Sarepta Therapeutics Inc

NASDAQ:SRPT

Earnings Call Analysis

Introduction to the Earnings Call and Financial Overview

In the first quarter of 2024, Sarepta Therapeutics reported robust financial results. Net product revenue reached $360 million, marking a 55% increase year-over-year. Highlighting this growth was the performance of their Duchenne gene therapy, ELEVIDYS, which generated $134 million in net product revenue, modestly surpassing the fourth quarter of 2023. Total revenue for the company stood at $413 million, showcasing the continuing strong demand for their therapies.

ELEVIDYS: A Closer Look

ELEVIDYS, the much-anticipated gene therapy, has shown significant promise despite a narrow initial patient base—primarily 4 to 5-year-olds diagnosed with Duchenne Muscular Dystrophy. The sales for ELEVIDYS have flattened in anticipation of an upcoming label expansion. Since its approval in June of last year, ELEVIDYS has generated over $334 million, demonstrating substantial physician and patient demand. This robust financial performance speaks volumes about the therapy's potential and further underlines the importance of the upcoming label expansion.

Regulatory Updates and Label Expansion

Sarepta is expecting a broadened label for ELEVIDYS, which could expand the patient pool by removing age and ambulation restrictions. This includes transitioning ELEVIDYS approval from accelerated to traditional status. The FDA's increased engagement and collaborative stance have expedited the review process, and Sarepta anticipates receiving the draft label sooner than initially projected. The company is gearing up for this expansion, focusing on ensuring site readiness, payer access, and community education.

Strategic Execution and Market Presence

The company's execution strategy has been praised in major external conferences, with specific reference to their efficient model and clear delineation of contact points for institutions. Despite the challenge of a relatively small diagnosed population, Sarepta's exceptional execution has facilitated rapid patient access to ELEVIDYS. The company has also successfully navigated significant industry challenges, such as insurance changes and the Medicaid redetermination process, that have affected overall revenue patterns.

Research and Development Highlights

Sarepta continues to invest heavily in R&D, albeit with a slight decrease in expenditure from $245.7 million in Q1 2023 to $200.4 million in Q1 2024. The company has focused on advancing its RNA platform and gene therapy programs, including the SRP-9003 trial for limb-girdle muscular dystrophy. Significant progress has been made in real-world evidence for eteplirsen and promising results from ongoing studies like the MOMENTUM study for SRP-5051.

Future Prospects and Community Impact

Looking towards the future, Sarepta remains optimistic about the potential impact of its therapies. With four approved therapies already serving the Duchenne community, the company is well-prepared for the broader adoption following the ELEVIDYS label expansion. Sarepta's commitment to supporting patients, as evidenced by their community engagement and educational initiatives, indicates a bright outlook for both the patient community and investors.

Closing Comments and Next Steps

As Sarepta awaits the FDA's decision on the supplemental Biologics License Application (BLA), the next few months are poised to be pivotal. The potential label expansion of ELEVIDYS could transform patient accessibility and set a precedent for gene therapy's future. Sarepta's consistent performance and strategic forward planning underscore their leadership in the field and their commitment to improving the lives of those with rare genetic diseases.

Earnings Call Transcript 2024-Q1

[Operator]

Good afternoon and welcome to the Sarepta Therapeutics First Quarter 2024 Earnings Call. [Operator Instructions] As a reminder, today's program is being recorded.

At this time, I'll turn the call over to Mary Jenkins, Associate Director, Investor Relations and Corporate Communications. Please go ahead.

[Mary Jenkins, executive]

Thank you, Victor, and thank you all for joining today's call. Earlier this afternoon, we released our financial results for the first quarter of 2024. 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. I'd like to note that during this call, we will be making a number of forward-looking statements. Please take a moment to review our slide 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. Actual results could materially differ from these forward-looking statements, and any such risks can materially and adversely affect the business, the results of operations and trading prices of Sarepta's common stock.

For a detailed description of applicable risks and uncertainties, we encourage you to review the company's most recent annual 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 statements, including any financial projections provided today based on subsequent events or circumstances.

And now I'll turn the call over to our President and CEO, Doug Ingram, who will provide an overview of our recent progress. Doug?

