Sarepta Therapeutics, Inc. (NASDAQ:SRPT) Q3 2023 Earnings Call Transcript

Sarepta Therapeutics, Inc. (NASDAQ:SRPT) Q3 2023 Earnings Call Transcript November 1, 2023

Sarepta Therapeutics, Inc. beats earnings expectations. Reported EPS is $-0.46, expectations were $-1.63.

Operator: Good afternoon and welcome to the Sarepta Therapeutics Third Quarter 2023 Earnings Call. At this time, all participants are in listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. At this time. I’ll turn the call over to Francesca Nolan, Executive Director, Investor Relations and Corporate Communications. Please go ahead.

Francesca Nolan: Thank you, Jonathan. And thank you all for joining today’s call. Earlier this afternoon, we released our financial results for the third quarter 2023. The press release is available on our website at sarepta.com and our 10-Q was filed with the Securities and Exchange Commission this afternoon. Joining us on the call today, are Doug Ingram; Ian Estepan; Dallan Murray and Dr. Louise Rodino-Klapac. After our further remarks, we’ll open the call for Q&A. I’d like to know that during this call, we will be making a number of forward-looking statements. Please take a moment to review our slides on the webcast which contains our forward-looking statements. These forward-looking statements involve risks and uncertainties many of which are beyond Sarepta’s control.

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Actual results could materially differ from these forward-looking statements and any such risks can materially adversely affect the business, the results of operations and trading prices for Sarepta’s common stock. For a detailed description of applicable risks and uncertainties, we encourage you to review the company’s most recent quarterly report on Form 10-Q filed with the SEC, as well as the company’s other SEC filings. The Company does not undertake any obligation to publicly update its forward-looking statement, including any financial projections provided today based on subsequent events or circumstances. And now we’ll turn the call over to our President and CEO, Doug Ingram, who will provide an overview of our recent product progress.

Doug?

Douglas Ingram: Thank you, Fran. Good afternoon, and thank you for joining Sarepta Therapeutics’ third quarter 2023 financial results conference call. It was only two days ago that we announced the results of our double-blind placebo-controlled trial EMBARK. Therefore, I will not linger on the results here, but I will begin by summarizing Sarepta’s perspective. First, taken as a whole, the results of EMBARK confirm that ELEVIDYS stabilizes muscles, slows or entirely arrests decline, does so across the ages, and does so with a laudable safety profile not shared by other programs for Duchenne. Second, the EMBARK results have not only satisfied the confirmatory requirements for our June approval, but have shown that ELEVIDYS benefits patients across age groups consistent with its mechanism of action.

Hence, we will soon be submitting a BLA supplement to broaden the ELEVIDYS label to remove age and ambulation restrictions. And finally, we have already engaged in productive and encouraging discussions with FDA, and they have confirmed that they are committed to reviewing an application to broaden the label and are committed to doing so rapidly. Now let me comment on quarterly performance. The third quarter was a defining moment for Sarepta. We launched our fourth therapy and the first gene therapy for boys with Duchenne Muscular Dystrophy. We continued to drive great performance with our three PMOs, and importantly, on a non-GAAP basis, we achieved profitability, placing us in ever more rarefied biotech territory. As you will have seen in our release, led by an exceptional launch of ELEVIDYS and continuing performance of our three approved PMOs, EXONDYS, VYONDYS and AMONDYS.

Third quarter total revenue came in at $332 million, and total net product revenue stands at $309.32 million, growing 49% over the same quarter last year reflecting the team’s ability to execute and serve Duchenne patients. ELEVIDYS net product revenue came in at $69.11 million, nearly tripled mean external consensus. Likewise, our PMOs achieved $240.21 million in net product revenue, growing 16% over the same quarter prior year, and non-GAAP earnings stood at $38 million in the quarter, a major milestone for Sarepta as we transitioned to a profitable and in the near term cash flow positive organization. The team has done a tremendous job, working with families, physicians, and payers in the quarter and it shows in these results. Dallan Murray, our Chief Customer Officer will walk you through what has been nothing short of a remarkable launch of ELEVIDYS.

And looking to the near future, we will take our proven track record of execution and move forward rapidly to expand the label of ELEVIDYS so this team can employ that level of execution to make ELEVIDYS available to the majority of Duchenne patients in the United States. Following Dallan’s discussion, Dr. Rodino-Klapac, who will provide an update on our pipeline progress? Now, as you would expect, we are not providing updated guidance this early in the launch, but also obviously across our four approved therapies, we are going to substantially exceed $1 billion this year, another important milestone to be sure. And with that, let me turn the call to Dallan for a commercial update. Dallan?

