Sarepta Therapeutics Inc

NASDAQ:SRPT

Earnings Call Transcript 2017-Q4

[Operator]

Good day, ladies and gentlemen and welcome to the Sarepta Fourth Quarter and Full-year 2017 Earnings Conference Call. At this time all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, an instructions will be given at that time. [Operator Instructions] As a reminder, this conference call is being recorded.

I would now like to turn the conference over to Ian Estepan, Vice President, Chief of Staff and Corporate Affairs. Sir you may begin.

[Ian Estepan, Executive Director, Corporate Affairs]

Thank you Takia, and thank you all for joining today’s call. Earlier today we released our financial results for the fourth quarter and year end of 2017. The press release is available on our website at www.sarepta.com and our 8-K was filed earlier this afternoon.

Joining me on the call today are Doug Ingram, Sandy Mahatme and Bo Cumbo. After our formal remarks we will open up the call for Q&A.

I would 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 risk and uncertainty any of which are beyond Sarepta’s control.

Our actual results could materially differ from these forward-looking statements as any and such risk can materially and adversely affect the business, results of operation and trading price 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 and Annual Report on Form 10-K, filed with the Securities and Exchange Commission, as well as the Company’s other SEC filings.

We filed our 10-K this afternoon on March 1, 2018 for the full-year of 2017 by the SEC required filing deadline. 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.

With that, let me turn the call over to our CEO, Doug Ingram, who will provide an overview of our recent progress. Doug.

[Douglas Ingram, President and Chief Executive Officer]

Thank you, Ian. Good afternoon, and thank you all for joining Sarepta's Therapeutics fourth quarter and full-year 2017 financial results and corporate update conference call. In 2017, an important foundational year for Sarepta, we exhibited our commitment to the rare disease mission, advanced our pipeline with a focus on scientific excellence and showed that we have the ability through a root which focused on execution to full fill our commitments.

In 2017, we executed the successful launch of EXONDYS 51 in the U.S. one of the most successful first year rare disease launches in history. We signed four new collaborations for our next generation precession medicines in gene therapy and gene-editing. We advanced numerous across our multi platform pipeline.

For instance driven by our partners at Nationwide Children’s Hospital, we received investigational new drug clearance from FDA for our Micro-Dystrophin and GALGT2 Gene Therapy Programs. We received an IND for our internally RNA targeted PPMO candidate SRP-5051 and we advance five additional PPMOs into IND enabling preclinical programs, and we successfully strengthened our cash position so that we exited 2017 with nearly 1.1 billion on our balance sheet to invest in making our vision a reality.

And our vision is not only ambitious, but it is also meaningful. Our goal is to improve and extend the lives of individuals with Duchenne muscular dystrophy and along the way emerges one of the most important leaders around the globe in precession genetic medicine and we have all of the elements to make that a reality.

We have as you know an urgent mission to improve the lives of patients with DMD, accrual and unforgiving disease that is universally stable. We have a strong foundation in EXONDYS 51, which continues to perform well. We have an industry leading pipeline of 16 distinct DMD programs cementing our leadership position in this very underserved disease area and we have a substantial cash position enabling us to aggressively advance our pipeline and build for the future.

Moving into 2018, I will remind you that we announced at the J.P. Morgan Healthcare Conference that our EXONDYS 51, 2018 revenue guidance is $295 million to $305 million and nearly 100% year-over-year growth versus 2017. We reaffirm here our full-year 2018 guidance. The team is engaged and continues to execute well with progress in securing reimbursement and persistent commitment from prescribing physicians, patients and our care givers.

Turning to our PMO platform, in September 2017, we announced positive Dystrophin results from our 4053 101 study of GOLODIRSEN our phosphorodiamidate morpholino oligomer engineered to treat about 8% of DMD patients with mutations in minimal to exon 53 skipping. As you may recall, the study results achieved statistical significance on all primary and secondary biological endpoints in 25 patients with DMD.

In addition to offering the potential to treat another 8% of the DMD community, these results further validate our precision medicine RNA splicing platform and our focus on scientific excellence to continues methodological improvements. Based on these results in the first quarter of 2018, we met with the FDA to seek guidance on the possibility of filing a new drug application this year and to seek an accelerated approval for GOLODIRSEN.

After the final meeting minutes from our FDA meeting are complete, we will provide an update on our GOLODIRSEN plans. We also note that on February 15, the FDA issued a draft guidance with the development of treatments for DMD and related Dystrophinopathy. A particular importance to technology like our RNA targeted pipeline.

In addition to other elements the guidance states the “deficiency of functional Dystrophin appears to be the proximate cause of the systemic and functional consequences of Dystrophinopathy, just to find particular interest in Dystrophin as a biomarker and a potential surrogate endpoint for accelerating approval.” As our RNA targeted technology is designed to restore Dystrophin, we are pleased with the FDA further guidance on the importance on Dystrophin restoration as a treatment approach for DMD.

GOLODIRSEN along with casimersen another one of our drug candidate are being studied in ESSENCE 4045-301, a global randomized, double-blind, placebo-controlled study evaluating safety and efficacy in patients amenable to skipping exon 45 or 53 which together make up approximately 16% of boys with DMD.

It should be noted as well that casimersen in our exon 45 candidate has shown exon skipping efficiency in vitro that is comparable to GOLODIRSEN. Our ESSENCE study remains on-track, we have enrolled well over 100 patients in this study and we expect enrollment to be completed in the near future.

Finally on our PMO technology, let me provide a brief update on the status of our EXONDYS filling in Europe. As you may know our marketing authorization application is currently being reviewed by the European Medicines Agents. We're in the late stages of responding to the EMA Committee from additional products for human use and their 180 day questions and preparing for an oral examination in later April.