[Douglas Ingram, executive]

Well, thank you, Mary. Good afternoon, everyone, and thank you for joining Sarepta Therapeutics First Quarter 2024 Financial Results Conference Call. .

Before I begin, let me provide you with an update. As you know, we have submitted a BLA supplement to expand the labeled population for our Duchenne gene therapy 11. We were recently informed by the FDA that they will provide us with a draft elevates label imminently and sooner than previously indicated. As we move into the late stage of our review, we will be going into a quiet period and as we have done in similar situations, we will not be taking questions on the call today. So with that, this afternoon, we announced another strong quarter of performance with total revenue of $413 million in net product revenue from our 4 approved therapies of approximately $360 million, growing at over 55% versus the same quarter last year. In particular, ELEVIDYS net product revenue was nearly $134 million, modestly above fourth quarter revenue. As we signaled in our last earnings call, ELEVIDYS sales will flatten as we plan for label expansion. This is not all surprising as our current elevates label is very narrow. Indeed, the labeled 4- and 5-year-old age range is quite narrow on its face, but the addressable patient population is actually more narrow still than that.

Let me explain. About half of Duchenne patients in this age group have not yet been diagnosed and are not yet available for treatment. And for those diagnosed, they are dissimilar to any other age group as they will have just learned of this devastating and life-altering disease, and they must get educated, find the right physician even before submitting a start form and beginning the process leading to treatment. Despite these limitations, we have already posted over $334 million since our approval last June, far exceeding all other gene therapies approved in the last few years combined. This says much about the opportunity in front of us. Physician and patient demand are significant. We are working well with public and private payers to facilitate access and our multiyear obsessive preparation in sight readiness, manufacturing, distribution, access and support is all paying off. Having served this community with 4 therapies over 7 years in every state in this country, we have a keen understanding of the prevalence of Duchenne in the United States. And therefore, we know quite well the opportunity that will come from a broadened label, both for the patient community and for the investment community that has bet on bringing a better life to patients.

Moving to our BLA supplement. As you know, in December of last year, we submitted an application with the FDA to expand availability of elevates by removing age and ambulation restrictions in the label and also transitioning that approval from accelerated to traditional. As we are in the midst of this review, we cannot yet comment substantively on the outcome, but I can say this. As we all know, Dr. Peter Marks, the FDA Seber Center Director, has publicly and repeatedly expressed the vision for the future of gene and cell therapy, one where the division is more collaborative and engaged and one that leans in and uses its regulatory flexibility and the tools available to it like the accelerated approval mechanism to advance therapies for serious life-limiting rare disease. In service of that mission and vision, Dr. Marks created a new super office of therapeutic products, or OTP, and brought in new aligned leadership under Dr. Nicole Verdun, the Division Director. Since Dr. Verdun has arrived, she has publicly echoed much of Dr. Mark's vision. And more than just words, we have seen an improved level of engagement. But we have also seen tangible evidence of progress toward that vision. For instance, since Dr. Verdun's arrival, we were able to quickly align on a viable trial for SRP-9003, a gene therapy for the ultra-rare disease LGMD Type 2E.

Our pivotal trial, EMERGE, is a single-arm study with an appropriately sized end of 15 patients and uses a biomarker, the missing beta-sarcoglycan protein as the primary endpoint. As we announced in our last earnings call, we have already commenced dosing in emerging. This meaningful evolution gives us renewed optimism that we can move forward more swiftly with the rest of our LGMD portfolio.

Now in a moment, our Head of R&D and Chief Scientific Officer, Dr. Louise Rodino-Klapac will discuss our R&D progress from last quarter, including the expanding body of real-world evidence for our PMOs, our LGMD progress and the results and plans for our advanced peptide conjugated PMO, SRP-5051.

