Earnings Call Transcript - SRPT Q1 2022

Mary Jenkins, Senior Manager, Investor Relations

Thank you, Chloe and thank you all for joining today's call. Earlier today, we released our financial results for the first quarter of 2022. The press release is available on our website at sarepta.com and our 10-Q was filed with the Securities and Exchange Commission earlier this afternoon. Joining us today on the call are Doug Ingram, Ian Estepan, Dallan Murray and Dr. Louise Rodino-Klapac. After our formal remarks, we'll open the call for Q&A. 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 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 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?

Doug Ingram, President and CEO

Thank you, Mary. Good afternoon, everyone and thank you all for joining Sarepta Therapeutics first quarter 2022 investor conference call. As you will have seen from our press release issued earlier today, Sarepta enjoyed yet another straight quarter of strong revenue growth for our three approved therapies, EXONDYS 51, VYONDYS 53 and AMONDYS 45, achieving total revenues of $210.8 million in net product revenues of nearly $190 million. Our net product revenue performance represents an impressive 50% growth over the same quarter last year led by AMONDYS, each of our three therapies contributed to our outsized growth over the same quarter prior year. While I have said it many times, it does indeed bear repeating. We have achieved over five years of sustained growth with a compounded annual growth rate of nearly 40% and we've done that without a single price increase and by pricing all of our therapies at Parab or said another way, our consistently strong performance comes from serving the patient community and reflects the value that these therapies bring to individuals living with Duchenne. Based on our performance to date, we can confirm our prior guidance of net product revenue of over $800 million for full year 2022, translating into product revenue growth of over 30% over 2021. Our Chief Customer Officer, Dallan Murray, will provide additional color on our performance in a moment; and our CFO, Ian Estepan, will provide an update on our financials. In the first quarter, we continued to advance our large pipeline of potentially life-changing therapies focused on rare genetic diseases across our three platforms. As you know, we're now in pivotal trials for our lead programs in both our gene therapy and our RNA platform. With respect to our gene therapy platform, we continue to initiate sites globally and to dose Embark, our 120-patient pivotal trial for SRP-9001. SRP-9001 is Sarepta's gene therapy largely agnostic to mutation to treat Duchenne by delivering a truncated but functional version of dystrophin. EMBARK is well powered and informed by the wealth of positive expression, safety and functional evidence that has come from previously dosing over 80 patients across three studies. As I've said often, you should assume that success in EMBARK, a well-powered Phase III pivotal study, will be our path to a successful launch of SRP-9001 in the United States and around the world. As I've also confirmed in the past, we are exploring with the FDA the possibility of a more expedited BLA filing for SRP-9001, anticipating your question. We will provide an update once those discussions are completed and will not provide additional color until that time. But again, for now at least, one should assume that EMBARK which will read out next year, is our pathway to approval. As we continue enrollment of EMBARK, we are also leveraging our world-leading gene therapy platform to advance our stick LGMD candidates, all of which share the same Rh74 vector and many of the same promoter as SRP-9001. On the RNA side, we are enrolling and dosing in momentum Part B, our pivotal trial for SRP-5051, our next-generation RNA-based PPMO for the treatment of Duchenne patients amenable to skipping exon 51. We are particularly excited to move momentum forward given the results of Part A. In Momentum Part A, we were encouraged to see 18 times greater exon skipping and 8 times greater than over a Teperson and we saw it in half the time and at one-fifth the drug exposure. It confirmed Momentum Part B, SRP-5051 could be a profound improvement over the current standard of care. At the same time, we are progressing the preclinical work for additional PPMOs to treat a much greater percentage of the Duchenne population than we currently treat. Our Head of R&D and Chief Scientific Officer, Dr. Louise Rodino-Klapac, will provide additional color on the performance of our R&D pipeline and readouts in the first quarter in a moment. Now I recognize that for many biotechs and for those that invest in them, the last 15 months or so have been challenging and some biotechs have particularly struggled in response to the external environment. We feel no shame and sorry for that but Sarepta remains, on the other hand, in a very strong position despite the external environment. We continue to enjoy strong revenue growth well on our way to eventually achieving that vaunted $1 billion in yearly revenue milestone. We entered 2022 with over $2.1 billion on our balance sheet. And even as we have aggressively invested in our pipeline, we exited the first quarter with over $2 billion in cash. Our pipeline continues to perform and we are in pivotal trials with potentially transformative therapies in both our RNA and our gene therapy platforms and we have one of the strongest and most operationally excellent teams in all of genetic medicines. And with our success, we're not standing still but we are growing. In addition to the expansion of our genetic therapy center of excellence in Eastern Ohio, we are building out a new 288,000 square foot facility in Bedford, Massachusetts where we will centralize our efforts, including RNA research and process development function, translational biology, gene therapy process development and quality control and we're building early phase GMP gene therapy manufacturing capacity that will help accelerate our future programs. And we continue to grow and add best-in-class talent as well. In 2022, we will add another 40% to our employee base, the bulk of whom will be in research development, regulatory affairs, clinical development and technical operations. And with that, let me turn the call over to our Head of R&D and our Chief Scientific Officer, Dr. Louise Rodino-Klapac for an update on our research and development activities. Louise?

