Earnings Call Transcript - SRPT Q2 2023

Operator, Operator

Good afternoon and welcome to the Sarepta Therapeutics Second Quarter 2023 Earnings Call. At this time, all participants are in listen-only mode. After the speakers' presentation, there will be a question-and-answer session. As a reminder, today's program is being recorded. At this time, I'll turn the call over to Francesca Nolan, Executive Director, Investor Relations and Corporate Communications. Please go ahead.

Francesca Nolan, Executive Director, Investor Relations and Corporate Communications

Thank you, Jonathan. And thank you all for joining today's call. Earlier this afternoon, we released our financial results for the second quarter 2023. The press release is available on our website at sarepta.com and our 10-Q was filed with the Securities and Exchange Commission this afternoon. Joining us on the call today are Doug Ingram; Ian Estepan; Dallan Murray and Dr. Louise Rodino-Klapac. After our further remarks, we'll open the call for Q&A. I'd like to note that during this call, we will be making a number of forward-looking statements. Please take a moment to review our slides on the webcast which contain our forward-looking statements. These forward-looking statements involve risks and uncertainties, many of which are beyond Sarepta's control. Actual results can materially differ from the forward-looking statements, and any such risks can materially adversely affect the business, the results of operations and trading prices for Sarepta's common stock. For a detailed description of applicable risks and uncertainties, we encourage you to review the company's most recent quarterly report on form 10-Q filed with the SEC, as well as the company's other SEC filings. The company does not undertake any obligation to publicly update forward-looking statements, including any financial projections provided today based on subsequent events or circumstances. And now we'll turn the call over to our president and CEO, Doug Ingram, who will provide an overview of our recent product progress. Doug?

Doug Ingram, CEO

Thank you, Fran. Good afternoon, and thank you for joining our second quarter 2023 financial results conference call. The second quarter of this year was perhaps the most consequential period in the long, consequential history of Sarepta. For families living with Duchenne, it was far more than that. Buddy Cassidy, living with Duchenne and an ELEVIDYS advisory committee member, shared the collective view of the Duchenne community on the June approval in words far more eloquent than I could possibly muster. As Buddy said, and I quote, 'There is more to do. But now let us pause and bask in the glow of our achievement. Let us bask in gratitude. Let us pause in celebration. Let us watch as dawn rises and brings in the day,' close quote. In May of this year, the FDA held an advisory committee meeting on our gene therapy SRP-9001, now called the ELEVIDYS. With a majority vote, the advisory committee recommended the approval of an ELEVIDYS for the treatment of ambulatory patients with Duchenne muscular dystrophy. On June 22, the FDA granted accelerated approval for ELEVIDYS to treat Duchenne muscular dystrophy, currently labeled for four and five-year-old patients. At the time of the approval, FDA leadership informed Sarepta and the patient community that if our confirmatory trial EMBARK meets its objectives, the FDA will, in the words of Dr. Peter Marks, 'move with maximum speed following submission of the data to the agency, minimizing any impediments to review results rapidly and broadening the label by removing any age restrictions.' So we have our path. Our confirmatory trial is well-designed and powered to show a statistically significant benefit in the studied population. For the avoidance of doubt, we have powered this study to show a benefit in the studied population that's four to seven years old. And with that, we will have confirmed the mechanism of action in Duchenne patients applicable to all age ranges. We will have the top-line for EMBARK in the fourth quarter of this year. We will announce top-line results as we submit them to the division, followed shortly by a label supplement. If successful, we should be able to expand our label in the first half of 2024 to include the majority of Duchenne patients. Additionally, we have already commenced our non-ambulatory trial ENVISION or Study-303. And we intend to commence two trials with alternative approaches to cleaving or clearing pre-existing antibodies. Our goal is to expand our label for ELEVIDYS to cover as much as 95% of the Duchenne patients. In a moment, our Chief Customer Officer, Dallan Murray, will provide details on the early days of the ELEVIDYS launch. ELEVIDYS is our fourth approved Duchenne therapy, and we have been very successful with all of our prior launches. Consistent with our track record, the ELEVIDYS launch is going well. A significant number of sites are now initiated and ready to infuse, payer discussions and negotiations have been more positive than our prior successful therapies. And there's a significant amount of enthusiasm from physicians and families as we have a substantial number of start forms, and more coming in weekly. In fact, I am pleased to announce that the first reimbursed ELEVIDYS infusion occurred earlier today, that is faster than we projected and speaks to the team's ability to execute. And now, as positive as this is, please bear in mind that the significant ramping of infusions will begin later this year. This is primarily due to payer logistics and to the release protocol for an ELEVIDYS, which requires that both we and the FDA release each lot. Shortly, our Head of Research and Development and Chief Scientific Officer Dr. Louise Rodino-Klapac will provide an overview of our development activities including progress with our next-generation PPMO, SRP-5051, and on the gene therapy side with our LGMD portfolio. To remind you, in addition to ELEVIDYS, we have a deep pipeline and are advancing a number of therapies in 2023. In fact, we have 24 ongoing human clinical trials by the end of this year. And we continue to advance our next-generation viral cassette, MyoAAV, which in early animal models looks to be as much as ten-fold more tropic than current AAVs. From a manufacturing perspective, our technical operations professionals, more than 400, and all our focus, with our partner Catalent, on producing and releasing launch to support our launch. Looking to the midterm, we will also continue to work to establish comparability at our Thermo Fisher plant for ELEVIDYS. And then looking to the future, we are advancing our approach to manufacturing to support our entire pipeline. In fact, we have made great progress in next-generation suspension technology, which we will use across our gene therapy portfolio, including the LGMD programs, and even potentially for ELEVIDYS. In fact, we have largely completed our suspension-based process development for ELEVIDYS. And we've made three runs with 250 liters, with a fourth run to occur later this year, with the goal of scaling to 1,000 liters in the near term. We have seen yields that are multiples greater than the current standard. As the leader in gene therapy for rare diseases, we will continue to focus on improving the science and the delivery of our therapies. Moving finally to quarterly performance, we have had another strong quarter with our three approved PMOs, EXONDYS, AMONDYS, and VYONDYS. I am pleased to announce that second-quarter total revenue came in at $261.2 million in net product revenue from our PMOs came in at $239 million, exceeding internal estimates and analysts' consensus. In the second quarter, we saw no negative impact on the approved PMOs for many warehousing related to the ELEVIDYS approval and do not anticipate substantial impact over the course of the year. We remain comfortable with our full-year guidance of $925 million for total PMO net product revenue, with a current bias to modestly exceeding that guidance. It is too early in the launch to provide an accurate guidance for ELEVIDYS, but we will continue to evaluate that. At Sarepta, we have a distinct culture. It is easy to say one is patient-focused, but our words are backed by action. We put the welfare of our patients above all other considerations, and when necessary, we fight for them. And the tools we use for that fight include our commitment to scientific excellence and the courage to represent the patients who depend upon us. Our fight may not always be easy, but it is paying off. We have four approved therapies and a wealth of potentially life-enhancing programs in our pipeline. We will achieve $925 million on the first three of our four approved therapies this year and far more next year when our newest approval is considered. We have a near-term high probability success plan to broaden the label of the first and only gene therapy for Duchenne. And if our plans are successful, we could be profitable in the next few quarters. We have done a lot already. But with our plans, our pipeline, and our commitment to dogged execution, we have only just begun. And with that, I will turn the call over to Dr. Rodino-Klapac, who will provide an update on our research and development progress. Louise?

