Sarepta Therapeutics, Inc. (SRPT) Q1 2017 Earnings Report, Transcript and Summary

Good afternoon ladies and gentlemen and welcome to the Sarepta Therapeutics Inc. Q1 2017 Earnings Conference Call. At this time all participants are in a listen-only mode. Latter we will have a question-and-answer session and instructions will be given at that time. [Operator instructions] As a reminder this conference call is being recorded. I would now like to introduce your host for today's conference, Mr. Ian Estepan Executive Director of Corporate Affairs. You may begin sir.

Thank you Nova [ph]. And thank you all for joining today’s call. Earlier today we released our financial results for the first quarter of 2017. The press release is available on our website at www.sarepta.com. And our earnings 8-K was filed earlier this afternoon. Slides outline the agenda for today's call can found on the Investor Section of our website. Joining me on a call today are Ed Kay, Chief Executive Officer; Sandy Mahatme, Chief Financial Officer and Bo Cumbo, Head of Global Commercial. After our formal remarks we will open up the call for the Q&A period. I'd like to note that during this call we'll be making a number of forward-looking statements. Our full forward-looking statements pledging is on Slide 2. Please take a moment or review this slide. These forward-looking statements involve risks and uncertainties, many of which are beyond Sarepta’s control. Actual results could materially differ from those forward-looking statements as any of such risks can materially and adversely affect the business, results of operations and the trading price of Sarepta’s common stock. For a detailed description of applicable risks and uncertainties we encourage you review the Company's most recent quarterly report on Form 10-Q and annual report on Form 10-K, filed with the Securities and Exchange Commission, as well as the Company's other SEC filings. We plan to file the 10-Q for the quarter 2017 by the SEC required filing deadline in May. The Company does not undertake any obligation to publicly update its forward-looking statements including any financial projections provided today based on subsequent events or circumstances. With that, let me turn the call over to Ed for of both the corporate and clinical updates. Ed?