Louise Rodino-Klapac, Head of R&D and Chief Scientific Officer

Thanks, Doug. We are pleased with the new progress and momentum across all of our R&D programs. I'll begin today with our late-stage clinical program. For SRP-9001 our gene therapy in development for the treatment of Duchenne, the data presented to date continues to give us confidence in the therapy's potential to alter the trajectory of the disease, with an emphasis on improving function, quality of life and preventing premature and early death. Driving this transformative effort is the underlying strength of our construct, combined with our deep understanding of Duchenne, neuromuscular disease and our science. We have demonstrated consistency of the therapy over three trials: Study 101, Study 102 and Study 103, having dosed 85 patients across these studies. Based on these results, we would expect the treatment benefit to continue to increase over time due to the progressive nature of Duchenne. Across these studies, we have seen sustained functional improvements as compared to natural history, with the longest now in year four of follow-up. And notably, the safety profile has remained consistent across different patient ages and weights. We continue to generate data from Studies 101, 102 and 103, including two-year data from Part 1 of Study 102 and one-year data from Study 103. As we have mentioned on our fourth quarter call, we plan to perform an integrated analysis of the one-year data for Studies 101, 102 and 103 for all patients who received the target dose. Our plan is to share the totality of these data with regulators and present all of these results at a medical meeting later this year. In parallel, enrollment in EMBARK for our Study 301, our 120-patient global, multicenter, double-blind, placebo-controlled Phase III trial evaluating commercially representative SRP-9001 material in patients with Duchenne between the ages of four to seven remains on track. We expect to have this trial fully enrolled in the middle of the year. Now, continuing with our gene therapy franchise. For SRP-9003 and our other LGMD programs, we continue to make good progress with respect to building our manufacturing process, including assay development and validation. When we're ready to test commercially representative material in a clinical trial, we will discuss the study design with OTAT. Moving now to our RNA-based platform. For our next-generation PPMO program, SRP-5051 in development to treat individuals with Duchenne amenable to exon 51 skipping, enrollment continues on pace for Part B of the MOMENTUM study. To remind you, MOMENTUM Part B is a multi-arm global ascending dose study of SRP-5051 used monthly, assessing dystrophin protein level and skeletal muscles following SRP-5051 treatment. As we've guided previously, we anticipate Part B to be fully enrolled in the second half of 2022. If the trial is successful, we anticipate Part B will serve as a pivotal study for SRP-5051 and we plan to seek accelerated approval. Now turning to some updates from the 2022 Muscular Dystrophy Association Annual Clinical Conference that took place in March. We shared data from across our private finance conference, included three podium and 10 poster presentations. Notably, for the SRP-9003 program for lead gene therapy in development for the treatment of limb-girdle muscular dystrophy Type 2E, or LGMD2E, we reported new data from the two-dose cohorts in Study SRP-9003 and 101. We also shared the full results from EXPLORE DMD, a study to assess the rate of preexisting antibodies to the AAV and Rh74 vector and individuals with Duchenne. For Study SRP-9003-101, we presented three-year functional and three-year biopsy data from Cohort 1, the low-dose cohort and two-year functional and biopsy data from Cohort 2, the high-dose cohort. From a safety standpoint, since gene therapy is only dosed one time, the adverse events that were typically observed during the first few months after dosing. Therefore, as expected, we did not observe any new significant drug safety events at year three. These results continue to reinforce the favorable safety profile of therapies that use the AAV-Rh74 vector, which also has relevance for other gene therapies administered with this vector. In terms of the durability of therapy, the results show that the persistence of the SRP-9003 vector in transfused muscle continues to drive meaningful levels of beta-sarcoglycan protein expression over time, leading to sustained improvements in functional outcomes. We are very pleased with these results because of the potential reach of our portfolio of five other LGMD programs, which all share the same AAV Rh74 vector. These data are also important for the research for ongoing SRP-9001 program for Duchenne because the SRP-9003 program uses the same AAV rh74 vector and HDK7 promoter and design and approach of SRP-9001. As we add to the growing body of clinical evidence for these programs, supportive, consistent, safety and durability data for one program has read through to the platform. Also presented at MDA were data from EXPLORE DMD, a study assessing the rate of preexisting antibodies to the AAV rh74 vector in individuals with Duchenne. The final results demonstrate that the majority of patients screened, 86.1% were seronegative, meaning they have a titer of less than 100 to 400 for anti-AAV rh74 total binding antibodies. This low prevalence of antibodies against AAV rh74 supports the broad applicability of AAV rh74-based gene therapy for patients with Duchenne. The findings of this study are important for several reasons. Because pre-existing antibodies against AAV vectors can hamper therapeutic efficacy and potentially pose a safety concern, the consequence of demonstrating a reliable way to prescreen individuals before they receive gene therapy. Additionally, our goal is to treat all individuals with Duchenne. The ability to better understand the population with preexisting antibodies allows us to target our research and development efforts toward novel ways to knock down these existing antibodies, so that these individuals could be eligible to receive therapy in the future. Further, our comprehensive approach of measuring total binding antibodies may help improve the safety and efficacy of AAV-based gene transfer therapy. The results of the seroprevalence study have also been observed in our EMBARK study for SRP-9001. We believe our observed low screening rate will allow more patients to be eligible to receive SRP-9001 compared to other gene therapies. As I conclude today, I'd like to thank my Sarepta colleagues who remain grounded in our mission to translate the very best science into the very best treatments for patients in the shortest time possible. Thanks as well to our partners in science, clinical trial investigators and the patient community for their dedication. I will now turn the call over to Dallan for an update on our commercial activities. Dallan?