Louise Rodino-Klapac, Chief Scientific Officer

Thanks, Doug. The accomplishments within R&D over the last quarter are many and highlighted by the approval of ELEVIDYS on June 22, 2023. The approval of the ELEVIDYS via the accelerated approval pathway represents a win for the Duchenne community and an important step towards broad approval for individuals living with Duchenne regardless of age or ambulatory status. As we look forward to the weeks and months ahead, we remain firmly committed to our values to follow the science and present objective evidence that supports ELEVIDYS's ability to change the trajectory of Duchenne muscular dystrophy. Since 2018, and across multiple studies, we have dosed the largest number of Duchenne patients, more than any other gene therapy in development for this disease. To remind you, we've shown consistent results across three clinical studies with respect to both biomarker expression and functional results. In clinical trials, ELEVIDYS demonstrated positive results at multiple time points, including one, two, and four years after treatment, in addition to a consistent safety profile. The BLA for ELEVIDYS included efficacy and safety data from studies 101, 102, and 103, for ENDEAVOR, as well as an integrated analysis across these three clinical studies, comparing functional results to propensity score matched external control. Importantly, the functional data reinforce the consistency of NSA improvement across these three independent trials and show the improvement across key secondary functional endpoints, such as time to rise and 10-meter walk-run. The data from studies 101, 102 and 103 Cohort 1, which is ages four to seven, have now been either published or accepted for publication in peer-reviewed journals. When compared to appropriate control populations, ELEVIDYS has consistently shown a treatment effect as measured by change in MSA score at one year. We applied the learnings from studies 101, 102 and 103 in the design, execution, and statistical analysis plan for the Phase 3 EMBARK study. To remind you, EMBARK is a double-blind randomized placebo-controlled trial of ELEVIDYS in Duchenne patients ages four to seven. We completed enrollment in the fall of 2022. The trial will be considered successful if the entire treated population shows a statistically significant positive difference in NSAA scores at one year compared to placebo. Our conviction around EMBARK is founded in data and was designed based on our experience with studies 101, 102 and 103, along with our propensity-weighted external controls and natural history data sources. We took extensive measures to ensure success, which includes the following: The EMBARK study design improves on Study 102 with measures to increase homogeneity, including a floor and a ceiling on baseline NSAA, and a requirement for rising times to be less than five seconds at screening. We also ensured a balanced distribution between treatment arms, by including a stratification factor for baseline NSAA score. We also increased the target sample size to 120 to increase power and enrolled 125 patients. All of these measures resulted in a study powered well over 90%. As discussed at the advisory committee in May, when it assumes better deviation of 3.5 points, and 120 patients, EMBARK was powered greater than 90% to see a 2.2-point difference on NSAA. We have always been confident in the powering of the study. We've also done extensive analysis and modeling that provides additional confidence in the success of EMBARK. First, when the integrated summary of efficacy population included in the BLA was narrowed to those who met through one entry criteria for an NF 33, the standard deviation goes down, confirming increased homogeneity. We also perform simulation models for scenarios drawn from existing program data that have all yielded greater than 90% power. Given the entire protocol, we're able to detect even lower treatment effects. For example, with an assumed standard deviation of 3.5 points, our analysis would predict statistical significance at observed treatment effects and the overall intent to treat population as low as 1.3 points. Taken together, we have strong confidence in the Part 1 readout of EMBARK. With regards to additional ELEVIDYS studies, we've commenced dosing in ENVISION, our placebo-controlled Phase 3 study in non-ambulant and older ambulant patients with Duchenne. We are also on track to commence an additional study as well as an ELEVIDYS study in AAVrh74 antibody-positive Duchenne patients this year. This is all with the goal of serving the entire Duchenne population. Now moving to limb girdle muscular dystrophy or LGMD. We remain committed to advancing our LGMD portfolio across a variety of subtypes and look forward to providing updates on these important programs in the months ahead. We're pleased to report that we have fully enrolled Journey for the LGMD natural history study, 126 patients with circle glycan oppositely have been enrolled and will be followed for 36 months. We've also made excellent progress enrolling Voyagene, our Phase 1 study evaluating SRP-9003 for the treatment of limb girdle muscular dystrophy Type 2E, in ambulant adult patients and non-ambulant patients using clinical process SRP-9003 material. Combined with positive expression and functional data shared from our initial study, SRP-9003-101, we believe the data from Voyagene will give us insights into a broader patient population. Our next milestone for Voyagene includes completing enrollment in Q3 of this year and initiating our Phase 3 study using commercially representative process material later in the year. Finally, we've commenced dosing of a systemic pilot study NAVIGENE for SRP-6004 dual vector RH74 mediated gene therapy, to treat LGMD2B, characterized by the absence of the associated protein. The innovative dual vector strategy allows us to deliver the full length of Ferland gene, the sole cause of LGMD2B. We also continue to make progress in manufacturing for all LGMD candidates in our pipeline and look forward to initiating clinical studies as rapidly as possible. Turning now to the progress we've made with our RNA platform. We were pleased to complete enrollment in the first quarter of 2023 for a MOMENTUM study for SRP-5051. And we remain on track to announce data from the study in the back half of 2023. In regards to our post-marketing studies for the PMOs, as mentioned last quarter, we completed enrollment in the ESSANCE trial, or post-marketing requirements for golodirsen and casimersen and continue to make good progress with our MIS51ON study, which is on track to be fully enrolled this year. The accomplishments of 2023 and the opportunities before us refute the promise of science to fundamentally impact and change the lives of patients around the world. In the research side, we continue to make excellent progress on the MyoAAV platform, along with an exciting pipeline of genetic medicine candidates. My deepest gratitude to our R&D colleagues across RNA, gene therapy and gene editing for their extraordinary work to get us where we are today. Finally, to the patient community, we understand the urgency and we're working tirelessly to bring forth transformative genetic medicines as rapidly as science will allow. We're doing everything we can to expedite the EMBARK study readout so that we can expand the ELEVIDYS label. We expect the data will be available in the next three or four months. 