Dallan Murray: Thank you, Doug, and good afternoon. The launch of ELEVIDYS in the third quarter was Sarepta’s fourth Duchenne launch. It was by far the most complex and challenging to date. And I’m proud to say the team was ready on day one and they have knocked it out of the park thus far. As Doug has mentioned, we generated just over $69 million in net product revenues in the third quarter for ELEVIDYS. Notably, the team exceeded our own lofty site readiness expectations with nearly 70 sites ready to dose today. This helps us support the patients at risk of aging out today and also sets us up for longer term success going forward. We approached this launch by building organically upon what was already best-in-class Duchenne commercial and medical teams.

We put additional responsibility on everyone across the board rather than building out separate gene therapy teams. And they have all stepped up magnificently to meet this important moment. Our early success was achieved in three ways. First, flawless execution with our external stakeholders, that is the neuromuscular KOLs, gene therapy sites of care, and the eligible patients they serve. Secondly, proactive payer engagement to expedite access for those patients who are eligible based on the label. And third, establishing a well-functioning, flexible distribution model supported by the Sarepta SiPs team to get each patient’s customized kit to the site of care at the right time, just in time for the infusion. I would like to take a moment now to recognize the Duchenne community and how they came together to expedite access for patients who are eligible for ELEVIDYS.

Led by our doctors, nurses, and other HCPs, all stakeholders were ready for this important moment, and it was humbling to see the whole community come together to support eligible patients in their treatment journey. This launch also demonstrated the progress our teams and the experts have made in the past several years, educating the payers about Duchenne. We were gratified by the urgency of payers and expediting policies that allowed access for eligible patients. Additionally, and importantly, the payers played a key role in supporting patients who are at risk of aging out. Saying all of that we still have much more work to do with some of the payers to achieve our goal of securing access and treatment for all eligible patients across the country, regardless of plan.

The team is working diligently as we speak, educating the payers on the robustness of the newly available EMBARK data. We’re confident that this data sets the stage nicely for access to align with our label today, as well as when we gain a broader label. The fast start in Q3 was a function of the team’s efforts in the quarter itself, and just as importantly, their efforts over the past seven years building the model which we have established to support all of the Duchenne patients eligible for our therapies. Had this been Sarepta’s first launch, our trajectory in the third quarter would have been very different and much slower. We’ve gained deep knowledge and expertise through three PMO launches, and I’m glad to say we were able to apply these learnings to the launch of ELEVIDYS.

So to summarize ELEVIDYS, it was a great first quarter for the launch because our team and our key stakeholders were prepared and they executed flawlessly to support the patients we serve. Driven in large part by the robust ELEVIDYS revenue in the third quarter, we grew overall net product revenue by roughly 30% over the prior quarter. Net product revenue in Q3 of 2023 was $309.3 million. Importantly, as Doug said, in addition to our success with ELEVIDYS, we also had our most successful quarter ever, serving patients with our established PMO franchise. We see continued opportunities in the U.S. and globally for our PMO business in spite of the fact that we also expect cannibalization from ELEVIDYS over time. Since the 4-5 [Ph] population represents far less than 10% of the PMO business in the U.S., this cannibalization will not have a material impact on our 2023 net product revenue.

I’d like to take a moment here to thank all of those who are relentlessly supporting our PMO patients. So as a result of the whole team’s effort, the net product revenue from our PMO business in Q3 was $240 million, representing a roughly 16% increase over the same quarter in 2022. Looking now at each of our PMOs individually, net product revenue for EXONDYS 51 was $142.3 million in Q3, which was over 16% above the same quarter in 2022. VYONDYS 53 net product revenue was $31.7 million, 3.4% above Q3 of 2022. And AMONDYS 45generated net product revenue of $66.3 million in Q3 of 2023. This represents roughly 21% growth over Q3 of 2022. As we mentioned in previous calls, we are in the mature phase of the market now for all three of our approved PMOs. As a result, while we expect the U.S. growth to continue to flatten and the ex-U.S. revenues while still in the growth phase to remain lumpy from quarter-to-quarter and thus difficult to project on a quarterly basis.

Taken together, we can reiterate our annual guidance of greater than $925 million in net product revenue for our PMO business in 2023. I’ll end by saying that I’ve been continually amazed and impressed by the resilience, commitment, and execution of our Sarepta teams over the years. And while the success over those years has been impressive, what the teams have achieved in the third quarter of 2023 stands above and beyond anything I’ve seen in my 10 years working to serve the Duchenne community. The future is bright for Sarepta and for the Duchenne community who have been waiting for and very much deserve this progress. Words can’t adequately express just how proud I am of our whole team. The individual stories from across the country are too numerous to mention here, nor can we as a team put into words the joy we feel when we celebrate each and every patient who gains access to any of our Dystrophin restoration therapies.

