Earnings Call Transcript - SRPT Q2 2022

Operator, Operator

Good day, ladies and gentlemen, thank you for standing by, and welcome to Sarepta Therapeutics Second Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' prepared remarks, there will be a question-and-answer session. Please be advised that today's conference may be recorded. I would now like to turn the conference over to your speaker host today, Mary Jenkins, Senior Manager of Investor Relations.

Mary Jenkins, Senior Manager of Investor Relations

Thank you, Olivia, and thank you all for joining today's call. Earlier today, we released our financial results for the second quarter 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 on the call today 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 the 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 Ingram, President and CEO

Thank you, Mary. Good afternoon, everyone, and thank you all for joining Sarepta Therapeutics' second quarter 2022 financial results conference call. I will discuss our outstanding quarterly performance in a moment. But given its importance to the patients that we serve, to Sarepta, and in my view, to the entire field of gene therapy, I will begin by focusing on our progress this quarter with the largest near-term gene therapy opportunity in biopharma, and that's SRP-9001, our gene therapy for the treatment of Duchenne muscular dystrophy. As you will recall, we previously disclosed that we were engaging with the US FDA about the possibility of submitting a Biologics License Application, or BLA, for the accelerated approval of SRP-9001 to treat Duchenne muscular dystrophy. We also cautioned numerous times that we would not change our base case assumption on the timing of approval unless we have strong conviction on the receptivity to an accelerated approval BLA by the FDA. As we announced last week, our discussions are now complete, and our base case assumption has indeed changed. Over the course of the second quarter, we engaged with the FDA in an in-depth review with the agency of the wealth of evidence that supports the safety and efficacy of SRP-9001 and the functional benefits associated with the robust expression of the shortened functional dystrophin when treated with SRP-9001. This included the safety and tolerability data unique to SRP-9001, the preclinical animal models supporting its benefits, the various function-related biomarkers associated with the nearly 90 patients dosed with SRP-9001 across studies 101, 102, and 103, and the impressive and consistent function of the results, which is, of course, the North Star Ambulatory Assessment (NSAA) and multiple timed tests across those studies. I would like to thank the FDA for its time, its commitment, and its input as the review spanned multiple meetings and included input and guidance across the FDA, including CEB leadership, the Office of Tissue and Advanced Therapies, as well as the Center for Drug Evaluation and Research, including its office of neuroscience and office of new drugs. Based on that review and the written guidance provided to Sarepta last week, we announced that we intend to submit a BLA for accelerated approval of SRP-9001 to treat ambulatory patients that have Duchenne muscular dystrophy. We intend to compile and submit our BLA this fall. We will hear whether an advisory committee is requested by the FDA after our BLA is filed. If one is requested by the FDA, we would anticipate it in the spring of 2023, and we are planning and preparing for just that. Assuming a successful review, we anticipate approval and launch in mid-2023. To that end, in addition to completing and submitting our BLA, we are immediately readying ourselves for what will be the largest gene therapy launch in the United States. That will include augmenting our commercial and medical affairs organizations, site readiness, and importantly, building sufficient inventory to serve the community at launch without delay. As we prosecute our BLA, we continue to execute EMBARK. That's our 120-patient pivotal trial for SRP-9001. The demand has been intense for EMBARK and site initiation and enrollment ramped enormously in the second quarter. Based on our current screen rates, we should be fully screened and enrolled in the next few weeks. One of the concepts that have been discussed both within the FDA and Congress is encouraging companies to have their confirmatory trial underway at the time of an accelerated approval. We anticipate EMBARK to act as our confirmatory trial for an accelerated approval and EMBARK will be fully enrolled by the time our BLA is filed. Furthermore, we anticipate dosing an additional cohort in Study 103 to study what our research informs us, our low-risk mutations in the currently excluded 1 to 17 range with the goal to narrow the exclusions to a low single-digit percentage by the accelerated approval time. We also intend to initiate a separate placebo-controlled non-ambulatory study later this year. That study was designated Study 303 for its indication. On the RNA platform, encouraged by seeing 18 times greater exon skipping, eight times greater dystrophin production and half the time and one-fifth of the dose of current standard of care, we initiated 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. While waiting continues globally, we announced in the quarter that the FDA has placed a hold on dosing in the United States, while we provide additional information and context around cases of hypomagnesemia. We have provided the requested information, and we continue to guide to completion of enrollment for MOMENTUM Part B in the second half of 2022. This confirmed in MOMENTUM Part B, SRP-5051 could be a profound improvement over the current standard of care. So at the same time, we are progressing the preclinical work for additional PPMOs to treat a greater percentage of the Duchenne population. My Head of R&D and Chief Scientific Officer, Dr. Louise Rodino-Klapac, will provide further color on the performance of our R&D pipeline. Now, to quarterly performance. This afternoon, we announced another exceptional quarter of execution and performance as we continue to serve the Duchenne patient community with our three approved therapies: EXONDYS 51, VYONDYS 53, and AMONDYS 45. Total revenue for the quarter was approximately $233.5 million. Net product revenue was $211.2 million, exceeding consensus and growing almost 50% versus the same quarter last year. Given our overperformance, we are now raising our full-year net product revenue guidance to between $825 million and $840 million. Summarizing, I could hardly be prouder of the Sarepta team for their tenacious execution this quarter. Even as we serve the community with our currently approved therapies, we made what could be a monumental leap in the advancement of SRP-9001 to the broader patient community. My colleagues and I are confident that this work will translate into a better life for individuals and families living with Duchenne in the United States and around the world. I want to thank my Sarepta team, I want to thank our committed investigators, and the patients who are participating in our studies, and I want to give a special thanks to the FDA for its time and guidance as we progress. All of these cohorts are necessary for the success of SRP-9001. And with that, let me turn the call over to our Head of R&D and Chief Scientific Officer, Dr. Louise Rodino-Klapac. Louise?