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. We were thrilled to receive approval for ELEVIDYS on June 22. And we owe a tremendous debt of gratitude to the patients who participated in the trials, the KOLs, and our R&D colleagues for getting us to this point. As Doug and Louise have said, we are deeply committed to broadening the label at the earliest time point that is feasible. During this time, the team has been diligently working day and night to expedite access to this potentially transformative therapy for all eligible four to five-year-old Duchenne patients. Their dedication is focused on ensuring swift and seamless access for those who can benefit from ELEVIDYS. In these early stages, much of our focus is on supporting those sites with boys turning six years old. At the same time, we are also rapidly preparing the sites to treat all of the patients who are eligible today and laying the groundwork to be ready for a broader patient population when the time comes. The team's remarkable progress and unwavering sense of urgency in executing our Duchenne launches are truly commendable and reflect our commitment to providing timely access to potentially transformative therapies for patients. The commercial and medical teams began educating the centers within 24 hours of approval, as we've done in our previous three launches. Right from day one, our case managers were fully prepared to assist patients in navigating the intricate aspects of the gene therapy treatment journey. Doug has previously highlighted the unique components of a gene therapy launch, which we must get right in order to serve the community. The three areas of focus are site readiness, peer engagement, and building the capabilities for antibody testing. In terms of gene therapy site readiness, as of today, we have over 50 sites trained, activated and ready to receive product. We have achieved this ahead of our own aggressive timelines. On the payer front, since approval, the team has engaged both commercial and Medicaid payers, representing approximately 250 million lives. Continued progress has been made in educating and informing them on the clinical data to support policy formation to our approved FDA label. As an example, United Healthcare, one of the largest commercial insurers in the United States, published their coverage policy for ELEVIDYS yesterday, aligning the therapy to its FDA-approved label. And finally, to touch on antibody testing, over 700 kits are in the hands of our key sites within a day or two of approval. Testing is currently underway, and the process is working smoothly. We've seen very strong demand for ELEVIDYS and are encouraged by the discussions with KOLs, payers, and the broader community. We began receiving enrollment forms within hours of approval, and we continue to see them come in on a daily basis. Since June 22, the team has had over 500 interactions with both treating and referring sites. In these early discussions, our focus has been first and foremost on patient safety, eligibility, procurement, dosing and preparation, and reimbursement. Launching the first gene therapy for Duchenne patients requires a multifaceted approach with a high level of communication not only with HCPs and sites, but also patients, families, and payers to ensure patients have timely access to this groundbreaking therapy. As a result of our preparation and diligent efforts, we are now at the point where patients can begin receiving ELEVIDYS with confidence. As I previously highlighted, our engagement with payers has been constructive, and the team is optimistic and making progress towards our goal of ensuring timely access. Of note, we are seeing states reach out to their local KOLs and experts to inform policies. We expect to have payer policies in place within three to six months depending on the plan. In the interim, we are working with payers on a case-by-case basis to obtain access for patients. To that end, we have received multiple authorizations. And as Doug mentioned, we were thrilled to announce that the first patient was dosed today. Over the course of the next week and a half, we have a handful of additional infusions across the country scheduled with patients representing a combination of commercial and Medicaid insurance coverage. We are gratified by the tremendous work being done across the country to support patients. In particular, there has been a concerted effort since approval to rally around those patients who are approaching their sixth birthday. The incredible efforts to support those patients from all involved have been truly humbling. While we are encouraged by our progress and accomplishments to date, it's important to reiterate that we are not providing revenue guidance in the early stages of this one-of-a-kind launch. As Doug made clear on the approval call, we expect this to take some time in the early stages before dosing can begin in earnest to generate the launch ramp we are confident will come. I want to take a moment prior to reflecting on our PMO business to thank everyone within Sarepta and our key partners who have worked so hard to make this launch a reality and allowed us to be ready to serve these patients right from day one. Now regarding our PMO business, it's critical to highlight the fact that we have not lost a step supporting our PMO patient community while we've risen to the challenge of the first Duchenne gene therapy launch. As Doug mentioned, we delivered $239 million in net product revenue in the second quarter, representing 13.1% growth over the second quarter of 2022. EXONDYS 51 totaled $134.7 million, representing 6.6% growth over Q2 of '22. For VYONDYS 53, sales were $32.6 million, growing roughly 8.2% over the second quarter of 2022. And for AMONDYS 45, sales totaled $71.7 million, representing more than 31% growth versus Q2 of 2022. Total ex-U.S. net product revenue in the second quarter was roughly $35 million. This represented an increase over the prior quarter, which was expected and fully reflected in our annual guidance and forecast. As discussed on last quarter's call, we expect to see even more quarter-to-quarter fluctuations in the overall net product revenue as the ex-U.S. becomes a bigger percentage of the overall PMO mix. Importantly, these quarter-to-quarter fluctuations along with the shifting mix of the PMO revenue base have all been anticipated and fully reflected in our annual guidance. Overall, the fundamentals of the PMO business coming out of Q2 are completely in line with what we expected at this point in the year. And we reiterate our full-year guidance of $925 million in net product revenue for our PMO therapies. In closing, our teams are fully engaged and executing today to support patients with all four of our approved therapies. I'm particularly pleased to see the continued success of our PMO business in the second quarter. In fact, looking back on the execution of all three of our PMO launches should provide a high level of confidence in the future of Sarepta and our potential to transform the Duchenne space with ELEVIDYS and pave the way for precision genetic medicines for other rare patient populations such as limb-girdle muscular dystrophy. And with that, I'll turn the call over to Ian Estepan for an update on our financials. Ian?