And so with that, I’ll turn the call over to Dr. Louise Rodino-Klapac. Louise?

Louise Rodino-Klapac: Thanks, Dallan. Our commitment to the science remains steadfast and our goal to change the lives of patients with rare disease is unwavering. Our opportunity to do good is limitless for those living with Duchenne, limb girdle, and many other diseases for which therapies are either inadequate or non-existent. As Doug has already detailed the EMBARK results, I’ll focus my comments on the progress of our gene therapy and RNA programs. First, limb girdle muscular dystrophy or LGMD. We remain committed to advancing our LGMD portfolio across a variety of subtypes and look forward to providing continuous updates on these important programs in the months ahead. We presented on our LGMD pipeline this past weekend at the Speak Foundation’s 2023 International LGMD Conference and shared our urgency with the community to bring forth genetic medicines for LGMD.

To begin, we made excellent progress for Voyagene, our Phase 1 study evaluating SRP-9003 for the treatment of limb girdle muscular dystrophy Type 2E, in ambulant adult patients and non-ambulant patients using clinical process SRP-9003 material. We are pleased to report that we completed enrollment in Voyagene and we remain on track to initiate our phase 3 study using commercially representative process material later this year. Combined with positive expression and functional data shared from our initial study, SRP 9003-101, we believe the data from Voyagene will give us insights into a broader patient population. We’re also excited to report that we completed dosing in our systemic pilot study, NAVIGENE for SRP-6004 dual vector RH74 mediated gene therapy, to treat individuals with LGMD2B.

LGMD2B is characterized by the absence of the protein Dysferlin. The innovative dual vector strategy allows us to deliver the full length of Dysferlin, the sole cause of LGMD2B. We look forward to reporting results from this study in the first half of 2024. As mentioned last quarter, our LGMD natural history study of the Sarcoglycanopathy, LGMD2E, 2C and 2D, called JOURNEY, has been fully enrolled and we’ve followed patients for 36 months. We continue to make progress in scalable manufacturing for all of our LGMD candidates in our pipeline and look forward to initiating clinical studies as rapidly as possible. Turning now to the progress we’ve made with our RNA platform. We were pleased to complete enrollment in the first quarter of 2023 for a momentum study for SRP-5051.

And we’re targeting readout of the study in 2023. Regarding our post-marketing studies for the PMOs, as mentioned last quarter, we completed enrollment in the ESSANCE trial, or post marketing requirements for golodirsen and casimersen. As a reminder, ESSANCE is a two-year study and is due to read out in early 2026. Finally, we were pleased to have completed enrollment in our MIS51ON study, our dose ranging post-marketing commitment for EXONDYS. MIS51ON is a randomized double-blind safety and efficacy dose finding study comparing the approved dosage of Eteplirsen, a 30 mg per kg weekly, to a dosage that provides significantly higher exposure, up to 200 mg/per kg weekly. MIS51ON is a two-part phase 3 study that was fully enrolled in October, 2023 with 160 patients enrolled.

We remain committed to rapidly and diligently advancing MIS51ON and sharing data as soon as it becomes available. We look forward to reporting continued progress with our RNA programs in the coming months. On a personal note, my passion for science and its promise to help others began early in life. These many years later, as I reflect on my career and where we are today in realizing the promise of genetic medicine, I’m grateful and I’m humbled. And yet we have so much more to do. We move forward from here today toward a more promising future for individuals around the world living with rare disease. In closing, I’d like to take a moment to thank the Sarepta team for their continued dedication and passion to patients, the science and our mission.

I’ll now turn the call over to Ian for an update on our financial results. Ian?

Ian Estepan: Well said, Louise. Good afternoon everyone. This afternoon’s financial results press release provided details for the third quarter of 2023 on a non-GAAP basis as well as a GAAP basis. Please refer to our press release available on Sarepta’s website for full reconciliation of GAAP to non-GAAP financial results. We’re obviously quite pleased with the financial results for this quarter on the back of a tremendous start for the EXONDYS launch. We actually achieved non-GAAP profitability and assuming an expansion to the label to the broader Duchenne population, we should achieve sustained profitability. We’re quite thrilled to achieve this milestone just in the first quarter of the launch. For the three months ended September 30th, 2023, the company recorded total revenues of $331.8 million, which consists of net product revenues and collaboration revenues compared to revenues of $230.3 million for the same period of 2022, an increase of $101.5 million.