We believe we have complied a robust data package and a strong response, but of course getting a lack of preside in these disease and the regulatory hurdle for a approval in Europe, a process that just not accommodate surrogate end points this review remains challenging, but we remain on-track hear from the CHMP in mid 2018.

As relates to our next generation RNA technology, we're pleased with the progress of our PPMO platform, the PPMO is designed to increase cell penetration of our PMO technology with the goal of producing greater quantities of Dystrophin. In early November 2017, we announced that FDA cleared our single ascending study IND application for our first PPMO candidate SRP-5051 engineered to treat the 13% of DMD patients who have exon 51 amenable mutations. If successful, PPMO offers the potential for improved efficacy with less frequent dosing for patients.

In addition to SRP-5051, we are conducting IND enabling preclinical trials on five additional PPMO candidates covering patients with mutations amenable to exon skipping for exon 53, 52, 50, 45, and 44. Our first six PPMO candidates would if effective treat up to 43% of the DMD population. Beyond this we are working on an approach to bring PPMO therapies to the extremely rare exon mutations and we have commenced the dialogue with the FDA regarding the potential pathway.

In addition to being a promising next generation therapy platform for DMD with a successful proof of concept in DMD the PPMO has potential utility in a broad range of other diseases. We intend to build out a strategy for the use of our PMO and PPMO technology in other rare diseases over the course of 2018.

Turning to our gene therapy platform, I would like to provide updates on two of our programs, Doctors Jerry Mendell and Louise Rodino-Klapac are the principle investigators for our Micro-Dystrophin Gene Therapy Program, which is designed to evaluate safety, biological activity, and efficacy of the RAAV, RH74 Micro-Dystrophin construct. The study is comprised of two cohorts with a total of 12 patients with DMD.

Cohort 1 includes infants three months to three years of age, cohort 2 includes patients ages four to seven. Patients are being enrolled at a rate of approximately one per month starting with cohort 2. All boys in this clinical trial will receive two times 10 to the 14th. A significant and potentially therapeutically meaningful dose. The construct employs the MHCK 7 promoter which was optimized for DMD by doctors Mendell and Rodino-Klapac.

In preclinical studies high levels of gene expression in the skeleton, diaphragm and cardiac muscles have been observed. Patients will receive a needle biopsy at three, six and 12 months to measure Micro-Dystrophin expression. Two patients have already been dosed and we remain on-track to report preliminary data from this program by mid 2018.

Also in November of 2017 we announced that FDA cleared the IND application for GALGT2 Gene Therapy program. This program is partnered with Nationwide Children’s Hospital as well. Dr. Kevin Flanagan, Director of Nationwide Children’s Center for gene therapy is the principle investigator for the GALGT2 program, which was developed by Dr. Paul Martin. The program explores the potential surrogate gene therapy approach to treat DMD by targeting the dystroglycan complex to enhance utrophin expression.

In animal model, over expression of GALGT2 restored muscle function to normal even in the absence of Dystrophin, this approach could potentially preserve muscle function regardless of genetic mutation. The Phase I/2a study will enroll at least 12 patients with DMD, who will receive RAAV, RA74, MCK, GALGT2 by direct injection into the femoral arteries of the leg beginning with the dose of five times either to 13, which has shown robust gene expression in preclinical studies for GALGT2. In order to measure Gene expression which is the primary outcome measure, open muscle biopsies will be performed at base line ended three months and needle biopsies will be performed at six, nine and 12 months.

Dr. Flanagan has dosed his first patient and is on-track to dose the second patient early in the second quarter. We anticipate reporting preliminary data for this trial in 2018. Throughout this trial to partner with the four most gene therapy thought leaders at Nationwide Children’s. Doctors Mendell, Rodino-Klapac, Flanagan and Martin have for decades led the way in gene therapy research and the treatment in rare neuromuscular disease. Their dedication to DMD is only matched by their commitment to scientific excellence and rigor.

We are also proud to be associated with Parent Project Muscular Dystrophy (PPMD), which provided 2.2 million in support of the Micro-Dystrophin and gene therapy program. PPMD the largest and most comprehensive DMD specific non-profit organization in United States is sincerely focused on finding a cure for Duchenne muscular dystrophy.

I will now turn the call over to Sandy for an update on the financials. With that Sandy.

[Sandy Mahatme]

Thanks Doug, good afternoon everyone. 2017 was an extremely successful year for the Company. As previously announced, we achieved the $154.6 million of net product revenue for the year. In the fourth quarter, we completed a convertible debt transaction which generated net proceeds of over $555 million.

As of December 31, 2017 we had approximately $1.1 billion in cash, cash-equivalents and investments on hand. Our bolstered balance sheet provides us with the resources to accelerate our R&D, expand our talent base and execute on our strategic plan. These efforts will lay the foundation for a successful 2018 and beyond.

Now moving to the financials. This afternoon's press release provides the details for the fourth quarter of 2017 on a non-GAAP basis as well as the GAAP basis. The press release is available on the SEC and Company website.

The non-GAAP results we will discuss on this call provide a more accurate picture for ongoing operations and the impact of operations on our cash balance and exclude stock compensation expenses, restructuring's, milestone payments and other onetime non-operating adjustments.

Please refer to our press release for a full reconciliation of GAAP to non-GAAP. In the fourth quarter of 2017, we reported a non-GAAP net loss of $18 million or $0.28 per share compared to non-GAAP net loss of $38.6 million or $0.71 per share in the fourth quarter of 2016.

I will now go through each P&L line item. Net revenue for the fourth quarter of 2017 was $57.3 million, which reflects sales from EXONDYS 51 compared to net revenue of $5.4 million for the same period of 2016. The increase reflects increasing demand for EXONDYS 51 in the U.S.

In the fourth quarter of 2017, we recorded approximately $3.5 million in cost of goods compared to $100,000 in the same period of 2016. Including the cost of goods was a $2.4 million of royalty payment as a result of the settlement and license agreements that we entered into with BioMarin in July of 2017.

