Sarepta Therapeutics, Inc. (NASDAQ:SRPT) Baird 2017 Global Healthcare Conference September 7, 2017 11:25 AM ET
Doug Ingram – Chief Executive Officer
Brian Skorney – Robert W. Baird & Co.
All right, good afternoon everyone. I’m Brian Skorney, one of Baird Biotech Analysts. Next company, we have presenting – really happy to have the CEO of Sarepta Therapeutics with us here the name that I have been following a number of years obviously. It’s been a very, very fun ride and the story I think is really going very well now that had great update yesterday. Doug is new to the company, have been on board a couple of months now.
Yeah about two months.
Yeah, so I think it’s been really a great hire for the company. And I guess to start maybe if you could give us a little bit of an overview of what you saw at Sarepta that really attracted you to the opportunity?
Sure, that would be great and I will sort of explain when I came to company is right now. And I’m supposed to say from lawyers that we have forward-looking statements, so look through our forward-looking statements and described all the risks there, so I can now be – I can now be fully aggressive. Look I can just referred number of reasons. I have done a few things. I was the President of this Allergan.
We ended up starting up that company and with small company nearly there absolutely we had a really interesting run. So there is quite a bit of money in the short period of time, had a lot of opportunities and I think people initially were surprised that I just – certainly because of the public overhang that existed at the time, but today with obvious that there was an enormous amount of opportunity. I feel stronger about that now than I did even before. And that it’s under pushing that can not last forever and there’s number of reasons.
First the submission of this company. If you want to attach yourself to the company that’s going to be successful, attach yourself to the company that’s passionate about doing something that matters. And I can’t envision a company that’s going more than matters in Sarepta. We’re dealing right now with duchenne muscular dystrophy. This is not just an unmet medical need. This is a devastating cruel disease that must be addressed. These children live difficult life, shorten life and ultimately die. And we can do something about it as a company. And the great thing about that is we have passionate group of employees inside this company. They’re committed by doing that in the science to get that done.
And that was the first. And the second is just opportunity and pipeline, starting first and foremost with a drug that we are selling today EXONDYS 51. EXONDYS 51 treats duchenne muscular dystrophy as you know 13% of the populations have the mutation. It’s a minimal to that. Notwithstanding with factor, we have – what some might think is a fairly scant label and folks envisioned that there might be access and reimbursement challenges. The fact is we’re having a brilliant launch so far this year as everyone knows at the end of our second quarter we were able to exceed analyst expectations.
We raised the four tasks in the rest of the year to $125 million to $130 million, which we’re literally raising $30 million on the bottom of that forecast. And if we’re able – I’m not updating, if we’re able to achieve that second quarter forecast that would be literally that the most successful first year also rare disease launch in absolute history and it will likely be probably top three or four most successful rare disease launches in the United States in the first year. So we’re off to a good start.
Then you take that and when you look at the pipeline, the pipeline is amazing. I mean, just with our base technology what we call the PMO, we can see cleanse new molecules that attack various of these mutations. We’re at 13% right now. Our goal is to get to 100% and I talk about what we did yesterday, take us in a significant step forward in that direction. And then beyond that we have next generation. Next generation what we call the PPMO, which is peptide conjugated version of what we’re currently doing today. And that’s not future world and that’s current world because if the talks was good, we will be in children treating them in a clinical trial this year with our PPMO.
And if we’re successful with that PPMO, we’ll get probably as much as a full order of magnitude, more dystrophin production and more efficacies with that product. That will be – I want to overpromised because it’s science and it’s development and it is that all the risk associated with that but that’s exceptional that would be entirely life alterant. And then if we go beyond that and that’s why this is just a crazy place to do. We have three gene therapy programs in duchenne muscular dystrophy.
We have utrophin, which is entirely a new way of looking at treating muscular dystrophy. So we’re going be all things to DMD and our goal is in the next coming years. We’re going to not just find therapy for a 100% of these kids, but dramatically improve the lives of the kids that have this horrible disease and then we’re going to beyond that with our technology.
And what we announce yesterday, which is with our drug golodirsen with an enormous step forward in our goal of treating a 100% of these kids. And it does a lot more than that from my perspective strategically. So I am sure you all saw, but if we did it, we announce results of biological endpoints for golodirsen, which is another one drugs, the same PMO structure and it’s treated about 8% of the children that have DMD.
