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Sarepta Therapeutics, Inc. (NASDAQ:SRPT)

The 31st Annual J.P. Morgan Healthcare Conference Call

January 9, 2013 7:30 PM ET

Executives

Chris Garabedian – President and CEO

Analysts

Matt Lowe – JP Morgan

Matt Lowe – JP Morgan

Hi there, welcome everybody. My name is Matt Lowe of the JP Morgan BioTech team. Our next company to present is Sarepta Therapeutics. We’ll have a breakout down the corridor in the Yorkshire Room afterwards. If I could just ask everyone to turn their cellphones off, and now introduce the CEO Chris Garabedian. Thank you.

Chris Garabedian

Thank you Matt, thank you JP Morgan for the invitation. I’m really excited to present what will be going on with Sarepta Therapeutics for 2013. I will be making some forward-looking statements so please refer to your SEC filings on Sarepta to understand the risk factors associated with the company.

I wanted to provide a company overview on Sarepta, Sarepta was the highest performing stock in BioTech last year. And we have a lot going on this year that we hope will drive value for investors and really make progress in the company in 2013. We are headquartered in Cambridge, Massachusetts, with about 120 employees. We are very well capitalized we have approximately $187 million in cash as of the end of the year. And our current market evaluation has been around $900 million on the current outstanding shares.

We’ve been focused on building a strong management team as you see here with recent hires at the CFO level, and General Counsel and the VP of Regulatory. These are all individuals who have experience helping build a global biopharmaceutical companies that are independent and continue to create value for shareholders. So, we really are building an organization that understands drug development and commercialization and we expect that this will drive a lot of value for years to come.

We have a pipeline in both the rear disease and infectious disease area, I’m going to be focusing primarily in our Duchenne muscular dystrophy program. And the status of that program and what we have going on in 2013, I will just highlight that we do have two active programs in the infectious disease space that is being funded by our government, both the Department of Defense and the NIH NIID respectively on our Marburg hemorrhagic fever virus program and our Influenza program. We have a lot of compelling proof of concept data that I won’t be talking about here, but that is also proof of concept for our technology and value drivers for the organization.

Our Duchenne muscular dystrophy program is very exciting in terms of what we believe can deliver a disease modifying affects to this population that has this devastating disease. This is a disease that’s characterized by these patients basically inability to produce the essential protein Dystrophin. And because of this lack of Dystrophin they end up on a progressive track toward losing the ability to walk by their pre-teen years and they have a life expectancy into their 20s, are rarely living beyond the age of 30.

The reason for this disease as I mentioned is simply their inability to produce the essential protein dystrophin which is really the shock absorber of the muscles and allows us all to maintain good muscle function into our adult lives and throughout our live.

Our drug Eteplirsen, which is a anti-sense Oligonucleotide with a very different backbone structure than we see with any other RNA therapeutics which we define as morpholinos, they are phosphorodiamidate morpholino oligomers, and we’re able to use our technology to direct alternative splicing or in essence we’re repairing the RNA mutation, the genetic mutation that exists and restoring the translation to produce the protein.

This drug is delivered systemically through IV infusion weekly. It has unique drug like characteristics, it has a short plasma half life, but once it gets uptake into the cell and produces the protein the protein has a longer half life. It’s cleared through the kidney intact, we see no metabolites, so it’s a very hearty compound that’s cleared very efficiently. And we’ve tested now this drug in patients up to 50 mgs per kg for over a year in duration currently, I’ll be talking more about the efficacy and safety profile of this drug.

The mechanism of action is what we describe as Exxon skipping, the Duchenne genotype is defined as a out of frame deletion in the dystrophin gene. This renders them unable to translate to the protein. We know from a natural phenotype that exists called Becker muscular dystrophy which is characterized by an in-frame deletion if we can simply restore translation by turning this out of frame deletion into an in-frame deletion then we can restore the ideas that we can restore the translation of the protein.

We know what the bad actor, this is an example of a patient in our study who has a deletion at 49.50. The bad actor here is Exxon 51. So, if we can silence or hybridize 51 out of the reading frame, we convert a 49.50 deletion to a 49.51 deletion which is in frame and akin to a Becker genotype and what we hope is a phenotype.

We showed this in previous studies with systemic delivery that we’re able to produce the protein in dose escalation studies, looking at 10 to 20 mgs per kg but we didn’t see the high level of dystrophin that we were hoping to see so we did a phase 2b study looking at higher doses over longer duration of treatment to see if we could actually produce dystrophin levels that we believe would be meaningful for this patient population to produce a functional benefit.