Prior to the approval of EXONDYS 51 we expensed such manufacturing and material cost as R&D expenses. As materials have previously expensed are being consumed our cost of goods will continue to grow. We expect our COGS for 2018 to be approximately 8% to 10%, which includes the BioMarin royalty.

Adjusted non-GAAP R&D expenses were $41.8 million for the fourth quarter of 2017 compared to $27.8 million for the same period of 2016 an increase of $14 million. The increase was primarily due to increased patient enrollment in the Company’s ongoing late stage clinical trials, and a ramp up of preclinical studies for the Company’s PPMO platform and other follow-on exons.

Adjusted non-GAAP SG&A expenses were $27.3 million for the fourth quarter of 2017 compared to $16.1 million for the same period of 2016 which is an increase of $11.2 million. The year-over-year increase is primarily driven by increases in professional services due to global expansion and compensation and other personal expenses driven by net increase in headcount.

In the fourth quarter we recorded $2.7 million in interest expense compared to less than $100,000 for the same period of 2016. The year-over-year increase was primarily driven by approved interest expense related to the convertible note that we issued in the number of 2017.

Given the multiple inflection points throughout 2018, we will not be providing guidance on our operating expense at this time. However, we expect non GAAP research and development expense to grow compared to last year as we're accelerating the development of our gene therapy and our PPMO programs.

Any increase in non GAAP SG&A expenses will be appropriately phased and it will be related to infrastructure build and manufacturing scale up to support our global expansion efforts. We plan to utilize our resources to advance our industry leading pipeline for DMD and pursue multiple disease targets for underserved and life threatening rare diseases.

With that I would like to turn the call over to Bo for a commercial update. Bo.

[Bo Cumbo]

Alright we're starting back. So I will start with the beginning. Thank you, Sandy. Good afternoon, everyone. We remain confident in our ability to continue the successful launch for EXONDYS 51, as evidenced by the strength of our fourth quarter earnings and our net revenue guidance for 2018.

We are very pleased with the progress the team has made in the first full-year launch and looking forward to a further adoption of EXONDYS 51 in the U.S. we're also building infrastructure in key market outside of the United States to expand our preparations for commercialization and continue our leadership role in treating boys affected by Duchenne.

In 2017 our U.S. commercial efforts were focused around four key activities. Driving prescriptions for identified and appropriate exon 51 skip amenable patients in major centers across the U.S. Maintaining active dialogue with payers to support coverage and reimbursement decisions for all patients with a amenable mutations to EXONDYS 51, addressing the administrative and procedural barriers to therapy to shorten the timeframe from start form to first infusion that are common among rare disease treatment and ensuring DMD patients have genetic test and are appropriately identified for exon skipping amenability.

We will continue to focus on these efforts in 2018 to build on what was already accomplished and work to provide access to EXONDYS 51 to all amenable patients. The team continues to ensure physicians understand the importance of identifying appropriate patients and starting them on EXONDYS 51.

Our genetic testing collaborations have also continue to identify more patients who could benefit from EXONDYS 51 and additional exon skipping products for any potential future launches including exon 53. Decode Duchenne the genetic testing collaboration with PPMD has identified many patients amenable to exon 51, 53 and 45 skipping candidates. We are proud of this collaboration and the genetic testing success we are seeing.

Patient demographics have remained fairly consistent throughout the launch. The percent mix of patients on commercial and Medicaid plans are approximately 60 to 40 and at this time we do not expect this to dramatically change in 2018. We are pleased to continue to see adoption across all age groups, the average age of patients on therapy is between 13 and 14 years old.

This age demographic indicates that both ambulatory and non-ambulatory patients are obtaining access to EXONDYS 51. We expect this trend to stay relatively intact until newborn screening for Duchenne becomes standard medical practice which would identify 100s of new patients eligible for EXONDYS 51.

From an adherence and persistency perspective, we believe port placements, home infusion and the safety profile of the drug have all led to higher than anticipated compliance rates. Throughout the first full-year of launch we are continuing to see high compliance rates and minimal discontinuation and at this time expect compliance to stay relatively high.

We previously shared that approximately 40% to 50% of patients opted to have port prior to their first infusion. Based on discussions with physicians and our specialty pharmacy partners, we expect this to continue. However, we do not actively monitor how many patients ultimately choose a port for drug delivery. We feel confident that approximately 40% to 50% of all new patients starting EXONDYS 51 will opt for a port.

A significant measure of progress is that during the first year of launch 100% of the top Tier-1 and Tier-2 treatment centers prescribe EXONDYS 51, these centers treat approximately 75% of the DMD population have continued to identify new patients amenable to Exon 51 skipping and submit start forms accordingly.

We continue to call on top Tier centers as we have since launch but have now expanded our reach into additional size to educate physicians on EXONDYS 51 and the importance of identifying Exon 51 in amenable patients.

With strong prescriber understanding establish payers have better understanding of the disease, the number of patients eligible for treatment in a given plans and clarity around the patients who would most likely benefit from EXONDYS 51.

Our ongoing efforts with payers include both Duchenne information and EXONDYS 51 data laying the foundation for access decisions regarding EXONDYS 51 and helping to prepare for future launches for the treatment of Duchenne. In January we received our permanent J Code, while there is always temporary disruptions involved for this transition, we expect to permanent J Code will help ease future reauthorizations.

Operationally, we continue to build appropriate infrastructure in key regions around the world to support growth as part of building our global leadership in Duchenne. We have now extended offers to country managers, to medical directors and MSLs within key markets across Europe. We have also started building our infrastructure in Latin America and recently hired the country manager of Brazil and are currently seeking the medical director.

In addition to these key markets, we're carefully assessing investment in other market as we look to expand globally. In summary, our operational preparedness has supported a very successful launch in 2017 and set the foundation for a solid 2018 and beyond.