2024 will be a pivotal year for Sarepta and for the patients that we serve. Indeed, it promises to be the most important year of progress yet in the fight against Duchenne muscular dystrophy. But we are also aware that it stands for more than that. By necessity, we are the leaders in gene therapy today and this year's outcome could set the direction for cell and gene therapy for years to come. Seven years ago, there was an enormous excitement for the transformative potential of gene therapy. That excitement flagged over the last years, not because the science failed us. But because many began to question whether this fledgling technology would be properly nurtured and supported. If we can achieve our goals this year, it will stand as a strong signal of renewed energy and excitement for a technology which after decades of brilliant progress has the potential of saving countless lives otherwise stolen by rare genetic disease. I look forward to updating you and hopefully celebrating our progress with you and more important still with the Duchenne community.

I will now turn the call to our Chief Customer Officer, Dallan Murray. Dallan?

[Dallan Murray, executive]

Thank you, Doug, and good afternoon. Before I discuss performance, I want to comment on the regulatory update Doug provided. We stand ready to deliver ELEVIDYS to a broader patient population following a potential label expansion. In fact, we are preparing with the same rigor as a new launch and are incorporating learnings to date from payers, clinicians and the broader Duchenne community following our successful launch within the current label.

Now to the first quarter of 2024. The team continued to execute on the ELEVIDYS launch and delivered as expected on the core RNA business. As Doug mentioned, we delivered roughly $360 million in net product revenue in the first quarter, representing more than 55% growth over the first quarter of 2023. As expected and projected on our Q4 call, ELEVIDYS came in modestly above Q4 2023 with net product revenues for the quarter of roughly $134 million.

Considering the relatively small diagnosed and eligible population we are working from and our progress to date treating eligible patients, this represents yet another successful quarter of solid execution. And if you will indulge me for a moment to dwell on that execution, we were pleased recently to see at a major external conference, one of our key institutions citing the Sarepta model is best in class. In particular, the simplicity of our model with clear delineated points of contact for the institutions, so they can access our resources and gene therapy expertise as needed. This was highlighted as an example of how to successfully commercialize onetime cell and gene therapies. As we have predicted on the last earnings call, the team has made the expected progress working its way through the diagnosed prevalent 4- to 5-year-old Duchenne population.

As Doug noted upfront, it's important to put these results to date in the correct context and not over interpret them as indicative of the broader market potential. As he pointed out, we're not only working from an extremely narrow 4 to 5 range. Other factors contribute to a lower relative potential in this unique age group. Firstly, there's a high proportion of undiagnosed patients in this early age group. And secondly, the patients and families being newly diagnosed need to come to terms very quickly with that new diagnosis and a complex patient journey. As such, some of the diagnosed 4- to 5-year-old patients age out simply because they don't have enough time. With all of that said, we're very pleased with the execution of the team in the first quarter of 2024.

During the quarter, the team was able to build on the initial launch momentum with KOLs, payers, institutions, and the broader Duchenne community to gain rapid access for appropriate patients within this existing label population. Despite the challenges, we've seen patients go from diagnosis to dosing with ELEVIDYS with an incredibly short time frames. And we've continued to see the community come together to support the eligible population broadly throughout the entire country and very importantly, in the key centers where we expected to dose patients.

Our team also executed supporting patients with our PMO franchise in the first quarter. They faced both the expected Q1 issues stemming from insurance changes and some unique onetime challenges caused by the Medicaid redetermination process. In addition to successfully working through those two issues, the team generated $225 million in net product revenue ending the quarter roughly in line with the $231 million in net product revenue from Q1 of 2023. The Medicaid redetermination process appears to have had an effect broadly within the industry and had a bigger impact on the Medicaid population than had been originally anticipated.

Procedural disenrollments affected as many as 20 million Medicaid patients, with roughly 70% of those patients being disenrolled due to paperwork issues. The redetermination process was simply reestablishing eligibility requirements, which have been relaxed during the COVID pandemic. The process, however, did appear to take many patients by surprise, resulting in some disruption for these patients due to the coverage gap. The Medicaid redetermination process is largely in the rearview mirror, with some minor expected impact going forward.

Additionally, we're confident the team has successfully worked through the expected annual insurance changes by the end of the first quarter, setting the rest of the year up for success. Taken together with both of these issues behind us and remembering the lumpiness of ex U.S. revenue, it is important not to over index on the Q1 PMO revenue. Total ex U.S. PMO net product revenue in the first quarter was roughly $36 million. This represented a modest decrease over the prior quarter, which was expected. As previously discussed, we expect to see continued fluctuations in ex U.S. ordering patterns quarter-to-quarter.