Thank you Ian. Good afternoon everyone. We appreciate you joining us for the Sarepta’s first quarter 2017 financial results and the corporate update call. In our first quarter we had many notable achievements across all areas of the business, which were aligned with our goal of ultimately helping as many DMD patients as possible. These achievements consisted of continuing to make progress with the commercial launch of EXONDYS 51 in the U.S. expanding into ex-U.S. territories and building an innovative pipeline. Based on the commercial trends we have observed to date for EXONDYS 51 we are raising our full-year revenue guidance from exceeding $80 million to exceeding $95 million dollars. Later on the call, Sandy will provide an update on net revenue for EXONDYS 51, our financial goals for the first quarter of 2017 and guidance for the remainder of the year. Bo will review the progress of the EXONDYS 51 launch and outline the build out of our European footprint. Before turning the call over to Sandy and Bo, I will begin with an overview of the progress that we have made over the quarter and outline our plans for the remainder of the year. The strong early trends that we reported on our year-end and fourth quarter 2016 call have continued. EXONDYS 51 is the first and only treatment approved in the United States that targets dystrophin deficiency, the underlying cause of Duchenne muscular dystrophy. The drug is designed to bind to EXONDYS 51 in dystrophin pre-messenger RNA resulting in the exclusion or skipping of this exon with the goal of restoring the reading frame and allowing for the production of an internally truncated dystrophin protein. Based on this mechanism of action, it's important to note that EXONDYS 51 can be used with or without steroids which only address the symptoms of DMD not the underlying cause of the disease. As a part of our ongoing development efforts and supportive access, we continue our strong commitment to generating clinically significant data. As you are aware, EXONDYS 51 was approved with a broad indication that has no restriction on age or disease severity. We believe the vast majority of the 13% of patients amenable to skipping exon 51, including those in near end-of-life could benefit from treatment. At the MDA Scientific Conference in Arlington, Virginia, we recently reported EXONDYS 51 treated patients from Study 201/202, demonstrated approximately half the rate of decline as age-matched patients. These were ages seven to 15.5 years. From a published national history study as measured by forced vital capacity percent predicted. And at the age adjusted mixed-effects analysis of the FEC present predicted EXONDYS 51 treated patients experienced an annual decrease of 2.3% of pulmonary function, compared to a 4.1% decline for the untreated natural history cohort. These data support that patients treated with EXONDYS 51 experience less deterioration of respiratory muscle function the natural history would predict. We view this as notable because patients would Duchenne unfortunately often die from respiratory or cardiac complications. Physicians at the conference who treat DMD boys appreciated the significance of the pulmonary function data and we believe that publication of this data will help support eligible ambulatory and non-ambulatory patients as they seek access to EXONDYS 51. The last patient in Study 204 will complete the 96-week study by the end of April. Our 204 Study is a Phase II, open label, multi-center study to evaluate the safety and tolerability of eteplirsen in advance stage DMD patients who are amenable to exon 51 skipping. We plan to analyze data and believe these analyses will be complete by the end of the year. We also expect dystrophin data from Study 4045-301 our European Phase II study of patients amenable to exon – skipping exon 53 skipping to be available also in 2017. We are in late stage discussions with the FDA on the final protocols for dystrophin measurement and quantification. Details of the protocol will be finalized and we will be able to provide more specific timing at the time of the data readout. We've been measuring exon skipping in dystrophin production via iTPCR, immuno-fluorescence signal intensity present dystrophin positive fibers, and Western blot. This comprehensive approach will allow us to actively measure the quantity and the location of the dystrophin produced by both our PMO and PPMO exon skipping agents. In addition to research and clinical development efforts, we are focused on expanding the number of DMD patients who have access to EXONDYS globally. There are in fact more boys afflicted by DMD in Europe than in the U.S. As a reminder our Marketing Authorization Application, our MAA, was validated by the European Medicines Agency at the end of last year. The proposed indications for EXONDYS in the MAA includes all patients amenable to exon 51 skipping aged four or older. We have received initial feedback from the EMA over the next several months expects to engage in meetings with them to discuss their feedback. The purpose of these meetings will be do agree on the next steps as we work through the multi-phase review process. In the meantime, we are currently planning to submit a request to the EMA for a six months clock stop to complete our ADME study. We also plan to use this time to collect data and conduct additional analyses from existing studies to address any EMA questions or request that may come. After completing these activities we anticipate EMA to continue to review until the final determination is made. We began building our global footprint in Europe this quarter to support a potential launch of EXONDYS. We have hired a general manager for the region and our European headquarters is currently based in Zug, Switzerland. We are continuing our IP efforts to secure access to the European market. And finally we remain on track to initiate our managed access program in late 2017. Next I'd like to turn your attention to our clinical pipeline for DMD, which we believe is the most extensive in the industry. ESSENCE a Phase III randomized, double-blind, placebo-controlled study for patients amenable to either exon 45 or exon 53 skipping, is on track and enrolling well. The first patient at a European site has been screened this quarter. And we expect the trial to be fully enrolled by the end of the year. ESSENCE serves as a registrational study for our clinical candidates SRP-4054 3 SRP-4055 and SRP-4053. The final protocols for the EXONDYS 51 post marketing commitments are still being discussed with the FDA. The data generated over the next several years will help inform and determine the clinical effectiveness of this drug. Based on our current assumptions final data from post marketing commitments will not be likely available for several years. Now switching gears to our PPMO platform, we're excited about the potential for this new class of Chemistry that we're developing. PPMO is a specifically designed cell penetrating peptide added onto the PMO backbone with the goal of increasing tissue penetration, leading to greater exon skipping efficiency and eventually dystrophin production. In the MDX mouse model we observed of 10 to 30 fold increase in dystrophin production for PPMO, compared to PMO and skeletal cardiac and smooth muscle cells. Increased dystrophin could lead to better efficacy, as well as less frequent dosing for patients. PPMO has demonstrated the ability to penetrate and attack muscle membrane in, in vivo studies which we believe could allow application of the technology to other neuromuscular diseases such as Pompe disease, myotonic dystrophy, facioscapulohumeral dystrophy, FSHD and Friedreich's ataxia, in addition to targeting the muscle we anticipate PPMO may have the ability to target other organs in the body. If the safety profile of our PPMO compound is confirmed in our ongoing GLP toxicology studies we plan on rapidly advancing PPMO into the clinic later in 2017. In summary, we are pleased with the advancement of our clinical pipeline on all fronts. Our mission is to treat as many patients as possible and the recent addition of our Chief Medical Officer, Catherine Stehman-Breen will further accelerate and focus our clinical development path. Now I'd like to turn the call over to Sandy for an update on our financials for the first quarter of 2017. Sandy?