Interestingly we learned in the first 24 weeks that there is a delay to the time that dystrophin is produced. So, what we actually showed was that at 12 weeks, even though we used the higher dose, 50 mgs per kg, we didn’t see dystrophin materialize in the muscle, we saw 0.8% dystrophin positive fibers after 12 weeks of dosing. But after 24 weeks of dosing, with even the lower dose, 30 mgs per kg, we saw more than 20% dystrophin positive fibers on average. And I’ll speak in a moment why that’s relevant, why that’s important when we look at the functional benefit.

In this extension study, we did 48-week biopsies in both the treated group and the Placebo delayed treatment group, which at the 48-week time point would have had 24 weeks of treatment. This table shows that of the patients who received 48-weeks of heplatocin Eteplirsen 47% dystrophin positive fibers were observed. So essentially half of the muscle fibers that we assessed were positive for dystrophin, this was beyond our expectations. And we see this in both the 30 mg per kg and the 50 mg per kg dose groups, in fact a 30 mg per kg had a higher numeric score with more than half of the dystrophin of the fibers showing positive for dystrophin.

We even showed good robust dystrophin levels in the Placebo delayed treatment cohort that crossed over and had 24 weeks of treatment. This slide shows you the individual patient scores on dystrophin positive fibers and you see here a very good consistent response, and this was across five different genotypes, a variety of genotypes, different age cohorts. And so we believe that this mechanism of action works regardless of genotype or phenotype that are amenable to this particular Exxon skipping target.

I’ll also point you to the 30 mg per kg cohort in the far left, these are the four patients that we had 24 week treatment biopsies and 48 week treatment biopsies. In this cohort we showed continued increase of dystrophin positive fibers from 24 weeks to 48 weeks, so this was very encouraging that we didn’t seem to hit a plateau and we see continued increase of dystrophin fibers in this cohort.

Again, we saw consistent levels at 50 mg per kg and then the placebo delayed treatment after 24 weeks again showed good robust dystrophin levels. And we like to show the visual almost you can get a qualitative feel, and it’s hard in this type of lit room, but if you pull this slide up on your computer, in your office or at home you’ll see really a visual star contrast of a pre-treatment biopsy, and the 24 and 48 week treatment biopsies where we really see an abundance of dystrophin throughout the muscle tissue. And we’ve shown this with the 50 milligram visually and the placebo delayed treatment cohort.

We also looked at clinical outcome and the standard of care in looking at the ambulation is six-min walk test. And we designed the study to select a population that we would have expected, would have declined over the course of 24 to 48 weeks. And we were hoping to show a differential in those treated patients versus that placebo delayed treatment cohort, and that’s in fact what we did show.

In this modified intend to treat analysis we showed those who received a Eteplirsen who were still valuable on six-minute walk test ambulation, we really showed over 48 weeks which was our pre-defined primary end point stabilization on the six-minute walk test. While the placebo group started to show that decline, and what we’ve highlighted here is the shaded part is where we would have presumed dystrophin to be present in the muscle based on the data I shared with you earlier.

And here, even the placebo group showed the type of decline we were expecting to see, but then they showed stabilization. And so, this was very encouraging to us, it’s not only did we show a differential to that placebo delayed treatment but we showed that stabilization after that dystrophin was presumed to be present.

I mentioned this is a modified intend to treat, and that’s because there were two patients that rapidly lost ambulation shortly after enrollment in the study. These happened to be homozygous twins, so they were both genotypically and phenotypically identical. And within the first measure at four weeks, they were both below 250 meters walked and they both were 100 to 200 meters below the rest of the cohort as short as 12 weeks. And this was before they had a chance to see the dystrophin produced in their muscle, as I described earlier.

So, we’ve removed them from the ambulatory measure analysis, however we don’t believe that these are quote non-responders. We do believe we see stabilization in these patients on other measures like you see here with pulmonary function that we’ve described here through 48 weeks.

The safety profile has been very favorable to date. This is the emergent adverse events through 48 weeks, through 48 weeks we saw no treatment related adverse events. And Eteplirsen has been very well tolerated and we didn’t see any lab abnormalities through 48 weeks.

There was one patient after 48 weeks that showed proteinuria by dipstick but it was transient and 24-hour test should know proteinuria. And there was no evidence on the specific kidney markers, of evidence of any kidney marker elevation in that same patient.

We also gave an update in early December at the European Neuromuscular conference that showed 62-week data. And this again, we showed stabilization. We were very encouraged by this because in this population that we selected for this study, I think no one in the DMD community would have guessed that after 62 weeks, a patient who had DMD would see basically hardly any change from their baseline, this would be less than 5%.