Ian Estepan, Financial Officer

Thanks, Dallan, and good afternoon, everyone. This afternoon's financial results press release provided details for the second quarter of 2023 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 June 30, 2023, the company recorded total revenues of $261.2 million, which consist of net product revenues and collaboration revenues compared to revenues of $233.5 million for the same period of 2022, an increase of $27.7 million. Net product revenue for the second quarter of 2023 from our PMO exon skipping franchise was $239 million compared to $211.2 million for the same period of 2022. The increase in net product revenue primarily reflects increasing demand for our PMO products. In each of the quarters ended June 30, 2023 and 2022, we recognized $22.3 million of collaboration revenues, which relates to our collaboration arrangement with Roche. The reimbursable co-development costs under the Roche agreement totaled $28.2 million for the second quarter of 2023 compared to $26.4 million for the same period of 2022. On a GAAP basis, we reported a net loss of $23.9 million or $0.27 per basic and diluted share, and $231.5 million or $2.65 per basic and diluted share for the second quarter of 2023 and 2022, respectively. We reported a non-GAAP net loss of $75.2 million or $0.85 per basic and diluted share in the second quarter of 2023 compared to a non-GAAP net loss of $103 million or $1.18 per basic and diluted share in the second quarter of 2022. In the second quarter 2023, we recorded approximately $34.1 million in cost of sales compared to $37.8 million in the same period of 2022. The decrease in cost of sales primarily reflects a decrease in our royalty payments during the three months ended June 30, 2023, due to changes in the BioMarin royalty terms and a decrease in write-offs of certain batches of our products not meeting our quality specifications for the three months ended June 30, 2023, as compared to the same period of 2022, partially offset by an increase in demand for our PMO products. On a GAAP basis, we recorded $241.9 million and $252.3 million in R&D expenses for the second quarter of 2023 and 2022, respectively, a year-over-year decrease of $10.4 million. The decrease is primarily due to a decrease in manufacturing expenses, partially offset by an increase in clinical trial expenses and compensation and other personnel expenses. On a non-GAAP basis, R&D expenses were $212.2 million for the second quarter of 2023 compared to $230.4 million for the same period of 2022, a decrease of $18.2 million. Now turning to SG&A. On a GAAP basis, we recorded approximately $118.6 million and $154.3 million of expenses for the second quarter of 2023 and 2022, respectively, a decrease of $35.7 million. The decrease was driven primarily by a decrease in stock-based compensation expense. On a non-GAAP basis, SG&A expenses were $90.3 million for the second quarter of 2023 compared to $63.7 million for the same period of 2022, an increase of $26.6 million. On a GAAP basis, we recorded $16.9 million in other income net for the second quarter of 2023 compared to $17 million in other expense net for the same period of 2022. The change is primarily due to an increase in interest income and accretion of investment discount due to the investment mix of our investment portfolio as well as a reduction of interest expense incurred as a result of the repayment of our December 2019 term loan during 2022. In the second quarter, we entered into an agreement to sell the rare pediatric disease priority review voucher received from the FDA in connection with the approval of ELEVIDYS for a consideration of $102 million with no commission cost. The net proceeds were recorded as a gain from the sale of the PRV as ELEVIDYS did not have a carrying value at the time of the sale. And finally, we had approximately $1.9 billion in cash, cash equivalents, investments, and long-term restricted cash as of June 30, 2023. So in closing, I'd just like to reiterate how exciting a time it is for Sarepta and the patients we serve, seeing the first patient dosed today brought true joy to all of our hearts. And then from a financial perspective, we're looking forward to being one of the rare biotech companies to actually make the transition to profitability. In fact, we anticipate becoming non-GAAP EPS positive in the upcoming quarters. So this has truly been quite an accomplishment on all fronts for us, and we're particularly proud of what we've been able to do. And with that, I'll turn the call over back to Doug to start the Q&A.