Dallan Murray, Chief Customer Officer

Thank you, Louise and good afternoon, everyone. Driven by continued demand for our three RNA-based PMO therapies, I'm pleased to report that the team delivered approximately $190 million in net product revenue for the first quarter of 2022. This performance represents more than 50% growth, or greater than $60 million in net revenue growth over the approximately $125 million in net revenue for the first quarter of 2021. For the first quarter of 2022 compared to the first quarter of last year, we delivered nearly 10% growth for EXONDYS 51 and more than 60% growth for VYONDYS 53, while maintaining our market leadership position in the exon 53 amenable population. The performance of AMONDYS 45 continued unabated in the first quarter of 2022. With 22 quarters of consecutive quarter-over-quarter growth, it is tempting to gloss over the day-to-day challenges the team has overcome to deliver on our objectives. I'll take a moment to elaborate. Firstly, as we come to expect through our deep experience in serving the Duchenne community and consistent with our historical experience, insurance changes at the beginning of each year impacted our revenue across all three therapies. Second, we saw competition for newly diagnosed patients in the four to seven year-old range from our own EMBARK trial for SRP-9001. We planned for this issue and factored it into our 2022 guidance. This competition disproportionately impacts EXONDYS 51 and VYONDYS 53 due to our penetration in these populations and subsequent reliance on these patients for new starts. Lastly, in addition to facing competition from the EMBARK trial, we are also actively enrolling exon 51 amenable patients in our MISSION study and Part B of the MOMENTUM study to support the approval of our PPMO candidate, SRP-5051. Our performance for the first quarter is even more impressive in light of the fact that all of this competition is from our own R&D group. We expect the pressures from clinical trial enrollment will persist for the remainder of the year but we remain comfortable with our 2022 net product revenue guidance of over $800 million. I'll now outline individual net product revenues for the first quarter for each of our three approved RNA-based PMO therapies. Beginning with EXONDYS 51 which totaled roughly $117 million, representing approximately 9% growth over the first quarter of 2021, you'll notice the revenue dipped slightly compared to the fourth quarter of 2021 but this is expected and primarily driven by the insurance changes at the beginning of this year. By the end of the first quarter of 2022, the team had worked through this challenge and we are now exactly where we forecasted we would be at this point in the year. The expectation for the remainder of the year is a return to the modest growth trajectory for EXONDYS 51. For VYONDYS 53, revenue totaled approximately $28 million, representing roughly 60% growth versus the first quarter of 2021. As we have noted previously, the smaller revenue for VYONDYS 53 when compared to AMONDYS 45 is primarily driven by a larger-than-expected exon 45 amenable population compared to the exon 53 population. This is also consistent with what we've seen in clinical trials. In general, we're pleased with the performance of VYONDYS 53 and particularly our continued leadership position within the exon 53 amenable population. For AMONDYS 45, revenue totaled nearly $44 million, representing greater than 25% sequential growth over the fourth quarter of 2021. The team continued to execute in the launch phase of AMONDYS 45, driving both patient identification and also working hard to gain access for the patients who have already submitted start forms. We expect the growth of AMONDYS 45 to continue in the coming quarters. I'm proud of this successful start to 2022 and of our dedicated and highly motivated team who work every day to execute on our mission and support the nearly 30% of patients who are amenable to one of our three approved RNA-based PMO therapies. With a fully integrated biotechnology company focused on Duchenne and other unmet needs in precision medicine, we look forward to working closely with our R&D colleagues as they discover and develop therapies such as SRP-9001 for an even larger proportion of the Duchenne population as well as advancing our deep portfolio of therapies in gene therapy, RNA and gene editing. And now, I'll turn the call over to Ian Estepan for an update on our financials. Ian?