Overall, the fundamentals of the business coming out of Q1 are completely in line with what we had expected up to this point. We are looking forward with optimism to the remainder of the year, and will again be ready to support the patient community with our 3 approved PMOs and in any scenario coming out of the ELEVIDYS regulatory process.

As Doug mentioned in his opening remarks, we know very well the potential opportunity we can expect from a broadened label and the team is working diligently to be prepared to serve a broader population of Duchenne patients. Having now 4 successful launches serving Duchenne patients, the team has become adept at executing on our currently approved drugs while preparing for the future.

In the case of the potential ELEVIDYS label expansion, the team is working hard to pave the way for patient access with the payers, site readiness with the institutions and community education more broadly. We're working from a strong base. And by the time of label expansion, our key stakeholders will have had close to a year to learn from the initial Duchenne gene therapy experience. As we've mentioned on a number of occasions, the community response across all of our stakeholders has been inspiring to everyone at Sarepta. It's been a busy year already, but the community we are a part of propels us forward and it's their individual stories that provide the fuel we need to keep up our pace. This is why we'll be ready for potential label expansion. We're exceptionally proud of the entire Sarepta team and what they've accomplished to date, and we're very much looking forward to this next chapter in the near future.

And with that, I'll hand the call over to our Chief Scientific Officer and Head of R&D, Dr. Louise Rodino-Klapac. Louise?

[Louise Rodino-Klapac, executive]

Thanks, Dallan. We continue to make great progress advancing new treatments with the potential to impact the lives of patients, along with our understanding of the science supporting these treatments.

As Doug mentioned in his opening remarks, the BLA toplement for ELEVIDYS was submitted in December of last year. We requested the removal of any age or ambulation restrictions in the label and conversion to traditional approval. The totality of data generated for ELEVIDYS supports but is a disease-modifying therapy that changes the trajectory of Duchenne, demonstrating a treatment benefit that is clinically meaningful and similar regardless of age.

Therefore, we believe that all patients with Duchenne can benefit from treatment. The action date is June 21. However, we've been informed by the agency that they will be sending us the draft label sooner than they had previously indicated.

We continue to advance our ongoing studies with SRP-9001. Our ongoing ENVISION study for Duchenne called SRP-9001, 303 is progressing well. U.S. enrollment is complete with the remaining recruitment occurring ex U.S. As a reminder, ENVISION is a global, randomized, double-blind, placebo-controlled two-part study evaluating the safety and efficacy of SRP-9001 gene therapy in nonambulatory and older ambulatory individuals with Duchenne.

Moving now to our programs to the limb-girdle dystrophies or LGMDs. As we mentioned on the fourth quarter call, dosing has begun in study SRP-9003, 301, also known as emerging for Phase III multinational open-label clinical trial of SRP-9003, the treatment of limb-girdle muscular dystrophy type 2E or beta-circoglycinopathy. The agreed primary endpoint of EMERGE is expression of beta-sarcoglycan the absence of which is the sole cause of the disease. The ability to progress a small NF15 biomarker study, together with our ability to demonstrate delivery of a functional beta-sarcoglycan protein is extremely important, not just for this program, but for the other sarcoglycanopathies in our pipeline, including LGMD2D and LGMD2C. When beta-sarcoglycan is missing, it not only causes LGMD2E, but also results in a loss or reduced expression of the other sarcoglycans. This is important because the sarcoglycans form the sarcoglycan complex at the muscle membrane, essential for function and protecting muscle during contraction.

Our gene therapy approach for the sarcoglyconopathies delivers the specific gene that codes for the missing native protein, the lack of which is the root cause of the disease. If we can restore a missing protein, such as beta-sarcoglycan, it's possible to restore the functional complex of the membrane, thereby restoring function to the muscle. Currently, nothing exists to effectively treat LGMD2E or any of the sarcoglycanopathies or other LGMD. The EMERGE study enrolling 15 participants who are ambulatory and nonambulatory, ages 4 and older pose great promise for individuals suffering from LGMD2E.