Louise Rodino-Klapac, Chief Scientific Officer

Thanks Doug. The significant achievements we've made recently with respect to SRP-9001, our gene therapy candidate to treat Duchenne muscular dystrophy, represent not just an important moment for Sarepta, but more importantly, for the patient community. Notably, we announced this past Friday, July 29, our intent to cement a BLA seeking accelerated approval for SRP-9001. We're thrilled with this development as it speaks to the strength of the underlying science and the data we've generated to date. I want to thank the team for all their work supporting this positive outcome and engaging with the FDA while also working on the BLA submission in parallel. Due to this major effort, we are well-positioned to submit our BLA this fall. The data we announced in early July, including important functional clinical results from studies 101, 102, and 103, and our integrated analysis will support this BLA submission. To remind you, Study 101 and 102 is clinical material, and Study 103 is commercially representative material. I'll now briefly recap these results for you. Starting with Study 103, or ENDEAVOR. We showed the patients in Cohort 1 with an end of 2020 improved four points from baseline on NSAA. Pretreatment had a mean baseline NSAA 22, and at week 52 improved mean of 26, approaching the top end of the NSAA scale. For example, these patients can now perform two activities unassisted that they were not able to perform prior to therapy. Equally impressive, SRP-9001 treated patients improved 3.8 points on unadjusted means and 3.2 points requiring of 52 weeks on NSAA compared to the propensity-matched external control group, with a p-value of less than 0.0001. These results are impressive as they demonstrate that commercially representative SRP-9001 improves motor function, and further confirms our confidence in the treatment effect of our therapy, increasing the probability of success for EMBARK or Study 301. Also, these data increase our level of conviction for EMBARK because the same commercially representative of SRP-9001 material is being used in both ENDEAVOR and EMBARK. Speaking of EMBARK, our clinical operations team has also executed flawlessly. As a result, enrollment in the study is nearly complete. In summary, Study 103 demonstrated improvements across all key secondary functional endpoints such as time derived, 10-meter walk run, time to extend four steps, and 100-meter walk run. Based on these data, patients receiving SRP-9001 improved significantly on every functional measure. I'll now recap our long-term results. These data are particularly important because they answered two of the most common questions. Are these data clinically meaningful? And is the effect durable? First, we will look at our original four patients after four years of treatment on SRP-9001 from Study 101. As a reminder, we conducted two analyses. NSAA change from baseline over four years in the four treated boys and then in comparison to an external control group using propensity score weighting. These data showed that patients with Study 101 demonstrated a mean increase of 7-points in total NSAA score from baseline in year four. Importantly, as these are older patients, around nine years old at year four, and because Duchenne is a disease that gets progressively worse, these patients would, according to the natural history of Duchenne, be in the steep decline phase of their disease. However, instead of declining, they've increased their function and maintained that increase, thereby demonstrating a distinct treatment effect that increases over time, supporting durability of SRP-9001. Based on the individual patient level data we showed, it's clear that all of these patients have remained stable and well above their baseline for this time period. No single patient drove the mean of the group. Further, when we compare the treated patients through propensity matched external control, we observed nearly a 10-point difference on unadjusted means and a 9.4-point difference using least squares with a p-value of 0.01 at four years. As an example, the SRP-9001 treated patients can now do five activities that those with the external control group were not able to accomplish. We are pleased to see that the treatment effect has continued to increase over time. It's also important to note that precipitous decline in years three and four of the external control group. These boys are now in a steep part of the decline phase of the disease, whereas the treated patients remain stable. Moving now to our two-year functional results from 20 patients, who received SRP-9001 in Part 1 of Study 102. At one year, we saw a 3-point median difference between the SRP-9001 group and the external control group. At week 96, this grew to a 5-point median NSAA difference with a p-value of 0.0001. The fact that only approximately half the patients in the treated group received a target dose makes these results even more impressive. I will now review the integrated efficacy analysis for all patients in studies 101, 102, and 103, who received a target dose of 1.33x10^14 vector genomes per kilogram compared to an external control. In this integrated analysis of one-year functional data for patients who received the target dose of SRP-9001, we show that the treated patients improved 2.4 points in NSAA total score from baseline. When compared to the propensity-weighted external control group, NSAA change from baseline one year after treatment for the treated patients was 3.1 points higher on unadjusted means and 2.4 points higher using least squares mean, with a p-value of less than 0.0001. As you can appreciate, these data now reinforce the consistency of NSAA improvements across three independent sites and show mean improvements across key secondary functional endpoints, such as time to rise and 10-meter walk run. We are also pleased to share expression data from all of the studies, which demonstrated consistency for both our clinical and commercial manufacturing process. Further, the safety profile of SRP-9001 remains consistent and manageable with no evidence of clinically relevant complement activation. In summary, these new data and our integrated efficacy analysis have demonstrated that SRP-9001 performs well above what natural history will predict and support potential as a disease-modifying agent. Now turning to Limb-girdle muscular dystrophy, or LGMD programs in our gene therapy franchise. For SRP-9003 and our other LGMD programs, we continue to make progress with respect to building the necessary steps of our manufacturing process, including LGMD-specific assay development and validation. In addition, our natural history study in Germany also continues to enroll and represents a key component of our LGMD development pathway. Our commitment to advance the best science and then translate that science into therapies for rare disease patients around the world remains strong. The progress we've made to date based on the clinical evidence, as well as a dedicated and tireless team of scientists and professionals positions us favorably to deliver on this commitment. Thank you to the patients, families, and investigators for their role in bringing forth these important therapies. I will now turn the call over to Dallan for an important update on our commercial activities. Dallan?