Doug Ingram, CEO

Thank you very much, Ian, and hear, hear to those last comments. Jonathan, let's open the call for questions.

Operator, Operator

Certainly. Our first question comes from the line of Colin Bristow from UBS. Your question please.

Colin Bristow, Analyst

Hey, good afternoon. And congrats on another milestone with the first patient dosed. I guess sort of two-part question around the comments you made around EMBARK, hitting with as low as 1.3 point delta. I'm curious what is powering the 1.3 delta is at. And has there been any discussion with FDA whether this would be considered clinically meaningful? And then sort of formal to that, I think the common question we're getting is this is EMBARK this is the primary in your overall population, which shows a directional benefit in 4- to 5-year-olds, given there's no multiplicity strategy, has the FDA given any indication on whether this would be sufficient to maintain the approval status? Thank you.

Doug Ingram, CEO

So I'm going to turn the question over to Louise on the powering issue. But real quickly, just on the latter question, we haven't had discussions with the agency directly about clinical meaningfulness of a particular number. But I want to remind you that the effect one sees at 52 weeks isn't the effect. It's a signal of the long-term effect. Using an artful metaphor, if we took off from Los Angeles, and we were 1 degree off trying to get to Tokyo, by the time we hit Catalina Island, we wouldn't be that far off. But if we continue with that 1 degree, we'd be 500, 600-700 miles away from Tokyo. That's what we're dealing with here. This is a disease that is degenerative over time. If we can see a statistically significant benefit in a mere 52 weeks, we have clearly changed the trajectory of this disease in a very positive way. So with that said, let me turn the technical question on the powering calculations over to Dr. Rodino-Klapac.

Louise Rodino-Klapac, Chief Scientific Officer

Thanks, Doug. So based on the modeling that we did, this isn't a traditional power calculation. So this was a simulation model in order to determine the lowest effect size that we could see in order to hit statistical significance. So we put the following assumptions into our model, which was in 125 patients, which is the number of patients we enrolled. No dropouts because we've not seen any dropouts in EMBARK. We assumed a standard deviation of 3.5% across the entire four to seven-year-old population. And then we varied the effect size in order to see how low we could go in order to still hit statistical significance. And that's how we arrive at the equal to or greater than 1.3 as the lowest number. This isn't the assumed effect size. This is as low as the modeling will show us to still see statistical significance.

Doug Ingram, CEO

And then one final thing. Colin, you had asked about the way the agency would look at the data. Again, we are powered for success and EMBARK, and our goal is to see a statistically significant meaningful benefit from the therapy in 52 weeks. At the end of the day, the agency standard is to look at the totality of evidence across the primary and the secondary. So sort of statistical significance, we look at the presumably, we look at the totality of evidence to justify the mechanism of action and expand the label to the broader population.

Operator, Operator

Thank you. One moment for our next question. Our next question comes from the line of Brian Abrahams from RBC Capital Markets. Your question please?

Brian Abrahams, Analyst

Hey, guys. Good afternoon. Thanks for taking my question. So in the back half of this year, we're going to see data from several late-stage DMD gene therapies. I guess I'm curious, based on what you're seeing on the ground so far. If you have a sense as to what physicians and patients are going to be looking for as they potentially choose a gene therapy to take, assuming there's multiple therapies available. What are your views on the potential approval paths based on interim functional analysis? Is that something that you guys ever explored with or contemplated or explore with the FDA?

Doug Ingram, CEO

We currently have one approved gene therapy for Duchenne muscular dystrophy. To be honest, we are not focused on what other organizations are doing at this moment. Our priority is to serve the patients who can benefit from our therapy today and to expand our treatment label. That's our main focus right now. Among our concerns, addressing these priorities is at the top, while worrying about other organizations and their strategies is less important to us.

Operator, Operator

Thank you. One moment for our next question. And our next question comes from the line of Tazeen Ahmad from Bank of America. Your question please?

Tazeen Ahmad, Analyst

Hi, guys. Good afternoon, thanks for taking my question. I was hoping to get a little bit more detail on the one patient that was just dosed today. Maybe if you can share the age of the patient and also how long it took from the time the doctor identified the patient as appropriate for the drug to today. And do you expect that timeline to be representative on a go-forward basis, at least for the next few months, for uptake? Thanks.