You’ll see a little bit of an uptick at 48 weeks and a downtick, there were two patients who had significant increases in their six-minute walk score from week 36 to week 48, those same two patients had the biggest decreases in six-minute walk between 48 and 62 weeks. So, those are patients that drove some of the phenomenon of an uptick and a downtick. But what we see is really a stabilization across both the placebo delayed treatment group and the early treatment group through this 62-week time-frame.

So, in summary, we’re very encouraged by this clinical data set. We think it’s a strong and relevant clinical data set for an ultra rare disease. To summarize to date, the experience with Eteplirsen is in 38 DMD patients who received the drug and that we have some safety information on. Of those 38 patients, 36 had treatment biopsies and of those 36, 28 showed increases on dystrophin positive fibers. 20 out of 20 of those patients showed increases on dystrophin positive fibers who received a dose of 10 mgs per kg or greater for at least 12 weeks of dosing.

We met the pre-defined primary end point of dystrophin production and the clinical end point of six-minute walk, with high statistical significance, and unprecedented results in DMD, at the 48-week time point that we predefined we maintained that statistical significance on both, on six-minute walk at 62 weeks.

As I mentioned there were no significant clinically relevant, clinically significant treatment related adverse events and it was very well tolerated, this data was collected across 11 sites in the US and two sites in the UK, our safety database now includes 12 patients who’ve received over a year at the highest doses tested, 30 and 50 mgs per kg.

And our morpholino chemistry, the same backbone chemistry has been dosed safely in over 400 patients in other diseases. We’re planning to initiate a confirmatory study by year end with dosing to begin and commence in first quarter of 2014. The reason I highlight this complete data package is we believe this is a sufficient data set to have a dialogue with the FDA about the potential for an accelerated approval. And we know that there has been a lot in the regulatory and legislative agenda, to really underscore this, particularly for rare diseases, and we see that going back instead of 30 year anniversary of the orphan drug act, but we’ve seen this really extended and particularly highlighted for rare diseases with the recent fiduciary Pdufa 5 legislation that was enacted in 2012.

I won’t go over the details here but we have expanded, accelerated approval language from this legislation that really speaks to diseases like Duchenne where we have a disease that’s devastating and life threatening, where we have a surrogate endpoint that we would argue dystrophin is the clear surrogate end point for Duchenne. In a clinical end point that has been use and validated in other neuromuscular diseases, six-minute walk.

The language also talks about the risk benefit and really balancing this on the needs and views of the patients, and the Duchenne patient community is very actively engaged and believe that these types of drugs need to be approved earlier because of the rapid progression of this disease and the irreversibility that we would expect this disease to have once you start to lose ambulation and other function.

And there has been a lot, I talked about at this conference even on breakthrough therapy. Breakthrough therapy is another part of this Pdufa Act that really again highlights that the FDA wants to show flexibility and increased communication and involvement with people even outside of the division to help accelerate development.

We are evaluating this currently, we have not applied for breakthrough designation. We are trying to understand the true merits of this. We do not believe this will assist us in the near term as we approach the FDA and talk to them about accelerated approval. We already have fast track designation, which affords a lot of the benefits. But we will be evaluating in the first half of this year, whether we believe we want to apply for this earlier or closer to when we’re sure we’re going to be filing an acerbated approval NDA.

But most importantly we are achieving alignment with all the stakeholders in the DMD community, so we’ve been working with patient advocates with investigators who are experts in Duchenne, and we believe the FDA has really signaled in several ways their openness and willingness to consider accelerated approval and for other expedited paths to approval for these types of devastating illnesses and including in the rare disease space.

I also wanted to talk about manufacturing, I get a lot of questions and I wanted to highlight the PMO backbone and the Eteplirsen structure as it relates to manufacturing. First of all Eteplirsen is the 30 anti-sense Oligonucleotide and you see the structure here so it has 30 sub units that are attached through a phosphor diametric linkage to our morpholin backbone. Each sub unit consists of this phosphor diametric linkage and amorpholina ring, and this is an example of one base pair, and again there is many benefits that this type of backbone confers in terms of drug like characteristics, but we also think it’s a backbone that we understand exactly how to produce, we’ve been manufacturing this same chemistry for couple of decades now and we’ve been manufacturing GMP quality drug for more than a decade when we’ve done studies in Hepatitis C.

Three batches at mid-scale production which we would put on stability and believe we would have ready for drug release for our confirmative pivotal study that we’ve described with begin dosing in first quarter of 2014.