Dallan Murray, Chief Commercial Officer

Thank you, Louise. In the second quarter of 2022, the team delivered double-digit growth across all three approved RNA-based PMO therapies. We eclipsed $200 million in net quarterly product revenue for the first time, generating over $126 million for EXONDYS 51, $54 million for AMONDYS 45, and $30 million for VYONDYS 53. This represents roughly 12% growth over the prior quarter and almost 50% compared to the second quarter of 2021. We are thrilled with this performance, and in order to properly contextualize, it's important to note that we experienced ordering volatility due to the July 4th holiday, which fell on a Monday this year. We believe that approximately $5 million may have been pulled forward from Q3 into Q2 as a result. I urge the analysts to incorporate this pull-forward into their models for Q3. As a result of our performance in the first half of the year, as you've already heard from Doug, I'm happy to say that we're increasing our full-year net product revenue guidance from over $800 million to a range of between $825 million and $840 million. As we mentioned on our first quarter earnings call, there remain a number of important factors which could swing our final number in either direction for the rest of the year. These include competitive enrollment into some of our own clinical trials. They are somewhat hard to predict when it comes to the 30% of the Duchenne population that we serve. As such, we provided this $15 million range, which we intend to narrow as we get closer to the end of the year. It goes without saying that I'm very proud of the execution and commitment across all our teams at Sarepta, which enables this kind of success and growth. Moving on to the performance of each of our three P&L therapies. EXONDYS 51 has continued to generate strong double-digit growth as we approach the six-year mark post-launch, representing more than 23 quarters of growth and generating nearly $2 billion in cumulative revenue since the 2016 launch. The growth of nearly 8% over the first quarter of 2022 represents another successful effort by the team in overcoming and managing the predictable headwinds caused by insurance changes at the beginning of each year. The team continues their efforts to find patients. Overall, we expect very modest growth for EXONDYS 51 for the remainder of the year. VYONDYS 53 grew more than 35% over the second quarter of 2021 and over 7% compared to the prior quarter. We have continued our market leadership position in the exon 53 amenable population, and our team is continuing their efforts to get new patients on therapy and maintain existing patients. We don't expect any substantial changes with VYONDYS in the coming quarters. AMONDYS 45 continued its very successful launch with the second straight quarter of more than 25% growth over the prior quarter. As we've previously mentioned, the pace of both start forms and conversion onto therapy has been faster than our launches for EXONDYS and VYONDYS. As such, we expect the growth rate to start to slow in the coming quarters, as we continue to get more of the eligible population on therapy. The AMONDYS 45 launch has been the most successful to date, and it's worth mentioning that the team used this launch as a dry run to sharpen our skills and execution as we prepare the team for potential SRP-9001 launch. Assuming a positive outcome from a regulatory perspective, this will not just be the most important launch in Sarepta's history, but very likely the most important launch in the history of precision genetic medicine. I cannot emphasize enough how proud we are of our highly motivated team and the mission-driven work they do every day to support nearly 30% of patients who are amenable to one of our three approved RNA-based PMOs. I'm pleased with our current momentum and success in the first half of 2022 and for our team's enduring commitment and unwavering execution. We will continue to serve the Duchenne community with our PMOs, while we evolve and prepare ourselves to launch SRP-9001 for an even larger segment of the Duchenne population. Our work won't stop until we have effective therapies for all patients living with Duchenne muscular dystrophy. And with that, I'll turn the call over to Ian Estepan for an update on our financials. Ian?