Doug Ingram, CEO

I usually wouldn't comment on this due to patient privacy, but this case is already public on social media. The patient was just one day shy of turning six years old. There's been a tremendous effort from both our team and the physician's staff to ensure this patient received treatment before aging out. We also appreciate the payer's commitment to facilitating access for this patient, which reflects well on our team's execution as well as the dedication of the physicians we collaborate with. It also highlights the willingness of payers to be considerate towards patients, which is encouraging for all involved. Looking ahead, as I mentioned earlier and Dallan also emphasized, expect a significant increase in therapy administration later this year. There are clear administrative reasons for this delay, as payers and policies need to be finalized. Additionally, we have to manage the dual-release process, where we release the product and then the FDA does their part. However, as Dallan pointed out, we do have a few patients scheduled for infusions in the coming days. I want to stress that you should anticipate that increase in infusions later this year.

Operator, Operator

Thank you. One moment for our next question. Our next question comes from the line of Gena Wang from Barclays. Your question please?

Gena Wang, Analyst

Thank you. I will also ask the peer questions. So based on your initial interaction with other hospitals, how many of these Duchenne muscular dystrophy patients are approaching six years old? And what strategy have you tried to treat those patients before payers' policy is in place? And is there a way you can book revenue before the payer policy is in place?

Doug Ingram, CEO

I apologize. I missed the last part of your question. I'm going to turn this over to Dallan to answer, but you'll see that strategy, which is not our own strategy alone, but it is a shared strategy with these fairly passionate physicians working in close association with payers, is to prioritize children so that they can get access of all possible for the age-out of the label. And you saw that with the boy who received access today one day before his sixth birthday. But Dallan, do you have any other thoughts on that?

Dallan Murray, Chief Customer Officer

Yeah, Gena, thank you for the question. In the short term, we've been focused on those boys that are turning six in the next while. As Doug said in the earnings call, there's an incident population in Duchenne of 400 patients born each year. Now not all of those patients are diagnosed by the age of their sixth birthday. There's actually a pretty good percentage that don't get diagnosed by their sixth birthday. But there is a good number of patients sitting in the sites that are turning six, and a big focus in terms of our execution. As Doug also said, and as we've said before, we aren't guiding around patient numbers. We're going to focus on net revenue as we've done with the other launches.

Operator, Operator

Thank you. One moment for our next question. And our next question comes from Salveen Richter from Goldman Sachs. Your question please.

Salveen Richter, Analyst

Good afternoon. Thanks for taking my question. And congrats as well on treating the first patient here. With regard to the 3.5 standard deviation assumption, recognize that that's what you saw, I believe, in Study 103. I guess, is there anything else that you're using to support that assumption? And in the context of heterogeneity and even with stratification, what would be how you're thinking about the impact here if it's higher? Thank you.

Doug Ingram, CEO

One might think the opposite. The 3.5 standard deviation was initially used for EMBARK based on historical trials but did not account for the tightening of the protocol related to Study 303, 301, or EMBARK to reduce variability and create more consistency. We have established a strong ceiling and floor in that trial and have stratified by NSAA baselines as well as by age groups, specifically the four to five and six to seven-year-old ranges. Additionally, all patients have been limited to a rise time of under five seconds. All these measures should theoretically reduce variability and enhance consistency across the population, thus lowering the standard deviation. However, the 3.5 points referenced were established before these adjustments were made. The research team did not alter the standard deviation in their modeling efforts and did not incorporate those factors. We are confident in our current position. The study was designed for 120 patients, accounting for some expected dropouts. Currently, we have overenrolled at 125 patients, with zero dropouts so far, and we do not expect any before the last patient visit in mid-September. We feel very positive about where we stand now.

Operator, Operator

Thank you. One moment for our next question. Our next question comes from the line of Gil Blum from Needham & Company. Your question please.

Gil Blum, Analyst

Good afternoon, everyone. And thanks for taking our question. Maybe a bit of a rephrasing on an earlier question here. Is there a situation in what you think the data from EMBARK will be broken up based on age, given potential different feedback from the agency? Thank you.

Doug Ingram, CEO

No, no, we don't. The study has been powered to see a treatment effect in the study population, which is four to seven. It's very well powered to see that. And we've had conversations with the FDA and FDA leadership, which has confirmed that if we're successful in our trial, they will move rapidly once we've submitted data to them to review that data and to remove the age limitations.

Operator, Operator

Thank you. One moment for our next question. And our next question comes from the line of Uy Ear from Mizuho. Your question please.

Uy Ear, Analyst

Hey, guys. Congrats on dosing the first patient. So my question is just referring to what Doug said in the prepared remarks. You said you're going to expand the label in the first half to the majority of patients. Can you kind of elaborate by what you mean by that? Will the older patients and the non-ambulatory patients be included? Or would that come much later where I think your goal is to reach 95% of the patients? Thanks.