Ian Estepan, CFO

Thanks, Dallan. Good afternoon, everyone. This afternoon's financial results press release provided details for the first quarter of 2022 on a non-GAAP basis as well as a GAAP basis. Please refer to the press release available on Sarepta's website for a full reconciliation of GAAP to non-GAAP financial results. For the three months ended March 31, 2022, the company recorded revenue of $210.8 million which consists of net product revenue and collaboration revenue compared to revenue of $146.9 million for the same period of 2021, an increase of $63.9 million. Net product revenue for the first quarter of 2022 from our PMO exon skipping franchise was $188.8 million compared to $124.9 million for the same period of 2021. For the first quarter of 2022, individual net product sales were $117.1 million for EXONDYS 51, $43.6 million for AMONDYS 45 and $28.1 million for VYONDYS 53. The increase in net product revenue primarily reflects higher demand for our products and a full quarter of AMONDYS 45 sales during the three months ended March 31, 2022, given its commercial launch in February of 2021. And as noted earlier in the call, we are reiterating our 2022 total revenue guidance of greater than $880 million for our net product revenue guidance for our RNA franchise of greater than $800 million. In each of the quarters ended March 31, 2022 and 2021, we recognized $22 million of collaboration revenue which relates to our collaboration arrangement with Roche. The reimbursable co-development costs under the Roche agreement totaled $17.7 million for the first quarter compared to $13.4 million for the same period of 2021. On a GAAP basis, we reported a net loss of $105.1 million and $167.3 million or $1.20 and $2.10 per basic and diluted share for the first quarter of 2022 and 2021, respectively. We reported a non-GAAP net loss of $48.6 million or $0.56 per basic and diluted share in the first quarter of 2022 compared to a non-GAAP net loss of $114.5 million or $1.44 per basic and diluted share in the first quarter of 2021. In the first quarter of 2022, we recorded approximately $31.4 million in cost of sales compared to $22.3 million in the same period of 2021. The increase in cost of sales is primarily due to increasing demand for our products, partially offset by write-offs of certain batches of our products not meeting the quality specifications for the three months ended March 31, 2022, with no similar activity for the three months ended March 31, 2022. On a GAAP basis, we recorded $194.3 million and $195.1 million in R&D expenses for the first quarter of 2022 and 2021, respectively, a year-over-year decrease of $800,000. This decrease is primarily due to decreases in market research with academic institutions and decreases in upfront and milestone expenses during the first quarter of 2022 compared to the first quarter of 2021. On a non-GAAP basis, R&D expenses were $173.2 million for the first quarter of 2022 compared to $177.5 million for the same period of 2021, a decrease of $4.3 million. Now, turning to SG&A. On a GAAP basis, we recorded approximately $71.8 million and $71.1 million of expenses for the first quarter of 2022 and 2021, respectively, an increase of $700,000. The increase was primarily driven by an increase in professional service expenses. On a non-GAAP basis, the SG&A expenses were $53.2 million for the first quarter of 2022 compared to $51.5 million for the same period of 2021, an increase of $1.7 million. On a GAAP basis, we recorded $17.3 million in other expenses, net for the first quarter of 2022 compared to $15.5 million in other expenses and that for the same period of 2021. The increase primarily reflects an increase in our mark-to-market adjustment on our strategic investments during the three months ended March 31, 2022, compared to the same period of 2021. We had approximately $2 billion in cash, cash equivalents and restricted cash and investments as of March 31, 2022. Based on our current assumptions, we believe our balance sheet provides us runway beyond the readout of Study 301 and into 2023.