Ian Estepan, Chief Financial Officer

Thanks, Dallan, and good afternoon, everyone. This afternoon's financial results press release provided details for the second quarter of 2022 on a non-GAAP basis as well as a GAAP basis. Please refer to our press release available on our website for a full reconciliation of GAAP to non-GAAP financial results. For the three months ended June 30, 2022, the company recorded total revenues of $233.5 million, which consists of net product revenues and collaboration revenues, compared to revenues of $164.1 million for the same period of 2021, an increase of $69.4 million. Net product revenue for the second quarter of 2022 from our PMO exon skipping franchise was $211.2 million, compared to $141.8 million for the same period of 2021. For the second quarter of 2022, individual net product sales were $126.4 million for EXONDYS 51, $54.7 million for AMONDYS 45, and $30.2 million for VYONDYS 53. The increase in net product revenue primarily reflects increasing demand for our products. As a result, we are raising our 2022 total revenue guidance to a range of $905 million to $920 million, and our net product revenue guidance for our RNA franchise to a range of $825 million to $840 million. In each of the quarters ended June 30, 2022, and 2021, we recognized $22.3 million of collaboration revenue, which relates to our collaboration arrangement with Roche. The reimbursable co-development costs under the Roche agreement totaled $26.4 million for the second quarter of 2022, compared to $18 million for the same period of 2021. On a GAAP basis, we reported a net loss of $231.5 million or $2.65 and $81.1 million or $1.02 per basic and diluted share for the second quarter of 2022 and 2021, respectively. We reported a non-GAAP net loss of $103 million or $1.18 per basic and diluted share in the second quarter of 2022, compared to a non-GAAP net loss of $130.6 million or $1.64 per basic and diluted share in the second quarter of 2021. In the second quarter of 2022, we recorded approximately $37.8 million in cost of sales compared to $19.5 million in the same period of 2021. The increase in cost of sales is primarily due to increasing demand for our products and write-off of certain batches of our products not meeting quality specifications for the three months ended June 30, 2022, with no similar activity for the three months ended June 30, 2021. On a GAAP basis, we reported $252.3 million and $239.6 million in R&D expenses for the second quarter of 2022 and 2021, respectively, a year-over-year increase of $12.7 million. The increase is primarily due to an increase in manufacturing expenses due to a shortfall of payment accrual related to our manufacturing supply agreement with Thermo Fisher, partially offset by decrease in upfront and milestone expenses during the second quarter of 2022, as compared to the same period of 2021. On a non-GAAP basis, R&D expenses were $230.4 million for the second quarter of 2022, compared to $220.7 million for the same period of 2021, an increase of $9.7 million. Now turning to SG&A. On a GAAP basis, we recorded approximately $154.3 million and $72.3 million of expenses for the second quarter of 2022 and 2021, respectively, an increase of $82 million. The increase was driven primarily by an increase in stock-based compensation expense due to the CEO grant modification agreement executed during this quarter. It's important to highlight, though, that this is a non-cash expense. On a non-GAAP basis, the SG&A expenses were $63.7 million for the second quarter of 2022, compared to $54 million for the same period of 2021, an increase of $9.7 million. On a GAAP basis, we recorded $17 million in other expenses, net for the second quarter of 2022, compared to $16.2 million in other expenses net for the same period of 2021. The increase is primarily due to losses on disposal of assets during the three months ended June 30, 2022. At the end of June 30, 2022, we had approximately $1.95 billion in cash, cash equivalents, and restricted cash and investments. So for once, it's finally nice to be lasting the lineup because I actually get to conclude by saying that we're absolutely thrilled with the feedback we received from the FDA for 9001. I think as everyone knows, we previously gated our spend and managed our expenses, and we obviously saw a very challenging market. However, based on the recent news, you'll now be ramping up our manufacturing capacity and further building out our commercial infrastructure so that we're prepared to serve the maximum number of patients with SRP-9001, if approved by the middle of the year. I thought it was also actually important to highlight, though, that due to the timing of these activities, I actually don't anticipate a material change in our spend for the remainder of the year, and I still expect our cash runway to extend into 2024. So finally, I just want to echo Doug's comments and thank the FDA for taking the time to evaluate our data, and we look forward to the review of our BLA submission. So with that, I'll turn the call back over to Doug to start the Q&A. Doug?