Doug Ingram, CEO

Thank you for your question. There are two key points to consider. Currently, we have a label for patients aged four and five. If EMBARK proves successful, which we strongly believe it will, we plan to submit that data to the agency right away, even before a BLA supplement is submitted, to expedite their review. If EMBARK is successful, we expect all age restrictions will be lifted from the label, allowing us to treat the majority of patients, including both ambulatory and non-ambulatory individuals across all age groups. We've already discussed with the agency the removal of these age limits, as ambulation status shouldn't restrict access; the therapy does not discriminate based on whether a patient uses a wheelchair. Additionally, we will gather further safety data from our ongoing non-ambulatory study to enhance the existing safety data for older and non-ambulatory patients. Our goal is to have a broad label for all patients by early next year. However, there will be two restrictions on therapy access for now. The first pertains to about 5% of mutations affecting exons 8 and/or 9, which will remain contraindicated for some time, though we will work to address that. The second involves patients with pre-existing antibodies, which our seroprevalence study indicates affects about 13.9% of patients. These individuals cannot currently receive treatment. However, as mentioned by Dr. Rodino-Klapac, we are initiating two alternative methods to eliminate these antibodies: telipidase and apheresis. If either approach is successful, we could potentially enable treatment for patients with pre-existing antibodies, increasing our reach to possibly 95% of patients. That is our objective.

Operator, Operator

Thank you. One moment for our next question. Our next question comes from the line of Michael Ulz from Morgan Stanley. Your question please.

Michael Ulz, Analyst

Hey, guys. Thanks for taking the question. Maybe just another one on the ELEVIDYS launch. In your prepared remarks, you mentioned greater than 50 sites are trained and activated currently. Just curious if you can give us the total number of sites expected? Just trying to get a sense of whether that represents a majority currently or where you're at in that process? Thanks.

Doug Ingram, CEO

50 sites is a tremendous number of sites. I am completely thrilled with the team's ability. So about 80% of all Duchenne patients are covered by about 50 centers of care in the United States. So 50 sites is an enormous number of sites to infuse ELEVIDYS. Our goal is to get to as many as 70 sites over time, and we're significantly ahead of schedule in our goal to do that. So we're in really, really great shape from a site perspective, and Dallan and his team deserve an enormous amount of kudos for where we've gotten right now.

Operator, Operator

Thank you. One moment for our next question. Our next question comes from the line of Danielle Brill from Raymond James. Your question please.

Danielle Brill, Analyst

Hey, guys. Good afternoon. I have a quick follow-up to Salveen's question on the standard deviation. I guess I'm curious, are you able to see blinded SD data or any other blinded data from EMBARK that allows you to stress test your powering assumptions? Just kind of hoping you can elaborate further on your confidence in the assumptions. Thanks.

Doug Ingram, CEO

We do not have access to the unblinded data, so looking at the blinded data wouldn't provide much insight. We feel quite confident about our initial study being powered with the standard deviation we observed in studies without the homogenizing restrictions present in EMBARK. However, the simulations conducted by Louise and her team, along with our statistics group, did not consider the homogenizing aspects of the protocol changes, such as stratifying by age and ensuring that all children had a rise time under five seconds, in addition to having strong floors and ceilings. Therefore, we are optimistic about the study's power and the standard deviation we have, though we have not been able to test those assumptions with unblinded data.

Operator, Operator

Thank you. One moment for our next question. And our next question comes from the line of Ritu Baral from TD Cowen. Your question please.

Ritu Baral, Analyst

Good afternoon, everyone. Thank you for the question. Regarding the centers, Doug, could you confirm if the few patients you mentioned will be at five different centers out of the 50? Also, could you share if there are particular centers that you think will progress more quickly than others, possibly due to their experience with Zolgensma and their level of comfort?

Doug Ingram, CEO

I can't speak to the last part of your question, but I can address the first two. All of the patients are being treated across different sites. If there are any sites that are moving faster, the good news is that the enthusiasm from the physicians is impressive. Everyone is working diligently to get children treated, especially those who might age out. We have greatly benefited from the fact that most of these sites have experience with Zolgensma and are familiar with administering gene therapies, so they were prepared before we initiated the process. Overall, there is a strong commitment to move as quickly as reasonably possible to ensure patients can benefit from ELEVIDYS.

Dallan Murray, Chief Customer Officer

And in terms of the antibody testing, it's going smoothly and functioning well, and we aren't disclosing the numbers right now, but it is working well and going smoothly. And we're happy with the demand.

Operator, Operator

Thank you. Our next question comes from the line of Anupam Rama from JPMorgan. Your question please?

Anupam Rama, Analyst

Hey, guys. Thanks for taking the question. Just a clarification point. Sorry if I missed this. What are the gating factors to starting the SRP-9003 pivotal study later this year? Thanks so much.

Doug Ingram, CEO

I'll turn this over to Louise without getting any of it wrong, but I think it's all just CMC and manufacturing, if I'm not mistaken. But Louise, you tell me if I'm missing a nuance.

Louise Rodino-Klapac, Chief Scientific Officer

No, that's accurate. We're ensuring that the release assays are ready, and we're fully prepared. As we mentioned, we have completely enrolled the Journey study and have a large number of patients ready, most of whom also have natural history data.

Operator, Operator

Thank you. One moment for our next question. And our next question comes from the line of Josh Schwartz from Leerink Partners. Your question please.

Unidentified Analyst, Analyst

Hi, all. This is Will on for Joe today. Thanks for taking our questions. I'll add my congrats on the progress this quarter. So one for us, wondering what the opportunity is for SRP 5051 relative to the PMOs that you currently market. Is this a potential franchise expander? And are there any reasons why a patient is not currently on a PMO, but would be a candidate for PPMO? Thank you.