Doug Ingram, President and CEO

Thank you very much, Ian. Chloe, let's open the line for questions.

Colin Bristow, Analyst

And congrats on all the progress. Doug, maybe you could just give us a quick update on when you expect to meet with the FDA regarding the path forward of the SRP-9001 strategy. It seems that hasn't happened yet. And then, just quickly on your competitor, Pfizer, they're about to initiate trials in the U.S. And so I just wanted your update thinking on how you view them as a competitor from a timing and, I guess, clinical profile perspective.

Doug Ingram, President and CEO

Thank you for your questions, Colin. I appreciate the opportunity to address the first one as it allows me to clarify for everyone. We plan to engage with the FDA, and we'll update you once those discussions are complete. I prefer not to provide more details until then, but I assure you we will keep you informed. In the meantime, I want to reiterate that the EMBARK study is a well-structured, placebo-controlled trial that we're very enthusiastic about. It is currently recruiting and dosing, with additional sites coming online weekly. We expect enrollment to wrap up around the middle of this year, followed by a readout next year, which will guide our pathway to approval in the U.S. and globally, unless we receive different information. Regarding Pfizer, they announced they would restart their previously halted study for safety reasons, but that does not impact us. Our focus remains on our program and the EMBARK study, which has clear entry criteria and operates largely as an outpatient protocol. This will benefit both the enrollment process and the subsequent labeling for EMBARK. Additionally, the screening-out rate is quite low, below 15% for SRP-9001 and rh74, unlike other constructs. We are dedicated to finalizing EMBARK's enrollment and are confident in the therapy's success, aiming for therapeutic approval in the U.S. and worldwide following EMBARK's success.

Brian Abrahams, Analyst

I think there's maybe a little bit of confusion around Phase III timelines. I was hoping you could clarify. It sounds like 9001 enrollment is on track for mid this year. So when one considers screening and data analysis, should we be expecting top-line data release around mid-2023 or closer to year-end? And then maybe on a similar note, on the registrational path for 9001, I recognize you aren't in a position to comment on the specifics of ongoing FDA dialogue. But just taking a step back, should we be thinking about this as accelerated approval or full approval? Or are there any middle-ground expedited scenarios we should contemplate such as maybe rolling BLA with existing data and integrated one-year analysis that you could update at the end of the submission with the EMBARK data when that becomes available?

Doug Ingram, President and CEO

EMBARK is a 52-week study. If we are fully enrolled around the middle of this year, we will have data by around the middle of next year. After that, we need to make sure we collate and perform quality controls on all the data, including the secondary endpoints and biomarkers. I expect this will be completed in the second half of next year. Our goal is to file as soon as possible after that, aiming for 2023. I want to be cautious and won't provide updates until we have something concrete. EMBARK aims for full approval, not accelerated approval. We plan to discuss with the FDA's division about the possibility of a quicker approach. One potential faster pathway could be the accelerated approval pathway to make this therapy available to patients sooner. We believe the data supports this discussion. We have three studies, exceptional expression, an excellent safety profile, and consistent functional benefits across all studies. I think it makes sense to have this dialogue, and we will update on the outcome of those discussions once they are finalized.

Judah Frommer, Analyst

Just one on kind of timelines for Study 103 data readout. I think you've said that FDA would get that one-year data before kind of it is shared publicly. So should we expect that we'll get one-year 103 data with the FDA conversation update? Or could that be reported before that potentially?

Doug Ingram, President and CEO

We are currently at a medical meeting where Louise and the team are mapping things out. We will provide an update on SRP-9001, which will include some data from Study 103, two-year data for Study 102 Part 2, and additional interesting information, including an integrated analysis across our studies. This will take place this year, but we do not have a specific timeframe to share yet as the team is still working on it.

Unidentified Analyst, Analyst

This is Sheldon on for Gena. Maybe just two quick ones. On the approval pathway for 9001 outside of the U.S., particularly in Europe, do you have any feedback from EMA on the approval requirements? Is it only pathway for a full approval? Or is there any other possibility for expedited process? And another question is on the related regulatory and sales milestone that you can receive from Roche. I remember the total amount is $1.7 billion. Could you give us some color on the breakdown of regulatory versus commercial milestones there?