Doug Ingram, President and CEO

Thank you very much, Ian. Olivia, let's open the line for Q&A.

Operator, Operator

The first question is from Anupam Rama with JPMorgan. Your line is open.

Anupam Rama, Analyst

Congrats on all the progress. Can you talk about the factors that led the FDA to get comfortable with a potential approval in all ambulatory patients versus something more age-restricted to 4- to 7-year-olds? And how does this change the addressable population based on your market research?

Doug Ingram, President and CEO

Thank you very much. Thanks for the kind words, Anupam. So first of all, I'm not going to give you a lot of detail about the back and forth with the agency. I'll give you the broad stroke answer. Broadly speaking, the way the agency got comfortable was because we have a wealth of data that supports the therapy and its benefits over a broad group of patients. And so we think it's appropriate now, given the data that we have right now, to file a BLA for the ambulatory population. There's no reason to believe that if the therapy is a benefit to four- to seven-year-olds, based on the data shown repeatedly in multiple studies, it would be ineffective for children younger or older. It ultimately will not affect the addressable patient population. I want to be very clear, it is not our goal to treat simply the ambulant population as large as that population is as a percentage of the entire Duchenne. Our goal is to have the broadest possible label. The regulations will provide for that given the fact that the mechanism of action of our therapy is equally applicable across all age groups, to the extent that patients have skeletal muscle benefits from this shortened but functional dystrophin.

Anupam Rama, Analyst

Yeah. And just a follow-up. Obviously, the ambulant population is approximately 50% of the population. So if you were just modeling four to seven year-olds, you would have to double the available patient population based on an ambulant patient population at a minimum.

Operator, Operator

Thank you. And our next question coming from the line of Gena Wang with Barclays. Your line is open.

Gena Wang, Analyst

Thank you for taking my question. Also, congrats on the accelerated approval path. So I have three-part questions. Regarding the accelerated approval, the FDA feedback: What were the main endpoints that served as the basis of a submission for accelerated approval? Did the FDA validate the propensity-weighted control? And lastly, do you expect the FDA to request EMBARK data before accelerated approval?

Doug Ingram, President and CEO

Yeah. Thank you very much. So first of all, to justify the accelerated approval, it is the totality of all of the evidence, including all of the endpoints, and that includes the preclinical work. The ultimate endpoint that would be the surrogate endpoint would be the 9001 shortened functional dystrophin protein that we justified. We certainly provided the entire dataset, including our propensity analysis, and I think it's very compelling. We certainly played a significant role in the dialogue we've had with the agency. And then as related to EMBARK, there was never a discussion or a suggestion by the agency that they either would require or would await any of the EMBARK data, either interim or otherwise. So that was a good mission that arose in our multiple discussions with the agency.

Gena Wang, Analyst

Thank you.

Operator, Operator

Thank you. Our next question coming from the line of Steven Mallon with RBC Capital. Your line is open.

Unidentified Analyst, Analyst

Hi. Thanks. This is Steve on for Brian. Congrats on progress. And thanks for taking our question. Can you share a bit more on what you learned from reviewing the totality of the 9001 data on the relationship between micro-dystrophin expression and functional endpoints, including CK? And what gives you comfort there that the FDA is aligned with the relationship between expression and function?

Doug Ingram, President and CEO

I think what gives us comfort is that we have multiple in-depth discussions in the meetings but also telephonic meetings with the division both OTAT, CEDAR leadership, the Office of New Drugs, and as a result, we have significant conviction based on the written feedback we've received from the FDA that we are to seek a BLA for accelerated approval. Louise, do you want to comment further on any of the underlying data association?