We will continue to build thoughtful operation infrastructure to prepare for EXONDYS 51 launches in other key market as well as prepare for future approvals with other PMO and PPMO exon skipping products and our exciting gene therapy programs in DMD and other disease phase. Giving the multiple opportunity before us we're very excited about the future at Sarepta.

And with that, I will turn the call back to Doug for closing remarks.

[Douglas Ingram, President and Chief Executive Officer]

Thank you, Bo. Before I begin let me apologize to [indiscernible] for the technical issue that we had a moment ago. In closing let me reiterate that we set the stage in 2017 by establishing our execution oriented credentials both scientifically and commercially. We built out our pipeline, enhanced our balance sheet to make that pipeline a reality.

2018 will be a year of transformation with a steady stream of potential catalysts and milestones all as we continue to serve our community with [indiscernible] and advance our pipeline with a sense of urgency. We have much to do in 2018. But along the way we will remain true to our mission on working to profoundly improve the lives of all patients with DMD.

And with that, operator please open up the call for questions.

[Operator]

[Operator Instructions] Our first question comes from the line of Anupam Rama with JPMorgan. Your line is now open.

[Anupam Rama, JP Morgan]

Maybe or perhaps a strategic pipeline question here. Are you guys still thinking about business development pretty actively here in the DMD space and how much of the business development is dependent on flipping over the PPMO and Micro-Dystrophin cards? Thanks so much.

[Douglas Ingram, President and Chief Executive Officer]

Thank you. So, this is Doug obviously. We will always be active in business development going forward we serve the DMD community, so we are confidently looking at opportunities to find therapies that would be life enhancing for children with DMD.

Going beyond that, if we see positive signals, in either our Gene Therapy Program or in our PPMO, it would give us an opportunity to extend ourselves even beyond DMD and other areas and in those situations I’m sure we will be looking at business development as well.

So, we have got a fantastic pipeline, we have got a lot to do, we are well funded to execute our pipeline, but we are always on the lookout for new ways to improve the lives of kids with DMD and beyond.

[Anupam Rama, JP Morgan]

Great, thanks so much for taking our question.

[Douglas Ingram, President and Chief Executive Officer]

Thank you.

[Operator]

Thank you. Our next question comes from the line of Christopher Marai with Nomura. Your line is now open.

[Christopher Marai, Nomura/Instinet]

Good afternoon. Thanks for taking my question. I was wondering if you could further comment on perhaps some of the data that we will be seeing in mid 2018 on the Micro-Dystrophin biopsies for your Gene Therapy Program, might we see a copy number information from that biopsy, or are there any other markers that you guys will be measuring and reporting on that we should expect in that day of release? Thank you.

[Douglas Ingram, President and Chief Executive Officer]

So, we are going to have preliminary data releases in two of our gene therapy programs, just so we are clear, we will have preliminary results of our Micro-Dystrophin Gene Therapy Program, after the first few biopsies in three months and likewise with our GALGT2 program will have preliminary results, I would expect those to be primarily biopsy related biomarker information regarding gene expression, in the case of Micro-Dystrophin expression.

[Christopher Marai, Nomura/Instinet]

Okay and then quick follow-up, the [indiscernible] binding domain is not included in your Micro-Dystrophin construct, as far as I recall, I was just wondering if you could comment perhaps on utility of that or why perhaps your Micro-Dystrophin didn’t include that domain? Thank you.

[Douglas Ingram, President and Chief Executive Officer]

Our contract is the result of an enormous amount of work over a number of years and as it relates to our cash in the life down the way in many years of work in preclinical and preclinical models they construct that we have for Micro-Dystrophin shows very robust expression and correlates with significant restoration functions.

So we feel very good about the construct that we are using, obviously the results will have to await a preliminary readout from our biopsies, but we feel very good about the construct and we feel very good about the preclinical work both from potential efficacy and in function perspective, but also certainly from a safety perspective as well.

The amount of preclinical safety work that went into RX74 the construct that we are using, the vector that were using for both Micro-Dystrophin GALGT2 has been a subject of the enormous amounts from animal and other preclinical work that gives us a lot of confidence about where we are today.

[Christopher Marai, Nomura/Instinet]

Okay. Thank you very much.

[Operator]

Thank you. Our next question comes from Alethia Young of Credit Suisse. Your line is now open.

[Alethia Young, Credit Suisse]

Hey guys thanks for taking my question. Congrats on the progress in Germany. I want to talk about Europe. Do you guys expect SAG or if there is not a SAG and you don’t get a positive vote what is the next step there and the second question is just exactly around gene therapy, I will assume your [indiscernible] PPMD this year. Do you think that will be able to kind of have Dystrophin and functional and do you find on communicating again later in the year on this program? Thanks.

[Douglas Ingram, President and Chief Executive Officer]

So as it relates to Europe and to be honest our effort right now is singularly focused on providing the a brilliant data package so that we are in a good position to show the CHFP at our oral explanation which we will have in late April that this therapy is very applications and safe enough to be brought to children in Europe that have the DMD that are Exon 51 amenable.

So what the next steps would be after that in the event that were unsuccessful, it’s something we're going to have to look at that time, obviously we have got options we have got a number of options, but right now our singular focus is on trying to do be successful as possible.

As it relates to the gene therapy, we will have to see next steps after our preliminary results, but right now we're tracking to get preliminary results from biopsies by the middle of the year and then we will assess where we are from there and what the next read out would be and we will certainly communicate it once...

[Alethia Young, Credit Suisse]

So we shouldn’t extract functional at this for its update?

[Douglas Ingram, President and Chief Executive Officer]

I think it will be very likely to chose to provide meaningful functional EU after this first few biopsies, it will be a three month read on biopsies and it will be three the mutations, so it will probably be potentially misleading to provide functional information at that point.