Doug Ingram, President and CEO

Sure. I'm going to leave the second question to Ian, who will answer consistent with what we said historically in the past. With respect to Europe, I just want to be respectful of our very good partner Roche and not step in front of them. I will note, just simply noting the theoretical level that there, of course, is the opportunity for getting into sort of traditional approval in Europe and there is a more expedited pathway. It's different than the United States but there is a conditional approval pathway that exists in Europe and I'm sure we'll be thinking creatively together about which of those pathways makes the most sense for the patients that we serve. And Ian, with that, you might want to touch briefly on milestones.

Ian Estepan, CFO

Yes. As it relates to the milestones, we haven't broken out the exact details between the split between commercial or regulatory. But the question we often get is in terms of timing and that is going to be very late in the either regulatory framework or obviously a post-launch that will be the back end loaded milestone payments.

Brian Skorney, Analyst

So just going on to the Pfizer recent announcement, I know that they're moving back into the clinic in the U.S. but moving into the chronic sounds like there's some restrictions or believe some hospitalization period post dose. I was just wondering, can you remind us of any sort of protocol requirements 9001 has proposed dosing? Is there an overnight observation period or any sort of mandatory post-dosing observation period?

Doug Ingram, President and CEO

Yes. Other than in Japan, everything is outpatient. Physicians obviously have the discretion if they want to keep a child overnight if they want but it's outpatient dosing and everywhere but Japan. So it's very different than the Pfizer protocol. And I'm sure it's informed by the experience that we both had with these therapies and the safety profile of relative therapies.

Gil Blum, Analyst

And congrats on the progress in this quarter. Just a quick one from us. So assuming Pfizer is going to be opening starts in the U.S., doesn't that exacerbate the competition for patients that usually go on EXONDYS, if you have any commentary around that?

Doug Ingram, President and CEO

I think that the greatest competition for EXONDYS is Sarepta. I think as Dallan noted for you earlier, EXONDYS in the United States competes with EMBARK. It competes with Mission. And I'm trying to remember, there's a third one. Dallan, you'll have to help me with it…

Dallan Murray, Chief Customer Officer

Momentum?

Doug Ingram, President and CEO

And Momentum, of course, Momentum for PPMO 5051. But notwithstanding all of that and that existed, of course, tracking into this year, EXONDYS grew fairly substantially versus the first quarter of last year versus the first quarter of this year. And our guidance for the year has that in it. So we're not particularly concerned about it. And then on the competition for patients for our relative gene therapies, without being excessively snarky, we are not at all concerned about the demand that we have for SRP-9001 and EMBARK.

Ritu, Analyst

This is a question for Ritu. What updates are you presenting at the ASGCT this month and for PPMO in June? Additionally, when can we expect top line data from the MOMENTUM study?

Doug Ingram, President and CEO

Louise, do you want to take that?

Louise Rodino-Klapac, Head of R&D and Chief Scientific Officer

Yes. At the ASGCT, we are presenting preclinical data on cardio outcomes for 9001. We will also hold follow-up presentations for clinical programs similar to what we've done in the past. However, we do not have our outlines for PMT.

Hartaj Singh, Analyst

Great. Focusing on PPMO, your study included boys mostly around the age of 8, averaging 11, 13, and 10 years. I believe you mentioned that approximately 80% to 85% of patients tested negative for AAV rh74. Could you discuss your PPMO opportunities in relation to older boys, as well as XES and potentially those boys who may not be candidates for gene therapy?

Doug Ingram, President and CEO

Thank you for the question, Hartaj. Currently, we cannot accurately predict the impact of gene therapy on PMO and PPMO. In a previous earnings call, I mentioned that I believe there will be a notable degree of cannibalization of RNA technology from gene therapy, particularly for PMO and, to a lesser extent, PPMO. However, I acknowledge that this assumption may be overly cautious. Firstly, our sterile prevalence study indicates that approximately 15%, or just under 14%, of individuals will be excluded. We have addressed the challenges related to neutralizing antibodies and will screen for gene therapy. There may also be older children who can receive RNA technology before they qualify for gene therapy. Moreover, I've worked in various countries outside the U.S. and noticed that the systems vary regionally, which can affect economic considerations and budgetary issues. There is a tangible opportunity in certain areas to offer PPMO or PMO to some patients. Notably, when the PPMO is approved, we expect to nearly double the number of patients eligible for PMO with the upcoming PPMOs currently in preclinical development. Additionally, we may be able to provide significant long-term benefits to patients through a one-time therapy, SRP-9001, followed by continuous treatment. This approach will require scientific validation and pharmacoeconomic analysis to support its feasibility. Nonetheless, there is promising potential in our PPMOs, which is why we are so enthusiastic about this development. Now, I will hand it over to LRK for further insights on this topic.