Net product revenue for the third quarter of 2023 from ELEVIDYS was $69.1 million. Net product revenue for the same period from our exon skipping franchise was $240.2 million compared to $207.8 million for the same period of 2022. For the quarter, individual net product sales were $142.3 million for EXONDYS 51, $66.3 million for AMONDYS 45, and $31.7 million for VYONDYS 53. The increase in net product revenue primarily reflects increasing demand for our PMO products, as well as net product revenue associated with the sales of ELEVIDYS. In each of the quarters ended September 30th, 2023, and 2022, we recognized $22.5 million of collaboration revenue, which relates to our collaboration arrangement with Roche. The reimbursement of co-development costs under the Roche agreement totaled $34.9 million for the third quarter of 2023 compared to $22 million for the same period of 2022.

On a GAAP basis, we reported a net loss of $40.9 million, or $0.46 per basic and diluted share, and $257.7 million, or $2.94 per basic and diluted share, for the third quarter of 2023 and 2022, respectively. We reported a non-GAAP net income of $37.7 million, or $0.37 per diluted share in the third quarter of 2023, compared to a non-GAAP net loss of $70 million, or $0.80 per diluted share in the third quarter of 2022. In the third quarter of 2023, we recorded approximately $37 million in the cost of sales compared to $40 million for the same period of 2022. The decrease in cost of sale primarily reflects write-off for certain batches of our PMO products not meeting our quality specifications in the three months ended September 30th, 2022, with no similar activity for the same period of 2023, partially offset by increasing demand for our PMO products.

On a GAAP basis, we recorded $194.3 million and $216.7 million in R&D expenses for the third quarter of 2023 and 2022, respectively, a year-over-year decrease of $22.4 million. The decrease is primarily due to a decrease in our manufacturing expenses, partially offset by increases in clinical trial expenses. On a non-GAAP basis, R&D expenses were $163.9 million for the third quarter of 2023, compared to $193.7 million for the same period of 2022, a decrease of $29.8 million. Now turning to SG&A, on a GAAP basis, we recorded approximately $120.9 million and $104.8 million of expenses for the third quarter of 2023 and 2022, respectively, an increase of $16.1 million. The increase was driven primarily by an increase in professional services and compensation and other personnel expenses, partially offset by a decrease in stock-based compensation.

On a non-GAAP basis, the SG&A expenses were $92.8 million for the third quarter of 2023, compared to $66.8 million for the same period of 2022, an increase of $26 million. On a GAAP basis, we recorded $12.3 million in other expense net for the third quarter of 2023, compared to $400,000 in other income net for the same period of 2022. The change is primarily due to the impairment of our investment and loss on contingent consideration, that partially offset by increases in increase of an investment discount net and interest income due to the investment mix of our investment portfolio, as well as reductions of interest expense incurred as a result of the repayment of our December 2019 term loan during 2022. We had approximately $1.8 billion in cash, cash equivalents, investments, and long-term restricted cash as of September 30, 2023.

We’re obviously pleased with the amount of capital on our balance sheet, but in turbulent markets, we know cash becomes even more valuable. We continually evaluate our expenses. That said, based on the EMBARK results and the information we have today, there’s no better use of our cash than to build inventory to serve those with DMD. With that, I’ll turn the call over to Doug to start Q&A. Doug?

Douglas Ingram: Thank you very much, Ian. Michelle, let’s open the call for questions.

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Q&A Session

Operator: Thank you. [Operator Instructions] The first question comes from Anupam Rama with JPMorgan. Your line is open.

Anupam Rama: Hey, guys. Thanks so much for taking the question. Just going back to the EMBARK results, we’ve gotten this question. If you guys adjust for multiplicity on your key functional secondary endpoints, would you still have statistically significant outcomes on these key measures? Thanks so much.

Douglas Ingram: Yes, thank you for that question, Anupam. I will turn this call over to Louise.

Louise Rodino-Klapac: Thank you. We actually performed a global statistical test, and we did this to do just that, to test for multiplicity and show that the secondaries did not hit significant just by chance. So, we essentially tested NSAA combined with the secondaries and showed that they were, in fact, statistically significant. So this is a quantitative way to test the totality of evidence in respect. So, if you think of the forest pot that we showed on our call, that’s essentially a statistical test to show that together we see that these are statistically significant.

Operator: Please stand by for the next question. The next question comes from Tazeen Ahmad with Bank of America Securities. Your line is open.

Tazeen Ahmad: Hi, guys. Good afternoon. Thanks so much for taking my question. For me, I think one of the most popular inbounds I’ve been getting in the last two days is just trying to triangulate timing. So, Doug, to the extent that you can provide us color with what steps are involved next in order to complete your filing, and is there any kind of precedent for a filing like this on the time it would take the agency to review an application? Could it be this calendar year that this could all be complete, or would it be something more traditional like a six-month review, for example? Thanks.