[Alethia Young, Credit Suisse]

Okay, great. Thanks.

[Douglas Ingram, President and Chief Executive Officer]

Thank you very much.

[Operator]

Thank you. Our next question comes from Joseph Schwartz of Leerink Partners. Your line is now open.

[Joseph Schwartz, Leerink Partners LLC]

Great, thanks very much. I was wondering if we could get your thoughts on the recent FDA guidance for DMD drug development and what do you make of the timing of its issuance, the lack of any reference to a threshold effects for Dystrophin expressions as well as the exclusive focus on Dystrophin to the exclusion of related targets that you have agents directed towards like utrophin and Micro-Dystrophin.

[Douglas Ingram, President and Chief Executive Officer]

So let me say we are very pleased that the FDA issue the guidance that spoke to Dystrophin as an important end point particular at our RNA targeted technology is focused on restoration of Dystrophin to improve the life of these kids. So obviously from my prospective it was a very good step forward.

Beyond that let me say this, as you may have heard earlier and as we had suggested in advance what we are going to do, we had meetings with the FDA on our GOLODIRSEN therapy based on the result of a trial that we had that looked that Dystrophin expression and GOLODIRSEN and I would like to speak more about that once we have the final minutes from that meeting which we would anticipate happening in the next month or so.

[Joseph Schwartz, Leerink Partners LLC]

Okay great and then can you give us an update on enrollment in essence, are you finding either the 45 or 53 patients are going more rapidly and when do you think you will be able to complete enrollment for all the patients as well as the 75 who are being evaluated before they go into the OLE.

[Douglas Ingram, President and Chief Executive Officer]

So we are doing very well enrollment right now, the 45s enrolled a little faster than the 53s, which very likely was simply random in nature since those 45 and 53 represent about 8% of the DMD population.

We increase end of the study as the 45s were coming up and we are hitting the sealing and we still have 53s to enroll, so we want to ensure that we didn’t exclude people while we were enrolling 53, so we increase the [indiscernible] of the trial but we should be fully enrolled by April, so things are going well.

[Joseph Schwartz, Leerink Partners LLC]

Great. Thanks for taking my questions.

[Douglas Ingram, President and Chief Executive Officer]

Thank you very much.

[Operator]

Thank you. Our next question comes from Tim Lugo with William Blair. Your line is open.

[Tim Lugo, William Blair]

Thanks for taking question. Can you talk about your reasons on not issuing operating expense guidance for the year and what are some of the levers that may be make you feel uncomfortable as of now to issue guidance for spending and is it pipeline related, are you waiting for gene therapy obviously to readout, would gene therapy manufacturing be a big factor, can you just talk about a bit.

[Sandy Mahatme]

Yes, hi Tim, thanks for the question. So as I explained in my prepared remarks we have multiple inflection points throughout 2018 and that’s the gene therapy readout, our EMEA feedback that we will be getting as well as all our PPMO program. So there could be a significant swing throughout the year in terms of the investments that you might have to make and because of that we have not provided any expense guidance at this point.

Obviously we do have internal budgets that account for all these situations and are obviously capital expenditure plan and our liquidity take all of these things into account. But it’s just a little too early for us to be providing guidance at this point.

[Tim Lugo, William Blair]

Understood and if you do receive a positive opinion from Europe, will that significantly change your revenue guidance for the year or is that more of a 2019 impact.

[Douglas Ingram, President and Chief Executive Officer]

If we have a positive opinion I would presume that our revenue guidance is significantly change. Remember, obviously post the guidance and then getting the approval, we have to go through and almost every country the HDA process to the access and reimbursement process which takes some time. So it would obviously be a great next step and we begin to continue to build and work through the HDA process, but I wouldn’t presume there would be a significant increase in revenue guidance post that for 2018. But it would certainly be something we would look to in 2019.

[Tim Lugo, William Blair]

Understood. Congrats on the progress.

[Douglas Ingram, President and Chief Executive Officer]

Thank you.

[Operator]

Thank you. Our next question comes from Brian Skorney of Robert Baird. Your line is now open.

[Brian Skorney, Robert W. Baird & Co.]

Hey thanks guys for taking the questions. Two from me, to start what are the current thoughts on decision to not do or to do the interim analysis in ESSENCE. If it were to be done, can you give us guidance as to when the first 75 patients will wind up reaching the one year time point? And then on the Micro-Dystrophin Gene Therapy Program, how frequently are you monitoring patients for Dystrophin specific T-cells, I know Jerry’s prior construct, that seemed to be one of the major issues in terms of immune reactivity, are you monitoring right now in the gene therapy patients who have been treated with Micro-Dystrophin, or are you seeing anything there, and kind of maybe even talk about what is done on this construct to avoid generating an immunity to Micro-Dystrophin. Thanks.

[Douglas Ingram, President and Chief Executive Officer]

Yes. So, on the interim analysis for ESSENCE I want to be somewhat careful about what I say, because I want to speak more robustly until we get the final minutes from our GOLODIRSEN meeting with the FDA, but I will note that in the event that we were moving forward with GOLODIRSEN in an NDA we would very likely use ESSENCE as the confirmatory trial for our GOLODIRSEN accelerated approval post marketing commitment.

And so as it relates to that we need to be quite careful about looking at ESSENCE and about looking to sooner things for fear that we risk the integrity of what could ultimately be a confirmatory trial for GOLODIRSEN. So, that’s sort of the way we are looking at it. We are going to be very cautious about things like interim analyses with respect to ESSENCE.

As it relates to the Micro-Dystrophin Program, the children in the Micro-Dystrophin Program are being monitored essentially constantly at least on a weekly basis. And so far things look very good, obviously we need to get biopsies and then we can provide more meaningful updates.

[Brian Skorney, Robert W. Baird & Co.]