Louise Rodino-Klapac, Head of R&D and Chief Scientific Officer

Actually, I missed the second half of the previous question. It was about the readout for Momentum. The Momentum study Part B is expected to complete enrollment at the end of the year. It's a 28-week endpoint, so we expect to present the top-line data in 2023. Sorry for missing that question.

Joseph Schwartz, Analyst

I was wondering if you can speak to the steroid treatment regimens being used in EMBARK and how balanced they are between the treatment and placebo arms? Are there any key differences? And are you doing anything to enhance the interpretability of the data and the contribution from 9001 in these patients when you report the data?

Doug Ingram, President and CEO

Thanks, Joe. I'll give the broad spoke answer and then let if there's a nuance that I've missed we tell you but the answer is they are identical across both ops placebo-controlled trial, all kids are on stable steroids before they enter the trial. And then they both get the same regimen of steroids, including the same regimen of pre-dosing steroids as well. At least if there's any nuance that I've missed out.

Louise Rodino-Klapac, Head of R&D and Chief Scientific Officer

That's accurate. It's actually the same.

Timothy Lugo, Analyst

And I promise I won’t ask an FDA question but maybe one on the base business. You mentioned that the exon 45 amenable population is larger than maybe originally expected. Can you dig into that a bit? Maybe how many patients do you expect a few years ago? What's your current thinking? And is this something that's also kind of an ex-U.S. phenomenon or just U.S.?

Doug Ingram, President and CEO

Well, whatever this phenomenon is that we're observing, it is definitely not limited to the U.S. We've seen it in Europe as well. The reason for this is that we have assets in Europe. One thing that surprised us early on was how quickly enrollment for exon 45 progressed compared to our previous experiences with VYONDYS, leading us to believe that the actual prevalence may differ from our initial estimates. Since launching the commercial therapy, the uptake has been tremendous. I want to emphasize the significant role of our field-based force, commercial colleagues, and medical affairs teams in this success. We have consistently improved our execution. To illustrate, we've achieved cumulative sales of $2 billion, reaching the second $2 billion in less than half the time it took to reach the first billion. While some of this improvement is due to approvals, the team's ability to effectively serve patient communities has been crucial. None of this is related to pricing, as we haven't raised prices since inception. Currently, we do not have a clear understanding of the prevalence rate between these two. There are studies, including one from Canada, that suggest the population for exon 45 might exceed 10%, but we are not yet ready to confirm that. Dallan, perhaps you can provide further insights on this.

Dallan Murray, Chief Customer Officer

Yes. No, as exactly what Doug has said and thank you for the question, by the way, I think, historically, all of the epidemiology that we were looking to show that the two populations, the exon 53 amenable population and the 45 amenable population, were the exact same size. And as Doug explained, the first hint that we got that this wasn't the case was in our clinical development program. And what we saw in the clinical development program is exactly what we see playing out right now in the commercial market. That was our assumptions were based on the older initial epidemiology. And as Doug said, there are some new publications that are more in line with what we saw in the clinical development space and what we're seeing in the commercial market. So we're continuing to look at this as we go.

Kristen Kluska, Analyst

Want to ask one around longer-term plans of the company. So if you see this cannibalization around gene therapy and are able to solve the problem for the 15% or so of patients with preexisting neutralizing antibodies, given the success you've seen, would you consider utilizing the PPMO platform for other potential indications or areas beyond DMD?

Doug Ingram, President and CEO

Absolutely, we're exploring that preclinically right now. But perhaps, Louise is going to provide a bit more color on that.

Louise Rodino-Klapac, Head of R&D and Chief Scientific Officer

Thanks for the question. We're extremely excited about the opportunity for PPMO, both in additional exons in Duchenne but also other indications which include muscle but also include other targets based on the PPMO's ability to penetrate other tissues. So more to come on that but we're certainly very excited about the opportunity for multiple indications for PPMO.

Yun Zhong, Analyst

My question is about the LGMD program. I'm sorry if I missed any updates, but what are the next steps and the timeline? Are you still addressing the CMC issues? Do you have a plan to advance the 2E program? Given the prevalence, do you think a basket study would be more appropriate than trying to align with the FDA on that plan?