If we have favorable discussions with the FDA, and we are looking at an accelerated approval filing, we are doing a paper exercise to talk about large scale production and that’s something we are preparing for the need to pull the trigger on if we believe we need to start preparing for commercial scale. And so, that’s something we’re preparing based on independent on those discussions with the FDA.

So, again, this is what I’ve described in terms of next steps on manufacturing but I want to just highlight that this is a chemical structure we know well, we are the experts, we have that expertise in house. We are transferring that through our tech-transfer two CMOs, that are validating these processes and preparing for production. And we’ve been working with the CMOs on a small scale as well, both for Eteplirsen as well as our other products in the clinic on infectious disease as well as preparing for pre-clinical manufacturing for our other Exxon targets in DMD.

So, there is a lot going on in 2013, I mentioned the clinical program a summary we’re preparing for end of phase 2 meetings with the FDA. This would be end of phase 2 clinical meeting to take place in the first quarter of this year. That will determine if we decide to pursue an accelerated approval filing, we are preparing briefing documents for both the clinical and CMC end of phase 2 meetings, we expect the end of phase 2 CMC meeting to take place in the second quarter of this year. And again, we have strong experience, we think the commercial model that we would need to prepare for, we already have talent that we’re bringing on in house. And this is a well characterized business model, we feel very comfortable pursuing.

From a market opportunity, there are many drugs that have been approved with price points in the rare disease area. Here is a collection of drugs that have been approved with various price points on an average of 300,000 to 500,000 per patient per year. In fact there was another one that was just priced recently at jury – around the $300,000 range. And if you look at this in terms of the target population we estimate there was about 2,000 patient in the US that would be amenable to Eteplirsen. Again this would be a $600 million to $1 billion market opportunity in the US alone.

If you look at the EU, we have more patients that would be amenable to Eteplirsen and the EU. And then just the next four Exxon targets of which we have current activities around three of those four ongoing currently, the US and Europe opportunity there is close to 9,000 additional patients.

And then we have a lot of activities planned for 2013. As I mentioned the FDA meetings that would be coming up in the first and second quarter, the final pre-clinical study reports for Eteplirsen would be submitted this quarter. We will have additional efficacy and safety data, week 74 week data that have venue to be determined sometime in the first half of this year. We are currently conducting Eteplirsen add-me studies, and reports would be finalized in the second and third quarter of this year. And we expect to conduct pre-IND meetings on at least one of the additional Exxons behind Eteplirsen. And we would be identified – finalizing the protocol, identifying sites, doing pre-screening in the second half of this year to start dosing in IRB approvals to commence in our confirmatory study in the first quarter.

Again, our decision to pursue accelerated approval and the timing of filing will be determined following our end of phase 2 clinical and end of phase 2 CMC meetings with the FDA respectively.

Lastly, I just want to summarize that we think this technology now has compelling proof of concept, both with our Duchenne program that I showed today as well as our infectious disease programs that have been in the clinic, where we’ve shown very good unprecedented antiviral response even with delayed time to treat where after four days of infection in primates with a legal hemorrhagic fever virus of Marburg, we still showed a 100% survival at the end of treatment and 83% survival at the end of 40-day follow-up.

We think this has brought application even beyond the rare genetic disease space, and we expect 2013 to start engaging potential partners around how we can leverage this technology moving forward. We have a variety of new chemistries that we have established strong IP around and we continue to look for more aggressive strategies to lock up the morpholino space because we think it is best to breed in the RNA technology space.

And again, this is not just translation suppression and turning off, what we’re doing with DMD is turning on a protein, because of genetic deficiency. And this directed alternative splicing I think is going to be a wave of the future as we learn more about genetic base disease and learn more about genes that are implicated in various diseases.

Lastly, the financial overview, we have a strong cash position with approximately $187 million on the balance sheet today. Our 2012 guidance was an operating loss of $25 million to $30 million so it gives you a sense of the burn you have this past year. Next year, we expect administratively would not produce significant additional burn, we would be expanding operations. But the main increase is going to be driven on our manufacturing scale up. And that will be dependent on whether we pursue large scale production and accelerated approval or whether we maintain the mid-scale that we’re in the throes of currently.

We have good volume, it’s a very liquid stock, our closing price has been in the $27 to $29 range, which is in the $800 million to $900 million market cap range, and so we’re very excited of where we sit today, to really be able to execute on all of the activities I’ve described so that we can drive value for Sarepta, the way we did in 2012. So, thank you very much for attendance and the breakout room is near.

Question-and-Answer Session

[No Q&A session for this event]

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