Okay, thanks

[Douglas Ingram, President and Chief Executive Officer]

Thank you very much.

[Operator]

Thank you. Our next question comes from Brian Abraham with RBC Capital Markets. Your line is now open.

[Unidentified Analyst]

Hi, everyone, this is [Rick] (Ph) on for Brian and thanks for taking my question. So, could you remind us about the development timelines for PPMO 5051, and maybe when you expect to begin dosing and then could you also maybe speak to your confidence to recruit patients for this trial given that EXONDYS 51 is already approved for patients amenable Exon 51 skipping?

[Douglas Ingram, President and Chief Executive Officer]

So, on 5051, to give you the broad strokes, we are in a single ascending dose study, our goal and we believe we are tracking to getting insight on dosing and maximum tolerated dose by the end of 2018, that’s extraordinarily important, because given preclinical models from an efficacy perspective, we have seen significant increase in cell penetration and significant increases in exon skipping and significant increases in Dystrophin expression using the PPMO versus its PMO counterpart, so we are really excited about it, but we need to see if we can get to therapeutic levels.

On timing of patients, we are already dosing patients so, so far things are going well. This is a small population, so it will always be somewhat challenging to recruit patients, but we are very confident that we are able to recruit the patients and complete the single ascending dose study and then move into a multi ascending dose study and then within to an extension study that will go from there.

And then as far as PPMO let me just scale beyond that it mentioned we as I mentioned in my text, we have five additional PPMOs that are currently in the IND enabling preclinical and toxicology work right now. Our goal is to have that recent additional IND filed by the end of this year and then another IND for another one filed immediately next year and then another one shortly thereafter next year as well at least. So we are working hard and as urgently as possible to complete the work that can get additional INDs filed and cleared and additional PPMOs in the clinics so that we can move these forward into patients and hopefully benefit patients.

[Operator]

Thank you and our next question comes from the line of Matthew Harrison of Morgan Stanley. Your line is now open.

[David Lebowitz, Morgan Stanley]

Hello this is David Lebowitz in for Matthew Harrison. Just extending on that last question with respect to PPMO. Given the higher tissue penetration, in I guess the early point thus far have you seen any safety signals that are different than EXONDYS 51?

[Douglas Ingram, President and Chief Executive Officer]

Well first of all no, we haven't at all, but I just want to caution all of us that this is a single ascending dose study, as you may recall or you may note for the single ascending dose studies start at significantly sub therapeutic levels. So we are very confident from our preclinical work, we feel very good and optimistic and that's why we are going at risk with six PPMO programs, but while I can tell you that we haven't seen any significant safety signals. Today, I would await more insight as we get to higher and more potentially therapeutic doses.

[Dave Lebowitz, Morgan Stanley]

Fair enough, and let e jump over to gene therapy, you have three different programs and the works two that are already started the dose. I guess going forward at what point do you consider yourself to having an update or to be able to compare the various programs, because generally I would think that this is not the overall objective to push them all for just to the end game. So when do you think you might have enough to begin least the valuating and comparison?

[Douglas Ingram, President and Chief Executive Officer]

Well, I think we're going to push them all forward for as long as possible and so we are confident that there is clearly a root to treat all boys with DMD and so it maybe sometime and one of the goals behind our approach and people have asked us why do you have three separate gene therapy programs and the goal is that we want to take numerous batch or we have a vision and our vision is to for family change the lives of these children in the positive and we are going to take as many shots ongoing as possible, so we're going to run this for a while before we would ever make a call like that.

I would also think beyond that I would note that GALGT2 and Micro-Dystrophin are entirely different approaches to treating DMD and GALGT2 just so we are clear it has potential utility even beyond DMD, GALGT2 has the ability to deal with other beyond DMD perhaps DMD perhaps other muscular dystrophies and maybe other neuromuscular disorders as well.

[Dave Lebowitz, Morgan Stanley]

Thanks for taking the questions.

[Douglas Ingram, President and Chief Executive Officer]

Thank you very much.

[Operator]

Thank you. Our next question comes from Ritu Baral of Cowen & Company. Your line is open.

[Ritu Baral, Cowen & Company]

Hi guys, thanks for taking the question. Good afternoon. First question is for Bo, Bo you said something interest, you said that you would expect to be average age of the patients to stay in the 13 to 14 year old profile going forward. Why would that be, I mean the average age of diagnose is about, average life span is about 20, why wouldn’t we see a creep down even before new born screening and earlier with EXONDYS in indentified patients.

[Bo Cumbo]

Thanks for the question Ritu. So if we just look at 2017, it helped pretty consistently, all through the year averages went back and forth between 13 and 14, the majority of the children that are on therapy fall in really to sort of 10 to 15 age bracket. And in 2018 we expect that as stay pretty consistent, we do get children all over to different age groups, but when new born screenings really kicks in, you are talking just hundreds of children, because to your point about average age of diagnostic is around hundreds of children there undiagnosed.

So we think the trend in 2018 will stay relatively consistent with the average age hovering somewhere in that 13 to 14 range, it could fluctuate a little bit, but we don’t see major fluctuations throughout the next year. The big fluctuation will happen when we have hundreds of new children being identified as new born screening.

[Ritu Baral, Cowen & Company]

Are you making an effort I guess to convince clinicians that may be want to treat earlier preserved function treat the seven, eight, nine year old or are they have a pretty good idea of the profile of patient and severity of disease that they want to treat at this point.

[Bo Cumbo]

You know what I mean Ritu its actually very consistent in between ages of five and 19. I mean all the children are getting - not all but majority of children are being prescribed from the physicians. So it’s not about convincing the physicians to prescribe earlier. They are actually prescribing as soon as they find the patients especially the young ones because those are going to be the ones that benefit the most from the drug.