Doug Ingram, President and CEO

Yes. So first of all, we are definitely exploring the concept of a basket study which could be very interesting for us, or at least a basket approach for all of the sarcoglycan. But that isn't delaying our activity with respect to LGMD2E and SRP-9003. With respect to SRP-9003, the rate limiting step is CMC. I want to be very clear about what kind of CMC. It's not really the process element at all. In fact, we've manufactured therapy. So it's not about that and we've really benefited from all of the work we've done with SRP-9001. It's the analytical work and getting all of the assays together. One would assume that you could have sort of generic assays across multiple programs. Such is not the case. There are a number of different assays that require them to be bespoke for each particular therapy. The good news is we know exactly how to do it. We've done it with 9001 to great effect. We don't have to guess about that. The process takes some time. It's a combination of design but it's also testing and validation and then testing. So it's moving along nicely, not ever as fast as I would want but I don't think there's anybody at Sarepta that thinks that I'm patient about anything. But it's just going to take a little bit of time but we're on track. We just have to get the assays complete. Louise, have I missed anything?

Louise Rodino-Klapac, Head of R&D and Chief Scientific Officer

No. That's accurate. I just will add that we are actively enrolling our natural history study called Journey for LGMD. And so that will certainly support us in moving ahead for our next stage of the trial in terms of patient identification and also understanding the national history which will inform our design and that's enrolling well.

Unidentified Analyst, Analyst

I wanted to ask a quick question. Can you provide more details about your statement regarding the cost of sales and the write-off of certain batches of the company's products that are not meeting quality specifications?

Doug Ingram, President and CEO

Sure. I'll turn that to Ian. Ian?

Ian Estepan, CFO

Yes, that was related to our PMO franchise, where a few batches last year did not meet our standards, and as a result, we wrote them off. However, this was not significant and did not have any major impact. It's just that sometimes certain runs don't meet our qualifications, and this is something that happens occasionally. We did not see any instances of this in the current quarter.

Unidentified Analyst, Analyst

Just wondering what the status of the ESSENCE confirmatory trial enrollment was? If I look at the clinical trusted enrollment should be done soon.

Doug Ingram, President and CEO

We should be fully enrolled by the end of this year.

Unidentified Analyst, Analyst

This is a question for Matthew. We are curious if you have already started regulatory discussions with the FDA regarding the LGMD program.

Doug Ingram, President and CEO

The LGMD program. I'm sorry, go ahead. Apologies.

Unidentified Analyst, Analyst

Yes. If so, then, what the minimum requirement you are expecting from the regulations?

Doug Ingram, President and CEO

We apologize for the interruption. We haven't had actual meetings with them, only written responses from OTAT, which were received last year. We haven't updated that yet. We plan to have a comprehensive discussion with them once the CMC issues are resolved, covering both the clinical design and the CMC to gain their approval on manufacturing. We had a general discussion with them in writing last year, and interestingly, Europe has also confirmed the potential use of beta-sarcoglycan as a surrogate endpoint. We still need to have additional and more concrete discussions about the actual development program, but there was certainly an acknowledgment of that possibility, which makes a lot of sense. To remind everyone, SRP-9003 is a gene therapy for a very rare disease characterized by patients degenerating and dying due to the absence of the structural protein, beta-sarcoglycan. Given the size of the gene, SRP-9003 can deliver a construct coding for the full-length wild-type beta-sarcoglycan in the proper location. We're seeing very good expression, similar to what we observed with 9001, along with comparable safety. Clearly, rh74 is performing exceptionally well. Thus, pursuing a more expedited pathway and using surrogate endpoints is logical. Our next steps are to complete the CMC and engage in dialogue with the division to secure their agreement on the design of the next trial. Then we can proceed with that and the other sarcoglycan as well.

Operator, Operator

And it does appear there are no further questions at this time. I would now like to turn it back to Doug for any closing remarks.

Doug Ingram, President and CEO

Well, thank you all very much for joining us this evening and for your questions. We appreciate all of them. We're very excited about the progress that we've made. We're very excited about our ability to serve the community that we serve and to continue to advance our research pipeline as we advance our development programs, including completing our pivotal trial enrollment for EMBARK and including completing our pivotal trial for Momentum as well. And I look forward, on behalf of all of the team at Sarepta, to provide additional updates as we give additional progress over the course of 2022. Thank you all and have a lovely evening.

Operator, Operator

This does conclude today's program. Thank you for your participation. You may disconnect at any time and have a wonderful evening.