So, number of reasons why that’s great. Number one of course, if we can get that across the finish line and get that therapy to physicians, 8% more of children that have DMD are going to find the benefits for the first time that have therapy that can help them. It is number two, completely validating of what we’ve been saying about our ability to sequence these technologies and bring therapies in relief for these kids.
Frankly, I think it validates and for those you might have had any overhang, which I think is more emotional what objective frankly, any overhang regarding EXONDYS 51, like clearly a completely validates what we saw in EXONDYS 41. And then we’ll eventually have this out at a major conference when folks see the rigor with which we approached the science. The way we’ve did this development. A approach to excellence and rigor I think you will be impressed by the fact that this is a company that understands the concepts of continuous improvement to scientific excellence and we are very science based in the company. And what did we see.
I’ll be real quick. We saw the following. So I am sure everyone, generally understands what we are dealing with here. This is exon skipping. We saw first and foremost a 25 kids. Our drug got to the right place, it did exactly what it is supposed to do in a very precision medicine way. So we looked at exon skipping and we found in a 100% of the time in these kids there was exon skipping. And we are also, and this a evolution for us, we are also able to measure the baseline amount that is essentially endogenous exon skipping that may have existed.
So that we could actually tease out drug induced exon skipping and that happened a 100% of the time. So the drugs getting to the right place, it is getting all the way to pre-messenger RNA. It is excising out, EXONDYS 53 in these kids. And it is a story reading for these in these kids and how do I know it is a story reading for these kids.
We look at dystrophin and now in Western blot I think historically there was a lot of learning as you go, and how one uses Western blot to quantify dystrophin, I think it is going to be clear that Sarepta is the gold standard today for how one can rigorously look at Western blot through properly quantified dystrophin. We had at a P value of better than 0.001. The production of dystrophin as a result of this exon skipping, and it was probably out of it. We are very happy with it.
Douglas said it was probably nearly 3.5 times more increase in dystrophin at 48 weeks versus that person. And then finally we used immunohistochemistry again in talking about this kind of constant effort to be more and more rigorous about the approach. We used a new muscle MAP concept with IHC, where we took all the human element out of it, we used computer algorithms to review IHC.
And what we saw again, very robust statistically significantly, is that dystrophin got to the right place. It got to the sarcolemma and it was well distributed and so obviously the conjuncture there would be as going to be functional dystrophin and help them for these children. So really positive results and I think very confirming of the thesis that we can find a way to treat all of this children.
So when we think of Golodirsen Data, and the next test there, I think no one wants to re-litigate the teplizumab [ph] or the FDA but there is really now way I can look at this dataset and not say this is at minimum the same as the teplizumab potentially somewhat better and you have a confirmatory study already, or Phase 3 study and that is part. I guess how – we talk about kind of fueling the relationship with FDA, how do you fuel the relationship with the FDA but you got to still be push forward from a president standpoint really should be unapproved.
Yes. It’s a great question. The way you do all of this is just based on the science and eminent based approach, if you want to be a bear and I just asked some people to try do this actually. You take this great result and then you find a way to spin it. Here we go another controversy with the FDA is boiling, and that is not the case.
The reason for the case because that’s not the approach we’re taking with the FDA, I have been around this industry for long time, I have worked with FDA many, many times, I worked with neuro-division and I was in last time it was alzheimer's company at the FDA with those folks just recently last September. And my impression of the FDA has always been the same thing.
We can get frustrated at times with our regulators, these are people that are evidence based professionals that react to science, we may not agree with them often. That happens all the time, one of the things that happen with that patient was that there was a robust scientific debate I get it. But in the end, science wins and in the end, I think these are professionals that were reacting right way to science.
So we’re going to do simple thing. Right now the status quo pathway that were on is we have placebo control trial that evolves. And that’s going well, and we’re going to be fully enrolled this year.
We’re also certainly going to take this data fully get it characterized, we got a lot of other – top line, we got to look at this data, little bit more so we fully understand. Some of the ins and outs and then we’re going to sit down with the FDA. We’re going to have a very direct evidence based discussion with the FDA, about what the FDA would like to see from us and additionally as a pathway to getting this therapy in the hands of kids, and in the hands of physicians in treating children.
And that’s extraordinarily important, we’re going to do that, we got a enormous sense of urgency certainly, as I said that to people and this is just true as in everyday that I come in and disrupt it. I walk down in the halls and there are large posters of children on the wall, and those are children with DMD. And they are all waiting for us. They can’t wait eight years to get this therapy to get help from them. But we’re going to do all the things we have with extraordinary sense of urgency by the end partnership in collaboration with the FDA.