Really it’s just a fact of there is not a lot of patients that are identified in the younger age group from zero to five, or zero to six, when they are diagnosed its mainly due to them having a brother that was diagnosed. And so this is why we do put a lot of effort on genetic testing. We also hang out flyers like child muscle weakness and we talk about education to not only to the neuromuscular specialist, but some large pediatrician groups on looking at CKs and looking for mortar weakness and really giving diagnosis of Duchenne. So it’s just a matter of, there is hundreds and hundreds of boys that are not diagnosed less than five to six years of age and when they get diagnosed they will go on therapy.

[Ritu Baral, Cowen & Company]

Got it. A quick follow-on GOLODIRSEN safety, obviously there was that CK issue in the UK patient very, very early in the year. Is that something that has either changed monitoring requirement in trials of GOLODIRSEN, that content that has come up with FDA, the discussions with them in your meeting?

[Bo Cumbo]

So, the answer is no to all of those. Not at all. Just to remind everyone, in the ESSENCE trial we have 48 sites and well over 100 patients, we have four sites in United Kingdom, out of the 48 sites that represents six boys, there was an adverse event in the UK that was rhabdo and CK elevation to remind everyone I don’t think it comes as a surprise to those. The DMD children, universally have elevated CK levels at some points and rhabdo is a known risk associated with DMD.

But nevertheless that rhabdo in CK occurred very shortly after the therapy, so we are cautious that we said it, it is possibly related to therapy notwithstanding the fact just by the way, with that the boy actually it had a significant fall the day before, so it was certainly an alternative potential explanation. And normally that would have been the end of it, there are drug monitoring committee, the independent committee reviewed this issue, looked at the data, looked at all of the labs and cleared all of boys that continue and that boy got back on therapy and there were no other incidents and certainly no rhabdo related incidents at all.

The issue here is a protocol related one. In the UK, only in the UK, but in the UK there was a specific stopping rule in the protocol that the MHRA noted that required us to stop while the MHRA reviews that the issue and we should hear back from them in March and so our hope is that those boys will recommence therapy in March. It has had no other resonating impact and it should not have any impact on the performance of ESSENCE, overall timing of ESSENCE.

[Ritu Baral, Cowen & Company]

Got it. And just a quick, one last question for Sandy, Sandy for 2018 8% to 10% COGS, range that you gave out do you think that’s the final COGS range going forward or are you still burning through some of the old supply at this point?

[Sandy Mahatme]

There is very little left over to burn, there will be a small uptick for next year Ritu, but we don’t expect the COGS to be significantly over a very low teens number and that could come down of it as well, because it continue optimize our processes, which is why I didn’t give any guidance for 2019 and as a result 8% to 10% is the numbers we have given for 2018.

[Ritu Baral, Cowen & Company]

Great. Thanks for taking all the questions.

[Sandy Mahatme]

Sure, thanks.

[Operator]

I’m sorry our next question comes from Chad Messer of Needham and Company. Your line is now open.

[Chad Messer, Needham & Company]

Great. Thanks for taking my question and congrats on a strong near progress. Your partner Summit recently reported some Phase II data for their drug Ezutromid, I’m really interested in getting you guys thoughts on this early biomarker data particularly their ability to effect utrophin levels and some of the MRI findings that that they recorded?

[Douglas Ingram, President and Chief Executive Officer]

Summit our partner, we have ex-U.S. rights with Summit they have been a great partner with us in a number of regards and obviously we are very excited about their results, what they actually issued a released with further analysis on those results that was the 24 week results so we await to 48-week results as well and then we will see where we are from there, but we are very happy for them and we're happy for the results so for.

[Chad Messer, Needham & Company]

Great. Thanks.

[Douglas Ingram, President and Chief Executive Officer]

Thank you.

[Operator]

[Operator Instructions] Our next question comes from the line of Yun Zhong of Janney. Your line is now open.

[Yun Zhong, Janney Montgomery Scott LLC]

Hi thanks very much for taking the question and a follow-up question on the PPMO pro-win just wanted to know if the plan is still it's an issue the multiple ascending dose study maybe somewhere around mid-2018 without waiting for the confusion of the single ascending dose study?

[Douglas Ingram, President and Chief Executive Officer]

That's our current goal yes, the exact timing of the multi outstanding dose is difficult to nail down with precession of course, because we have to see how we get on the single ascending dose, but our goal is to get to a comfortable level and then commence the multi ascending dose while the single ascending dose continues and will continue to inform the multiyear ascending dose.

[Yun Zhong, Janney Montgomery Scott LLC]

Okay, and you have been talking about this potential less frequent dosing was PPMO, but I wonder comparing less frequent dosing versus potential maybe on better efficacy with the same dosing regimen which one do you think important and given that FDA has some issues with them efficiency or protein production prescription just comparing the dosing versus efficacy?

[Douglas Ingram, President and Chief Executive Officer]

Well it's a very interesting issues, so obviously efficacy is extraordinarily important and it continuing to increase the expression of Dystrophin extraordinarily important as you all know better what the ultimate dosing regimen maybe as we get better and informed both from our single ascending dose and our multi ascending dose. With that said, it may be very well be the case that we are not compromising efficacy to get better dosing.

What we have found in animal model is an extraordinarily long amount of exon skipping in the muscle with a single dose of our PPMO, so the goal here is to not compromise so we are not making a trade-off between efficacy and dosing that we get actually a much better dosing regimen which would obviously be great for the boys but we get robust expression Dystrophin as well, but we will know all that better as we complete the single ascending into to the multi outstanding dose study.

[Yun Zhong, Janney Montgomery Scott LLC]

Great. Thank you.

[Douglas Ingram, President and Chief Executive Officer]

Thank you very much.

[Operator]

Thank you. Our next question comes from Debjit Chattopadhyay of H.C. Wainwright. Your line is now open.