Further, the design of this study functions more broadly as a pathfinder for our other LGMD programs and provides a blueprint for a potentially viable regulatory pathway for the development of future gene therapies for rare and ultrarare diseases.

Before I speak to our updates for our RNA programs, a focus for a moment on the real-world evidence that we and distinguished Duchenne thought leaders continue to generate foretells. The recent real-world analysis of the eteplirsen treatment was peer reviewed and published in the journal muscle and nerves. In the published analysis, treatment with eteplirsen resulted in statistically significant survival benefit compared to a controlled natural history group of Duchenne patients. This analysis included nearly 600 eteplirsen patients and over 1,200 individuals with Duchenne in the natural history control cohort. These are sizable groups, especially in the context of a rare disease. The analysis found that eteplirsen-treated patients survived 5.4 years longer compared to natural history. The survival age in the treated group was 32.8 years compared to a median survival of 27.4 years in the natural history group. Overall, treated patients had a 66% reduction in risk of death. Moreover, patients aged 10 to 28 years for whom deaths are most likely to be observed. Eteplirsen treatment had a 42% lower risk of death than age-matched natural history patients. In addition, earlier initiation of eteplirsen treatment and longer duration of treatment were associated with increases in the survival benefit. The analysis showed that patients treated with eteplirsen in the 2- to 4-year group and in the greater than 4-year group have not reached the median survival time indicating that longer eteplirsen treatment was associated with longer survival time. In patients with greater than 4 years of eteplirsen treatment at an 85% lower risk of death compared with patients with less than 2 years of treatment exposure. In addition to the survival data, other peer reviewed and published real-world analysis has shown that eteplirsen treatment is associated with delays in time to loss of ambulation, improvements in lung function and various quality of life measures when compared to standard of care or natural history controls. With this latest survival data for eteplirsen, we're continuing to observe the dystrophin restoration and exposure to therapy leads to a meaningful divergence from natural history.

Now continuing with our RNA platform. Early in the first quarter, we announced positive results from Part B of our MOMENTUM study for study SRP-5051, 201. MOMENTUM is an ongoing study of SRP-5051, our investigational pepticonjugated PMO or PPMO. And based on the data we generated to date, we believe SRP-5051 represents a best-in-class therapy from an efficacy perspective and that we have a path forward to an NDA. As mentioned, previously, we plan to discuss an accelerated approval with the agency and anticipate this meeting will take place in the third quarter of this year.

For SRP-5051, while there are limitations that comparing across different trials, results have shown greater production of dystrophin and 10% with less frequent dosing. We believe these data have the potential to translate to clinically meaningful results for patients. We also saw similar dystrophin expression levels for both nonambulatory and ambulatory patients, reinforcing that all patients addition could benefit from dystrophin restorative therapies.

I'll conclude with our post-marketing studies for the PMO. The ESSENCE trial are post-marketing requirement for golodirsen and casimersen as well as mission for post-marketing commitment for EXONDYS are both fully enrolled and remain on track.

In summary, our team looks forward to the months ahead as we work diligently to advance our mission with the goal of serving patients around the world living with rare disease. I'd like to take a moment to thank my R&D colleagues for their unwavering dedication to advancing our entire portfolio.

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

[Ian Estepan, executive]

Thanks, LRK, and good afternoon, everyone. This afternoon, financial results press release provided details for the first quarter of 2024 on a non-GAAP basis as well as the GAAP basis. .

Please refer to our press release available on Sarepta's website for a full reconciliation of GAAP to non-GAAP financial results. For awareness, beginning in the fourth quarter of 2023 amortization of in-licensed rights and income tax or benefit expense are no longer excluded from the non-GAAP results. The company has added the income tax effect of adjustments which represents the estimated income taxes each pretax non-GAAP adjustment based on the applicable effective income tax rate. Non-GAAP financial results for the first quarter of 2023 have been updated to reflect this change for comparability purposes.