I’m confident that we can join issue with them. And perhaps, we find lots of areas to disagree with but in the end, we’re going to respect our regulator and work with them to pathway for this thing.
Great, so when we start think beyond exon 53 and one of the promises on different part of platform has really been that once you can prove this once, the chemistry is the same, the backbone is the same, what you are doing is switching an oligo-nucleotide to sequence the risk that you have a different outcome seems pretty low. How do you start stepping through to other exons, when you do exon 44, how quickly are we going see additional oligos move forward, because I think you contribute upwards of 80% of DMD. What is the understanding that they get smaller and smaller?
Well, rapidly. This is a short answer. So we are driven middle of the strapline to figure out exactly how we can accelerate the way we’re looking at covering it as much as we think we state as possible. And we’re going to as rapidly as possible begin to sequence new treatments for the other exon amenable till now. For a number of – maybe the next four or five we’re going to figure out four clinical programs that we’re going to do that. And one of the issues that we’re trying to figure out as a group is to what extent do that with PMO, at what point do we start thinking about PPMO in these cases if we get good signals on tox and we get confident on the tox of this drug.
But between those two we’re going to rapidly beginning to sequence exons and go after the next stated four large areas. And then beyond that we’re going have start building up a dataset and now this is going to become more of a regulatory issue with the FDA. If we’re successful in clinical development of three, or four, or five in these, then there is this tail of an enormous number of them. They’re very small. You get down to less than – about 1% or less than 1% of DMD. We’re not walking away from those folks, just we’re going to find an avenue. That avenue is going to obviously require involvement with the FDA, we’re going to have find some alternative pathway.
Once we get very confident, not only on efficacy but probably, I think it’s importantly, safety. And then we’ll find some regulatory pathway into an issue with the FDA on that and find the way to cover all these children. And that’s a little bit out in the future. But I think the immediate next step is start sequencing a number of the other exons either in PMO, or PPMO, or both and get into the clinical strategies.
Great. So just thinking about EXONDYS 51 and launch I mean, obviously, every quarter has really been – be relative to expectations. But there’s been lot of controversy following the approval in terms of the insurance reimbursement. How is the insurance reimbursement situation looking? What are people missing in kind of the general preps when they see [indiscernible] we don’t deem medical necessarily we’re not going to cover it. What’s the reality of EXONDYS 51 coverage?
So I’ll say this. I’ll step overall and say the reality is we’re going have the most successful ultra-rare disease launch in literally reimbursement. So obviously, we can get access to reimbursement. Is it easy? No it’s not easy. It’s a battle and I think every rare disease, I suspect company would say probably about the same thing, it’s about how to work with these payors and get reimbursement. We have really sophisticated team, as to refer that those what doing on the ground, so the payor-by-payor, case-by -case, dealing with them, we are – we’ve engaged by now with about payors that cover almost by 260 million lives in [indiscernible]. Over 70% of those payors have gone to next level of asking for more in-depth medical discussions to really understand the data and how this works. And we were hearing even just yesterday that a lot of re-insurers are reaching out to KOLs and asking thought leaders what they are seeing out in the community, that have actually used the drug.
But I can tell you, what excites us that’s what we want to see. The more market research we all want to do with physicians, neurologists, KOLs that are actually using EXONDYS 51, the more we’re excited about that. You’re going to find that there’s lot – they are finding a lot of utility out there.
So it’s a case-by-case and I don’t want to fight, but it’s working and so we are getting on therapy and we are seeing great insurance when they do, we’re getting very few dropouts right now, which I think was a concern that people had early into that explains why we’re having a really nice launch here.
One of the things, I was – I think a lot of us are surprised about with the number of patients that aren’t really genetically subject for DMD and that’s the real driver to continue generating new patients starts. How is that going? How are the efforts going to kind of get – pull in more DMD patients who don’t know their subtype and get diagnosed?
That in parallel – that is connected parallelly because this is actually before my times. So as I understand it if you went back to like 2015, both combo our Chief Commercial Officer and his team they did some work. So let’s just frame out how genetic testing is going and the like. I think they were horrified at this direct, there was very little genetic testing that was going on and fairly some amounts of genetic testing was done. It was as that kind of make sense, like if you don’t have a therapy, genetic testing is an interesting issue, but its valuable.
And then the second thing that was obvious was that there is a really for education, because even if we get genetically tested these kids have exon 51 a minimum mutation, there are probables of exon 51. So there is a collection of mutations that are the ones that benefits from EXONDYS 51. That’s an educational process. And they had to go through significant process.