Louise Rodino-Klapac, Chief Scientific Officer

I'll add that certainly, the strength of our data was in the preclinical data, and we've learned from our functional data linking the 901 dystrophin to function has continued through all of our clinical studies to see consistency across those clinical studies with 9001 dystrophin. The data is compelling, so I’ll just keep going back to about the totality of the data, the expression data, the biomarker data, and functional data is what we're producing.

Doug Ingram, President and CEO

Thank you. And on the animal data that predicted exactly what we would have seen in the studies that we've run. We've run just keep in mind we have dosed nearly 90 patients just in Study 101, 102, and 103. I'm not talking about March, which, as you know, we will have in the next few weeks. I think we will be fully enrolled in that study, and that will be another 60 patients before we cross them over. And we've seen very consistent results, very consistent functional results in the 101, 102, 103, very strong key values across all the underlying biological markers supporting the conclusion that this therapy provides a significant benefit. All the protein was properly localized and showed that the very single-digit reductions in CK. CK is a very noisy endpoint, and yet in every one of our studies, we see significant drops in CK that is a great ambition, the benefit that we're also seeing in the functional results both NSAA and time tests, all of which are truncated. We've seen third-party muscle MRI that has been truncated in the reduction of fat and fibrotic tissue. So there's just a wealth of total evidence that supports the conclusion from our perspective that the SRP-9001 therapy and the result in shortened functional protein, which was rationally designed over 14 or more years through both design and review of natural history, would justify the conclusion that our protein is functional. We have a very reliable safety profile. And based on all that plus the feedback we've received from the FDA, we think there is certainly appropriate and we have an enormous conviction about the pathway forward as we seek a BLA for an accelerated approval for the ambulant population and then follow-up in the non-ambulant population as soon as reasonably possible, as they're an important part of our mission.

Operator, Operator

And our next question is coming from the line of Judah Frommer with Credit Suisse. Your line is open.

Judah Frommer, Analyst

Yeah. Hi. Thanks for taking my question and congrats as well on the progress. We were just kind of curious given how close the timelines are between the accelerated BLA filing and the EMBARK data coming out. In your mind, is the accelerated BLA somewhat of a low-risk option to explore approvability? And does it in any way compromise, if you didn't get the accelerated approval, the ability to quickly file with the EMBARK data thereafter, to the point where if it's not accelerated, we should still be thinking about the same timelines for a Phase 3 filing?

Doug Ingram, President and CEO

I'll start by addressing the last question first. This will actually expedite our discussions, as we will be in a BLA with the agency. To be clear, we will not file unless we have strong evidence that the BLA would be well received and lead to a productive review. We do not view this as a low-risk situation. It would have been easier for us to wait for the EMBARK readout, but doing so and then filing a BLA afterward would delay getting this therapy to children by up to a year. Based on the feedback we've received, it's more appropriate and ethical to submit a BLA for accelerated approval. Given our data, we can deliver this therapy to patients as soon as possible. Although the NAV on Sarepta might be similar in both scenarios, it is a different situation for children waiting for this therapy. Every hour counts, and this is a serious disease that robs these kids of their muscle. If we can secure accelerated approval, thousands of children could retain muscle function that would otherwise be lost during the potential year-long delay associated with traditional approval. I want to emphasize that our decision for accelerated approval is based on thorough reviews and extensive discussions with the FDA, which has provided us with the confidence to submit the BLA this fall.

Operator, Operator

Thank you. One moment for our next question. And our next question is coming from the line of Tazeen Ahmad with Bank of America. Your line is open.

Tazeen Ahmad, Analyst

Hi, guys. Good afternoon. Thanks for taking my question. Ian, you said not to expect a meaningful uptick in expenses in Q4. But as you ramp up commercial supply, can you give us a sense of how expenses in 2023 could compare to this year? And then separately, can I ask on PPMO, when should we expect the next update, either data wise or on the path forward? Thanks.

Ian Estepan, Chief Financial Officer

Yes. Just on the expenses, you’ve seen an uptick in OpEx. However, because of the growth of our revenue from a net cash burn perspective, I actually expect it to be relatively flat for 2022 and 2023.

Doug Ingram, President and CEO

And I'll turn the PPMO question over to Louise, who might want to comment on the interactions with the PPMO.

Louise Rodino-Klapac, Chief Scientific Officer

Yes, with PPMO, we’ve obviously submitted information to FDA and are waiting for their feedback, so we’ll update as soon as we have that.