Douglas Ingram: Tazeen, thank you for your question, and let me preface my question by saying I’m probably going to frustrate you by not giving hard and fast timelines, other than we’re going to move rapidly and we have a commitment from the division to move rapidly as well. Our goal is to file a BLA supplement. I believe it’s an efficacy supplement, and we’re going to do that very soon. The team is working on it right now. I don’t want to commit to the exact date, but very, very soon that will be submitted. I think traditionally the agency may have six months to review. I do not believe. I believe the agency is committed to moving as fast as is reasonably possible to review this, and there is precedent for this. You see this in other areas like oncology all the time where you can get for something like this very fast turnaround.

And of course remember this isn’t a BLA but a BLA supplement so the inquiry while extraordinarily important is focused. And that focus is on the fundamental question does the totality of the evidence justify the conclusion that a ELEVIDYS is bringing a better life to these patients and of course we believe that it does. The standard for this is quite clear. It’s substantial evidence looking at the totality of evidence. The statute on this is quite clear. I apologize I don’t know what that music is. I promise I’m not playing a guitar right now. The statute says it’s very clear. Can one fairly and responsibly conclude that the therapy will have the effect it purports to have and the regulations are also particularly clear that for life-threatening and severely debilitating illnesses one’s life can be shed especially where no satisfactory alternative therapy exists.

The FDA has determined that it is appropriate to exercise the broadest flexibility in applying the statutory standards. And as Louise just pointed out to everybody not only are the evidence on whole very compelling that ELEVIDYS is arresting the decline in these patients but if you do the actual statistics and look across the primary and our functional secondaries you can see statistically adjusting for any risk of a false positive, adjusting for multiplicities that is powerfully statistically significant. So all of which is to say winding back to the original question Tazeen that we’re going to submit a BLA supplement very soon. The agency is committed to working with us very rapidly and while I won’t give an exact timeline, I am confident that we’re going to move quickly to review this and if successful broaden this label.

Tazeen Ahmad: Okay, thanks Doug.

Operator: Please stand by for the next question. The next question comes from Gena Wang with Barclays. Your line is open.

Gena Wang: Thank you for taking my questions. Maybe just follow this comment. Doug, will you announce when BLA efficacy supplement was accepted and in the data package can you lay out what kind of data will be included in addition to what you shared with us? Would that also be like say the protein correlation of the protein level versus function? Will these data also be included in the package?

Douglas Ingram: There will be certainly more in the package and then the top line we’re still evaluating other information including for instance protein and other things, CK and the like. But obviously the focus of the review is going to be first and foremost the efficacy and the safety for this therapy. And then of course it’s all going to be evaluated in relation to our request to broaden this label by removing age limitations and ambulation limitations on that. I don’t think we’ve made any final decisions about what we’re announcing during this process but obviously generally speaking we tend to be pretty transparent with folks.

Gena Wang: Thank you.

Operator: Please stand by for the next question. The next question comes from Colin Bristow with UBS. Your line is open.

Colin Bristow: Hey, good afternoon and congrats on the impressive ELEVIDYS sales. Maybe another one on the EMBARK data. Can you speak to the interpatient variability you saw in ELEVIDYS treated patients? A sort of question we’ve been getting is were the positive results driven by a small group of high responders? And maybe if you could also comment on how this variability compared to the phase 2 experience that would be helpful. Thanks.

Douglas Ingram: Sure. I’m going to flip this over to Louise to answer specifically. But I would generally note that the positive results, the P value on these positive results, they’re not close. On the time to rise it’s .002. On the 10 meter walk run it’s .004. On the global statistical analysis when one looks at the primary and all the secondaries together it’s .004. So it’s very, very powerful. But Louise, perhaps you want to answer more specifically on some of the variability issues.

Louise Rodino-Klapac: Yes. Generally we did not see variability, high variability amongst the patients. The standard deviation was either at or below what we anticipated from our previous studies that we used to power and EMBARK. So there we did not see any high variability.

Colin Bristow: Thank you. That’s helpful.

Operator: Please stand by for the next question. The next question comes from Reed Forsyth [Ph] with Guggenheim. Your line is open.

Unidentified Analyst: Hi, this is Rye on for Debjit. Did the top line data provided to the FDA from EMBARK include information on…?

Douglas Ingram: I am very sorry, but I was unable to hear that answer, that question. Can you ask it again, perhaps?

Unidentified Analyst: Yes. This is Rye on Debjit. Did the top line data provided to the FDA on EMBARK include information on…?