And an another group really impressive group PPMD was there is security stand, the PPMD that was in the process of figuring out a way to genetically test and they actually have done a lot of brilliant work to sort to focus on this as well. So we see today, I’d say that company and the outside patient efficacy groups that made wellness strides both on getting, show them genetically tested when they are suspected of having DMD and physicians becoming far more sophisticated about knowing what mutation are minimum, the EXONDYS 51.
In terms of who you’re seeing coming in for EXONDYS 51, I mean how is kind of the breadth of new patients coming, you’ve seen primarily in patients who are remain ambulatory kind of within certain age, there is a lot of patients [indiscernible] patients were newly diagnosed at age two, three.
It is broad, the answer is you are seeing broad uptick, both in ambulatory and non-ambulatory, and one of the question I asked recently what’s the breakdown between the two. We don’t have a breakdown, we don’t know with any precision to do on but there is a good, there is a mix between ambulatory and non-ambulatory. And what’s interesting is the last quarter we noted that actually you’re seeing an uptick in younger children as well, which is great, some people are misunderstood what we are saying. It’s an uptick in younger children, its not in the detriment, we are growing in all of these areas, so across all of the age groups in both ambulatory and non-ambulatory that number of patients that have been treating, I would say there is a lot of breadth here.
Great. So we mentioned a little bit about PPMO but I mean it seems like there is a kind of enthusiasm coming from the company about this internal development and what’s like – all goes well with toxicology and moving into patients later this year. So walk us through a little bit about what is the PMO relative to PMO, why is it about a version of the PMO and what should we looking for in kind of the step-ups in components are in this platform?
Okay, so let’s step back. The PMO which is our backbone of the EXONDYS 51 and will be collocation in the other tumor products, at a molecular that’s brilliant, we sequence these drugs, we know that when I get in this trial, get the pre-RNA, they exercise it out and just an amazing way, they can create an RNA because we have 51 we are still reading, create detriment and detriment gets right place and I think just an extraordinary piece of science there.
And we are excited about that, there is a limitation with these PMOs and the limitation is that they are hard to get in the cell, that they are neutrally charged and that they get in cell probably because these children have weaken cells and that’s why they able to get in. These children urinate a lot of these drug out and that is a limit ability to create disruption. The amount of disruption we are creating and the benefit that we are confirming today is great but it is limited by that issue. Because we can’t, its easy for an all day long so that we can get more in and they urinating it out, so of course the challenge of this, how can we find a way to get more of this amazing therapy into the cell, if you can do that we would change this approach dramatically and that’s what PPMO is. So PPMO is a peptide conjugated PMO. So for instance PPMO 51 for the same sequence that we have in the EXONDYS 51 that has a conjugated peptide.
We tried this one before some time ago and that peptide actually toxic in the kidney, so it didn’t work. So we went back to the drawing board and we began to screen I think the hundreds of literally hundreds of different peptide approaches, its easy to find a peptide that wouldn’t create toxicity issues, or at least would create exemptible toxicity issues, we could significant benefits and now knock on wood, and this is science let’s go back to the whole of your statement, let’s remember this is science, and science is a lot of random environment.
So there is a lot of environment we actually go there and toxicity is got to break the right way and the like. But I can tell you that in vitro in animal models on the efficacy side, if we are right, we have target it could be anywhere from 10 times to 30 times in some places in the body more to shipping production than what is currently being produced and that would be if it came to be almost certainly a life altering change in the way people would look at DMD.
To see how we are excited and by the way, and again this is animal model in vitro but in vitro in the animal models it goes everywhere, we get increases in cardiac, esophagus obviously skeleton muscles, so we are excited and we’ve got signals that give us hope and excitement and some confidence around to talk but that’s going to be the issue but we are looking at. So right now we are just finishing up and I can’t give you any hints about it, we don’t have the data that’s a good news I can’t guess possibly disclose but I don’t know but we’ll in the end of them, non-union primate studies in [indiscernible], we’ll have that in-house, very, very soon in the next month or so. And if that most likely expected to look it will be in patients this year, we’ll begin the single ascending dose study, it will be operative as we lead that.
Great. Just looking back EXONDYS 51 really quickly, big focus on the U.S. opportunity people tend to have ex-U.S. opportunity, first of all what’s the current status at EMA, what are the asks from CHMP but you need to fulfill to get a solution from them and how is the process ex-U.S., ex-Europe in terms of securing country approvals reimbursement?
