have better sequences to target 51, but more importantly, all of the follow-on exons appear to have at least as good of exon skipping efficiency and we would expect that to translate at least as good of efficacy as we see with eteplirsen. And so that gives us confidence in the follow-on exons. We also show safety in pharmacokinetics that are similar and so that is something that we are confident that it would behave similarly as eteplirsen on a safety standpoint.

Regarding the other applications, obviously we would need to start with preclinical program, this takes 18 months to 2 years once we identify a lead preclinical candidate. Our test is twofold, one, we have to have a chemistry, a new chemistry that can be applied that we believe has a therapeutic index, that is safe. We believe we have some of those chemistries depending on the disease that we are going after, the cell that we are targeting. And then we also have to have activity related to that chemistry and whatever the sequence is that is targeting a specific gene target that gives us confidence to move forward with that lead candidate. This is what I have said all along, is we will announce once we have that data set, that we can identify for a specific target against a specific disease. But what I have provided in the scripted comments were a variety of areas that we are investigating and looking into and, again, stay tuned for data that would lead to that benefit.

Great. Thanks.

The next question is from Joe Schwartz with Leerink. Please go ahead.

Hi, guys, thanks for taking our questions. This is Paul on for Joe. Just a quick question on the EU exon 53 trial and its read-throughs for the 53, 45 trial in the US. I was looking at a poster presented recently and it showed that the placebo-controlled portion of the study was 12 weeks long, and we were wondering what the logic is underlying that given that it takes longer,theoretically speaking, to make dystrophin and show a comparative benefit. And then given that how long you would think you would run the placebo-controlled portion of the 45, 53 trial before going into some sort of open label phase or discontinuing placebo dosing? Thanks very much.

Sure, for the exon 53, and I think it is important to note that this study has been in preparation for almost two years because it is part of a very large grant. It really is a dose to hydration phase for the first 12 weeks in which we go up to 30 mg/kg, and this was just a fast way to accelerated it in the EU. That is the placebo-controlled and then we add another 12 patients, everybody goes on drugs. So it will be similar outcome measures with six-minute walk tests, pulmonary function and we will be also getting, obviously, kind of experimental outcome measures such as MRI. But it will be the actual -- it will be a one-year study on an open label getting basically all of the efficacy measures. And in regards to the study, the 45, 53 study in the US, we are still under discussions at that with the FDA so we don't have any final guidance on that.

Okay. Thanks.

Our next question is from Yaron Werber with Citi. Please go ahead.

Hi, this is [Kumar] again for Yaron. Thank you for taking my question. So for the mid-scale supply how long will it last for? And won't you speak to the large-scale batches of next year? Do you need to do a bridging study?

No. Look, again this is a synthetic molecule. More akin to a small molecule drug synthesis than a biologic. We believe your classic comparability testing would suffice to show that regardless of scale if you use the same process that the stuff in the vile is comparable, right, in terms of active drug, purity profile and stability. So the stability of the production runs to date, we have very good and long stability on our API and we typically won't go to fill and finish until we are closer to the need. Because, again, we have good stability in viles but just not as long-term as we do with API. So the API is there and obviously we would do testing once we moved to vials. And this was part of the discussions with the FDA of creating that drug supply chain for our clinical program and eventually commercial scale. So we don't anticipate there be bridging studies, per se, other than showing comparability batch to batch, lot to lot, and from small-scale, mid-scale to large-scale. Again, as I said earlier we are very confident in the supply chain from the data we have to date.

Okay. Great. Thank you. And also for the pre-NDA and CMC meetings later this year, what are your expectations from those meetings?

Look, these are classic meetings that take place to make sure we check the boxes, we highlight based on the guidelines for NDA, formatting, what is expected. We just highlight and clarify exactly what is going to be in it so we have time to make any final comments, adjustments before we actually hit send and put the submission in. Of course this is not a guarantee that they will accept the filing but it does increase, at least the confidence that we can clarify any issues around those final touches on the NDA. Ed, did you want to comment further?

No, I think this is really if you're within the similar specs it should be fine. This is not a biologic and we have made that difficult transition from small-scale to mid-scale. It is much easier to go from mid-scale to large-scale. So far we're not anticipating any issues.

Yes, and on the clinical and preclinical sessions it is just a matter of saying here's what we have, here's what you're going to see in the NDA, a few questions related to that, but again, we look at these meetings as relatively perfunctory as we prepare for that NDA. We kind of know what we need to with the NDA, it is just a great opportunity to have a touch point with the FDA before we hit that send button.

Okay. Great. Thank you so much.

We have no further questions at this time. I would like to turn the call back over to Chris Garabedian for closing remark.

Thank you, operator. We appreciate the interest in Sarepta Therapeutics and we remain committed to advancing our DMD program with urgency and with a commitment to getting our drugs through the regulatory approval pathways as rapidly as possible. We look forward to speaking to all of you on the next conference call. Thank you very much.

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