Operator, Operator

Our next question coming from the line of Salveen Richter with Goldman Sachs. Your line is open.

Salveen Richter, Analyst

Hi. Thanks for taking our questions, and congratulations on the feedback. We were wondering if you would be willing to divide the population, maybe accept a label in younger patients as part of this accelerated approval process. And how are the discussions in Europe progressing for a potential faster path to approval? Thank you.

Doug Ingram, President and CEO

Louise, do you want to take that question?

Louise Rodino-Klapac, Chief Scientific Officer

The first part of the question, could you...

Doug Ingram, President and CEO

I think it’s about a 60-40 split, and it's approximately every 50-50 in the estimated prevalent population.

Louise Rodino-Klapac, Chief Scientific Officer

That's correct. And then the European discussions are going well in our 301 trial, the global trial with European patients included. Certainly, this partner, Roche, is driving the ex-US development and conversations and discussions with health authorities are proceeding well. Our development in the US is supportive of that as well.

Operator, Operator

Thank you. And our next question coming from the line of Colin Bristow with UBS. Your line is open.

Colin Bristow, Analyst

Hey, good afternoon, and a big congrats on the progress. So a few from my side. Regarding the discussions around the accelerated pathway, can you give us any color on what was discussed regarding the sort of titering or product consistency issues in Part 1? And sort of what gets FDA comfortable with this? On the expression versus function data, this is something you've been teasing us with for a while. FDA has seen it, when should we expect to see it? And then just finally, the letter that you got from FDA, who is the signatory on the letter? Thank you.

Doug Ingram, President and CEO

So I’d like to give you that. But first of all, with respect to consistency, the number, the issue that occurred with respect to the clinical material previously that was related to Part 1 didn't relate to Part 2 of Study 102, but it had everything to do with the titering method that was being used by our partner, Nationwide Children's Hospital. They have this super coil titering method that resulted in, when we looked at them with a more accurate and titering method, that we saw that 60% of the batches were less than the target dose. That doesn't exist anymore. So just to be very clear, even before we move to our commercial manufacturing process itself, we had already developed a linear titering method that was far more precise. And generally speaking, our commercial process is in really all regards, much tighter. So we feel very good about the consistency of the process. So generally speaking, we did shed everything at the agency, including all of the biomarker data, preclinical data, expression data, functional data, expression CK and function data together. We're not going to provide additional updates, or do I really want to provide any sort of blow by blows in the agency. I think the obvious next step for us with respect to this therapy in the patient community is to get this BLA filed, get this BLA reviewed, and if successful, get this therapy to as many patients who would benefit as possible. Then finally, as it relates to the signatory on the letter that we received, it came from the Head of - Dr. Peter Marks.

Operator, Operator

Our next question coming from the line of Ritu Baral with Cowen. Your line is open.

Ritu Baral, Analyst

Good afternoon, guys. Thanks for taking the question. Just has there been a fundamental shift in how the FDA views gene therapy to proceed with the BLA submission with what feels like a priority review for a very broad population? And would you need to provide any biomarker data at month three from the EMBARK study to complement the BLA? Thank you.

Doug Ingram, President and CEO

Thank you very much for the questions. I think the agency has always been committed to gene therapy. I think that justification for this accelerated approval of BLA, which will be the first accelerated approval in gene therapy in vivo, is a result of the data that we have. I will remind you, this is not a data set that justifies this filing. We have nearly 90 patients worth of data. We have years of preclinical and animal data that shows how the surrogate endpoint, which is the 9001 protein, will perform. We translated it into patients, and we've seen great results. We've even seen great results over the longer term where you see what we would have anticipated and predicted, which is essentially a disease-modifying therapy where you get in that you had a very significant benefit in the first year. As you would expect from a disease-modifying therapy in a degenerative disease, you see that benefit grow significantly over time. You saw the two-year mark in 102. We had a five-point delta. And then you look at these kids, a small cohort, but still impressive. You see nearly a 10-point delta versus natural history. And then finally, on EMBARK, there has been no suggestion from the agency as we stand right now that they would need to see additional information from EMBARK.

Operator, Operator

Our next question is coming from the line of Brian Skorney with Baird. Your line is open.

Brian Skorney, Analyst

Hey good afternoon, everyone. Thanks for taking my question. Just to add to the questions around the FDA discussions. Just wondering if you had discussed with the FDA at all the thought about expanding the placebo-controlled portion of EMBARK. I know both the size and the follow-up period of the placebo-controlled portion of ESSENCE was increased after EXONDYS approval in order to have definitive results from a larger two-year study. Just wondering, was there any discussion about doing this for EMBARK if the AA pathway relieves a little bit of the pressure to get an early approval?