A couple of things, next big focus from a regulatory perspective, obviously is Europe, we were in a clock stop with them, we have to give them an agony study.
So that’s kind of one concrete piece of data that has to get over to them and we are quite confident that all get done and decide and we get that done. And then beyond that we are expecting enhanced first half 2018, its an ongoing dialogue, very productive robust ongoing dialogue where we’re taking are about not only the certain endpoints but also clinical endpoints as well, having that debate we’re literally going back and forth with them even as we speak.
And in terms of some other regions outside of Europe and U.S., I know we are taking both India and South America recently. What’s the process there? And is there any transformation you’re seeing revenue from other countries besides the U.S.?
The most – so the near-term issues we have a managed access program. So we have a – we gone out in two ways in the managed access program which is what we are calling all of these sort of early access program, name patient program that exist around the world and we’re literally in Europe, South America, Canada and Asia with all of those. And I think you know the background that number one we don’t promote it, we’re not allowed to promote it but that should be listed in. Number two, it has to be our name patient basis. And number three, we do sell the product in those situations.
So now we’re in the process and there is a lot of opportunity starting early, there are a lot of kids that have Duchenne muscular dystrophy in Brazil and Argentina otherwise. And so there is a real opportunity there. And I think there is a possibility in getting some modest amount of sales even this year, but there will be modest and I’d say I wouldn’t put them in this model. This will be – in the next year we’ll probably we have additional sales across the regions that are coming from the map program.
Again, I would speak a little bit cautiously about getting overly exited about the amount of sales. EXONDYS is slower process and the value is as much strategic as it is revenue to be honest. It’s an opportunity for patients to get access to this therapy years in advance, so this approval which is wonderful. And frankly, it’s an opportunity to use this product and understand that therapy, the value of that therapy. There is a patient approval and very likely to be helpful and approval itself, because they have a lot of experience with a positive and negative.
AAV vector-based gene therapy has taken world by storm over the last year.
So, I mean, once Haemophilia A have access in SMA. You guys seem to be really on the forefront of gene therapy, there’s couple of other companies involved in gene therapy in DMD. And how should we value your gene therapy programs? Why has it taken longer to move into a dystrophin gene therapy than other diseases? And what you think is unique about that three programs that you have?
Well, I’m not good at the history of why things are aligned, I’ll say that of course, everything we deal with is a little more difficult because of Duchenne muscular, as you got to get everyone, you have to flood the bloody with drugs to get an effect. But you have a good point, we are leaders in gene therapy, we need to start being vocal about that, because I think some people don’t realize that. We have three gene therapy programs relating to DMD. We have Nationwide Children's Hospital at Ohio. So we’ve been down over there, they’re obviously leaders in gene therapy and we will be in children this year with gene therapy from micro-dystrophin.
So we will very likely be the first in children with the micro-dystrophin. We have Genethon, we got a micro-dystrophin program with Genethon. So we got with Nationwide Children's Hospital entirely different approach, which is got to be true, which is an entirely different approach where we’re tend to be express a protein that we hope would actually mimic dystrophin and provide a benefit for the muscle as well. So we got those three gene therapy programs as well as a bunch of other programs dystrophin and golodirsen. So gene therapy is successful, we still hope it is will I think we are leaders in that.
Great. So maybe just in last couples of seconds some comments on financial position. I know that there’s recent raise. So what’s financial position now? How far do you think that gets us to profitability? And I mean, what do you think about with cash deployment and additional PBX evidence?
We have over $600 million in cash in the bank. We have almost no debt, so we are in a great position financial year in the company. Our goal is to use that money to fuel our development programs. Our burn rate is decreasing obviously even as we are going to spend more in R&D because of the revenue, we are going to be about $125 million to $130 million year this year and growing next year which is great. I come from the world where I love being profitable, and I love profitable and I love being judged on PV based on earnings per share. But first and foremost we got to get these development programs in order and make sure we get the right ROI on them and that’s our goal first.
So its too early to say, we want to be profitable, I don’t, I think Bo Cumbo told you that we can be profitable by the third quarter of next year, which is probably two, I quoted by one or two. I think you’re out of problem when we are out of the company and get somebody who knows what they’re doing because we need to focus on these R&D programs. But we’re also going to be a company that’s unprofitable in seven year. So our goal is to get profitable when it makes sense. We need to know where we’re funding these programs first.
Great, I really appreciate the time. Thanks for coming.
Thank you very much.