[Debjit Chattopadhyay, H.C. Wainwright]

Thanks for squeezing me in. I have a few out here. So as far as 5051 program is concerned you were expecting to get the eight to 12 mixed [Indiscernible] right. So in the single ascending dose study where are you currently versus the goal?

[Douglas Ingram, President and Chief Executive Officer]

Were still very low, so we are clear you know I'm sure as you know as single ascending dose study we start at significantly sub therapeutic levels and move up very slowly. So we are significantly far away from getting into potentially therapeutic doses right.

[Debjit Chattopadhyay, H.C. Wainwright]

Okay, and then for the Micro-Dystrophin program at a recent investor event you specified greater than 20% Dystrophin expression levels. What is driving the relatively high bar here, is it because of the lightly lower ability to sustain stress for a Micro-Dystrophin construct versus a full in Dystrophin or the expected vector loss, vector expression loss as the boys age.

[Douglas Ingram, President and Chief Executive Officer]

That’s a great question to answer really is optimism that comes from the three clinical animal model, the reality as you point out is that what we have seen reputedly is showed nearly small amounts of Dystrophin expression correlate to functional benefits we have seen this many times and there is a [indiscernible] once you use that on exon 44 amenable boys who have extraordinarily low amounts of back ground random exon skipping and yet have much mild phenotypes types.

So in one sense you are right,. We looked at it that way we would say even small amounts in Dystrophin expression in gene therapy would be meaningful and it may very well be. We don’t think we need 20% to be meaningful, but we are seeing in animal models, expression that gives us a lot of confidence, so we may get to significant level. I don’t know if I have actually said 20%, I know we would be very, very happy at 5% to 10% to 15%, but in animal models we get very optimistic.

[Operator]

Thank you. Our next question comes from the line of Gena Wang from Barclays. Your line is open.

[Gena Wang, Barclays]

Thank you for taking my questions. May be just follow the previous question, so you mentioned that you know the like 5%, 10% Micro-Dystrophin level you will be very happy. So would that be the goal like for you to look at the bio marker data when we had into the later this year, what the data and will you plan to dose higher if the level is below your expectation.

[Douglas Ingram, President and Chief Executive Officer]

It’s like so many things, we obviously adapt ourselves to what we see and I would also note that because of the preclinical work that was done and the safety package that exits with respect to our Micro-Dystrophin program, we actually are clear to go significantly higher than where we're, but I would also note right now that we are at two times 10 of the 14 dosing which is a significant potentially therapeutic dose.

And we believe based on animal model that that is an appropriate and significant therapeutics dosing, if things are working well that we will see robust expression. So in event that if something happens and we don’t, certainly we need to adapt ourselves and think about going higher, but our current planning is that we have chosen a very good therapeutic dose. In fact if I'm not mistaken, I'm not sure there has been a dose in gene therapy higher than two times 10 to the 14.

[Operator]

Thank you. Our next question comes from the line of Hartaj Singh of Oppenheimer. Your line is open.

[Unidentified Analyst]

Hi guys this is [indiscernible] for Hartaj Singh for taking the question. Doug you been alluding through eventual expansion into other rare diseases beyond DMD. Are there specific diseases that you would identified those making those strategically or you more just keeping in mind and evaluating individual through the opportunities as they rise and then just more broadly, how you are thinking about that from the prior division timing prospective.

[Douglas Ingram, President and Chief Executive Officer]

So a couple of things, one I think generally speaking with probably looking it at a very broad way. So we look at this in a very kind of broad way, with that said obviously there are neuromuscular rare disease targets that right inside our real house and we're going to be thoughtful about where we go next, to make sure that we do leverage the expertise, the abilities, the talent that we have in house.

One of the dangers in life is getting spread out and then going beyond your own abilities, we wouldn't do that, but we do look at things pretty broadly, we fill kind of a wide net and then sort of the question about sort of when do we go out beyond DMD. In addition to things that might be opportunistic along the way, you know I think there is two different place times when we were really looking at this.

The PPMO had positive signals then that means that we have an RNA targeted technology with an extraordinarily laudable safety profile that had utilities significantly beyond DMD and we would certainly take advantage of that both internally and likely externally. Likewise with gene therapy if we see positive gene therapy signals we are going to build for ourselves a very robust significant gene therapy approach division where you get manufacturing capabilities and the like and once we have that expertise we're certainly going to leverage that expertise beyond DMD as well.

[Operator]

Thank you, and our next question comes from the line of Ed Tenthoff of Piper Jaffray. Your line is now open.

[Edward Tenthoff, Piper Jaffray & Co.]

Great, thank you very much and I have got to say this comes from really informative really helpful, I’m impressed by the progress you guys continue to make. And one very straightforward question maybe two, how many boys are on EXONDYS 51 right now and at the time a voluntary guys discussed net pricing of $300,000 per year range can you give us an update on where that's coming out one year of the launch. Thanks so much for the time.

[Douglas Ingram, President and Chief Executive Officer]

Thank you very much and thanks for your comments. So we haven't provided the number of patients on therapy, we have used revenue as our surrogate market use upon performance, I will say that epidemiologically and I said this before we are still in - if you really we use the silly sports analogy second innings of where we are right now, we're not deeply penetrated so there is a lot of headroom to do a lot more goods to boys with DMD. And as far as that pricing goes you know things haven't changed significantly so the net pricing that we have revealed before is where we are exactly today.

[Operator]

Thank you, ladies and gentlemen this concludes today's question and answer session. I would like to turn the conference back over to Doug Ingram for closing remarks.

[Douglas Ingram, President and Chief Executive Officer]

Well thank you very much for your time, everyone. Again apologies for brief technical issue. Hopefully all of the questions have been answered and really appreciate your patience and your time this evening. Thank you very much.

[Operator]

Ladies and gentlemen, thank you for your participation in today’s conference. This concludes today’s program. You may now disconnect. Everyone have a great day.