Doug Ingram, CEO

So broadly speaking, if it's successful, we'll see the data later this year. If we're successful with that data and if the risk-benefit analysis supports it, we plan to seek an NDA for 5051 next year. The primary objective would be to create a more convenient and potentially more effective version of our PMOs. For patients already receiving therapy, transitioning to this new therapy could greatly benefit them. In the United States, our access success rate has been strong, and it could improve even further if we are able to provide 3% to 5% more dystrophin than the PMOs. Additionally, this presents a theoretical opportunity to expand our RNA technology beyond the United States, which excites us as it could help more patients worldwide. There is significant potential with the PPMOs if they prove successful. We are looking forward to analyzing Part B of the momentum later this year and making informed decisions across our portfolio, moving things forward aggressively if 5051 shows promise.

Operator, Operator

Thank you. One moment for our next question. And our next question comes from the line of Kristen Kluska from Cantor Fitzgerald. Your question please.

Kristen Kluska, Analyst

Hi, everyone. Congrats on today's milestone. Given that you're taking all these steps now across sites, payers and antibody testing, is it your expectation that if you end up getting a broader label in the first half of next year, that the three to four month timeline you've communicated to us in terms of patients getting on therapy could be shortened? Thank you.

Doug Ingram, CEO

Yeah. The answer is generally speaking, yes. This really is an initiation issue with the launch of the therapy, policies have to be in place. In some places, codes have to be in place and the like. And then, of course, we have this current release process. So we ought to be in a position to move faster over time. But as I said before, we've had a lot of very fantastic early success, but we should assume that the real ramp begins later this year.

Operator, Operator

Thank you. One moment for our next question. And our next question comes from the line of Tim Lugo from William Blair. Your question please.

John Boyle, Analyst

Hi, team. This is John on for Tim. Thanks for taking our question. So I was just wondering beyond the effort that the team is making to get access to patients approaching six years of age, just wondering if you could talk a little bit about any higher demand you're seeing from the patients approaching that age cutoff and if you're seeing more patient starts from those patients.

Doug Ingram, CEO

I'll turn this over to Dallan.

Dallan Murray, Chief Customer Officer

Yes. Thank you for the question. We're observing strong demand across both the four and five-year-old age groups. Initially, access tends to be more focused on patients with upcoming birthdays, likely due to the urgency and conversations taking place among key opinion leaders, payers, and our teams. So at the start, we notice a concentration on those turning six; however, we anticipate this to balance out quickly as we engage with all eligible patients in the four to five age brackets.

Doug Ingram, CEO

So we're seeing demand in start forms across the ages. We'll likely get access skewing to the older kids in that age range for the obvious reason that we want to get them dosed before there's an issue with the label.

Operator, Operator

Thank you. One moment for our next question. And our next question comes from the line of Brian Skorney from Baird. Your question please.

Unidentified Analyst, Analyst

Hi, this is Luke on for Brian. Thanks for taking our question. Regarding the pace of progress getting the ENVISION trial up and running, have you seen any signals that the availability of commercial products might be a headwind to enrollment in the ambulatory population?

Doug Ingram, CEO

The answer to that is no. So we were very thoughtful about the protocol for ENVISION. In fact, we've significantly limited the number of patients that are going to come out of the United States to ensure that we don't have an issue with the progress of that therapy as we broaden the label. Now that does mean that the enrollment for ENVISION will move slower than for instance, EMBARK, which rapidly enrolled as everyone may recall. But ultimately, we're not seeing an impact from this approval on that basis, and part of it is because we're going to enroll the majority of subjects outside of the United States.

Operator, Operator

Thank you. One moment for our final question for today. And our final question for today comes from the line of Debjit Chattopadhyay from Guggenheim. Your question please.

Debjit Chattopadhyay, Analyst

Hey, good afternoon. What is the current gross margin for ELEVIDYS? And where do you think it will migrate either on peak capacity or if you could successfully migrate to the 1,000-liter scale?

Doug Ingram, CEO

Sure. I'll turn this over to Ian.

Ian Estepan, Financial Officer

We anticipate that the margins will be comparable to high-quality targeted agents, around 80%, similar to what we're observing with our PMOs. Initially, the margins will be higher with earlier patients, but will decline as heavier patients are included. We expect to stabilize around that 80% range. Additionally, there could be significant changes, but we can't currently quantify that from our manufacturing standpoint regarding the suspension process. However, this could certainly impact our yield and potentially increase that number, though we aren’t ready to commit to that just yet.

Operator, Operator

Thank you. This does conclude the question-and-answer session of today's program. I'd like to hand the program back to management for any further remarks.

Doug Ingram, CEO

Thank you, Jonathan, and thank you, everyone, for joining us this evening and for your questions. I appreciate it. We've obviously made, from my perspective, great progress so far this year, both with the approval of ELEVIDYS and then serving patients, both with ELEVIDYS and with our existing PMOs. I will remind us that the team has done a brilliant job of continuing to serve the community with our PMOs. And we feel very confident about our current guidance on the PMOs. We have a lot to do for the rest of the year, both serving these patients, continuing to serve the patients with the PMOs, getting the EMBARK readout about which we have an enormous amount of condition, and then we will share that with you essentially at the same time that we share with our colleagues at the FDA. Our goal, of course, is to broaden this label as soon as reasonably possible and bring ELEVIDYS to the vast majority of patients living with Duchenne and their families. With that, I look forward to updating everyone over the course of the quarter, and I would ask everyone to have a lovely evening.

Operator, Operator

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.