For the 3 months ended March 31, 2024, the company recorded total revenues of $413.5 million, which consists of net product revenues and collaboration revenues and other revenues compared to revenues of $253.5 million for the same period of 2023, an increase of $160 million. Net product revenue for the first quarter of 2024 from ELEVIDYS was $133.9 million. Net product revenue for the first quarter of 2024 from our PMOs EXONDYS skipping franchise was $225.5 million compared to $231.5 million for the same period of 2023.

For the first quarter of 2024, individual net product sales were $120.2 million for EXONDYS 51, $71.9 million for AMONDYS 45 and $33.5 million for VYONDYS 53. The increase in net product revenue primarily reflects the net product revenue associated with the sales of ELEVIDYS. In the quarter ended March 31, 2024, we recognized $54 million of collaboration and other revenues compared to $2 million for the same period of 2023. The revenue incurred during the first quarter of 2024 primarily reflects the $48 million of collaboration revenue recognized related to Roche declining an option to acquire the ex U.S. rights to a certain external early Duchenne development program.

As a reminder, we have recognized all the upfront payments from the Roche agreement, so it should not be included in your models going forward. We also recognized $6 million of contract manufacturing and collaboration revenue associated with the batches of commercial ELEVIDYS supply delivered to Roche. The reimbursable co-development costs under the Roche agreement totaled $21.7 million for the first quarter of 2024 compared to $20.3 million for the same period of 2023.

On a GAAP basis, we reported a net income of $36.1 million or $0.38 per basic and $0.37 per diluted share and a net loss of $516.8 million or $5.86 per basic and diluted share for the first quarter of 2024 and 2023, respectively. We reported a net GAAP non net income of $78.2 million or $0.73 per basic and diluted share in the first quarter of 2024 compared to a non-GAAP net loss of $87.7 million or $0.99 per diluted share in the first quarter of 2023.

In the first quarter of 2024, we recorded approximately $50.6 million in cost of sales compared to $35 million in the same period of 2023. The increase in cost of sales primarily reflects increasing demand for our products and increase in royalty payments through the ELEVIDYS sales in 2024, with no similar activity in 2023 and an increase in write-off of certain batches of our product, not meeting our quality specifications during the 3 months ended March 31, 2024, when compared with the same period of 2023.

On a GAAP basis, we recorded $200.4 million and $245.7 million in R&D expenses for the first quarter of 2024 and 2023, respectively. A year-over-year decrease of $45.3 million. The decrease is primarily due to the capitalization of commercial batches of ELEVIDYS manufactured after approval in June of 2023, partially offset by ramp-up of our other late-stage clinical trials. On a non-GAAP basis, R&D expenses were $178.1 million for the first quarter of 2024 compared to $220.7 million for the same period of 2023, a decrease of $42.6 million.

Now turning to SG&A. On a GAAP basis, we recorded approximately $127 million and $110.7 million for expenses for the first quarter of 2024 and 2023, respectively, an increase of $16.3 million. This increase was primarily driven by an increase in professional services used for the launch of elevates and ongoing litigation matters as well as the timing of charitable contributions. On a non-GAAP basis, the SG&A expenses were $10.5 million for the first quarter of 2024 compared to $83.3 million for the same period of 2023, an increase of $17.2 million. On a GAAP basis, we recorded $6.5 million in other income net for the first quarter of 2024 compared to $12.7 million for the same period of 2023. The change was primarily due to an increase in the fair value of our contingent consideration liability. We remain well capitalized with approximately $1.4 billion in cash, cash equivalents and investments in long-term restricted cash as of March 31, 2024, and we have the resources on hand to support a successful launch in the event of a potential label expansion.

And with that, I'll turn the call back over to Doug for closing comments. Doug?

[Douglas Ingram, executive]

Thank you, Ian. Thank you very much, and thank you all for joining us this evening. As I mentioned at the beginning of this call, given the stage of our BLA supplement review, we're in a quiet period right now, and we cannot entertain questions this evening. As I also mentioned at the beginning, we should be receiving our draft to ELEVIDYS label very shortly. So the next few months will be enormously consequential ones. .

Certainly for Sarepta, but more importantly, for the thousands of Duchenne families who eagerly await access to this therapy. I look forward to updating all of you once we conclude our BLA supplement review.

And with that, be well, and have a good evening.

[Operator]

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone, have a great day.