Doug Ingram, President and CEO

There were no discussions like that. We did not propose anything along those lines. Regarding ESSENCE, one reason we increased its size, which I believe was initially suggested by the FDA, was to ensure it was adequately powered, and we accomplished that. For EMBARK, our current assessment shows we are very well-powered, exceeding 90% based on our analysis. We feel confident about the status of EMBARK. Initially, we considered a maximum of 120 patients for the trial, and we decided on that number to prioritize success.

Operator, Operator

Thank you, one moment for our next question. Our next question is coming from the line of Hartaj Singh. Your line is open.

Hartaj Singh, Analyst

Great. Thank you. I just got two questions. And again, really nice update. One is, I was just wondering, as you mentioned, you've had a lot of conversations with the FDA over the last few months. If there was to be an AdCom, can you just speculate on what aspects the FDA could focus on? I mean, would it be various efficacy databases? Could it be the manufacturing? Could it be anything safety related? I mean, knowing full well, it's just poor speculation part. But I imagine you would have gotten a sense of where the FDA is comfortable and where they're not. And then just secondly, can you just remind us of the royalty or the tiering structure you have with Roche on ex-US sales for SRP-9001? Thank you.

Doug Ingram, President and CEO

Yeah. So thanks for your question, Hartaj. I mean, I would say, look, we feel great about where we are. We've got an enormous wealth of data that justifies the approach that we're taking right now. Obviously, all of this review issue. We'll submit our BLA. It will be filed. If all goes well, we'll have a very positive review. We haven't been informed by the FDA that we're going to get an AdCom. If there is an AdCom, we would actually invite it. We're excited. It should just be another opportunity for us to highlight our data, the safety and efficacy and the like. I’m sure that AdCom would go into all of the issues, which is certainly the CMC issues always feel very solid on the CMC issue. Obviously, on the core - the ability of our SRP-9001 protein to predict clinical benefit, I think the data is, it is an understatement to say it’s powerful. I mean, we’ve got an enormous amount of data on the patients we’ve dosed, analysis we’ve done, all the preclinical work, and of course, safety. But even on that, as we've said, this is, we take safety very seriously. We have a very laudable safety profile that we stack in right now. So we feel good about all of it. I'm sure if there was an AdCom - could not know that yet, we would expect them to explore all of those issues. But again, I think the totality of evidence that we have with respect to SRP-9001 and the justification for Accelerated Approval is very robust right now, and we feel very good about where we are and how this review would track.

Dallan Murray, Chief Commercial Officer

Yes. And then, as it relates to our royalty arrangement with Roche based on ex-US sales, surprisingly, the actual royalty rate goes from low-double-digits to the high-teens, and that's based off of our manufacturing yield that determines the exact level.

Operator, Operator

Thank you. And one moment for our next question. Our next question coming from the line of Tim Lugo with William Blair. Your line is open.

Tim Lugo, Analyst

Congratulations on all the progress for patients in the quarter. You mentioned that the expression or safety data from the non-ambulatory study would be available around the time of potential approval. Is that something that could be available or kind of supplemented in the filings? Is that something that could be available prior to approval, prior to an AdCom? I guess could you just talk a bit about when that could come out through 2023?

Doug Ingram, President and CEO

Yes. Thank you very much for the question. The importance of this accelerated approval pathway is particularly important to these patients. This year has been a very challenging time for the biotech investor, and it seems sometimes, and I understand why, but it seems sometimes the hope and vision are lately replaced with a sort of blinkered pessimism that results from what has been a tough year. I should remind us that as challenging as it may be, what we all do together, which is the biotechnology organization and our scientists and professionals, but importantly, also those on this call today, those of you who invest in biotechnology, this is unbelievably important to society and it endures our optimism. The science and genetic medicine, in particular, has made revolutionary advances over these years. Sarepta, in my view, is a leader in genetic medicine for rare disease, and we intend through our scientific execution and our tenacity to lead that return to optimism. And when optimism returns, it should be for companies like Sarepta that preferentially benefit. Companies like us with a strong balance sheet, with strong revenue, with best-in-class talent and with a strong late-stage pipeline poised to improve lives, not some distant future, but literally very soon. Companies like Sarepta that at least in my opinion, know how to execute and get things done. With that, I would ask you all to have a lovely evening. Thank you for your time.

Operator, Operator

Ladies and gentlemen, that does conclude the conference for today. Thank you for your participation. You may now disconnect.