Thanks Ed. Good afternoon everyone. We are pleased to report that based on continued patient and physician interest in EXONDYS 51, coupled with progress in the reimbursement landscape, we generated net revenues of $16.3 million from the sales of EXONDYS 51 in the first quarter of 2017. Based on the recent trends, that Bo will elaborate, on we have gained some clarity on the launch trajectory. These trends have continued into April and based on the information that we have to date we feel comfortable raising our net revenue guidance for the year from exceeding $80 million to exceeding $95 million. Our guidance only includes sales generated in the U.S. and does not include any potential sales from a managed access program which we expect will begin to with the tail end of the year. So we are quite pleased with how the launch is progressing, our Q1 achievements and believe that we are well-positioned for future growth. We finished Q1 with the strong cash position with to the completion of the sale of our rare pediatric disease, priority review voucher or PRV for $125 million. This sale, as I have previously stated, provided an important source of non-diluted capital to the company and was recorded as a gain from the sale of an intangible asset for GAAP purposes. This is a onetime transaction and has been excluded for non-GAAP reporting. This afternoon's press release provided details for the first quarter of 2017 in both an adjusted or a non-GAAP basis as well as GAAP basis. The press release is available on the SEC and company websites. The non-GAAP results we will discuss on this call provide more accurate picture for ongoing operations and the impact of operations on our cash balance and they exclude restructuring, stock compensation expense and gain from the sale of the Company's PRV. Please refer to our press release for a full reconciliation of GAAP and non-GAAP. In the first quarter of 2017, we reported an adjusted non-GAAP net loss of $33 million, or $0.60 per share, compared to a non-GAAP net loss of $52.5 five million or $1.15 per share in the first quarter of 2016. The decrease is due to product sales of EXONDYS 51, lower manufacturing expenses due to the capitalization of inventory upon the approval of EXONDYS 51 by the FDA and those offset by the increased professional services primarily due to increased legal fees and commercial initiatives. As I previously stated, revenue for the first quarter of 2017 was $16.3 million. No revenue was recognized in the first quarter of 2016. Adjusted research and development expenses were $27.2 million for the first quarter of 2017, compared to $35.9 million in the first quarter of 2016, a decrease of $8.7 million. The decrease is due to lower manufacturing expenses because of the capitalization of inventory upon the approval of EXONDYS 51, offset in part by increased patient enrolment in our ongoing clinical trials. Adjusted selling, general and administrative expenses were $22.2 million for the first quarter of 2017, compared to $16.6 million in the first quarter of 2016, an increase of $5.6 million, primarily due to higher legal fees and commercial initiatives. Our research and development, as well as selling general and administered expenses for Q1 were in line with our expectations and we are not changing or updating our expense guidance for the year. We had approximately $391 million in cash and investments at the end of the first quarter. In addition we have prepaid approximately $21 million towards our 2017 and 2018 manufacturing expenses. To conclude, we believe our guidance places us in a very strong position to successfully achieve our goals for the remainder of the year. With that I'd like to turn the call over to Bo for an update on the U.S. launch of EXONDYS 51. Bo?

Thank you Sandy. Good afternoon everyone. We're increasingly confident in our ability to execute a successful launch for EXONDYS 51 as evidenced by our updated net revenue guidance for the year. Although we are still in the early stage in the launch we are seeing encouraging trends emerge regarding the commercial prospects for EXONDYS 51. We are continuing to evaluate the market size as we progress throughout the launch. Based on the current literature, we believe there are approximately 9,000 to 12,000 boys living with DMD in the United States and approximately 13% of these boys have mutations amenable to skipping exon 51. Patient demographics have remained fairly consistent throughout the launch to date. The mix of patients on commercial Medicaid plans has remained at approximately four to 60 to 40. Based on natural history studies boys with DMD typically lose ambulation between the ages of 11 and 13 years of age. While we do not capture the status of ambulation within our start forms the average age of patients currently on therapy is now between 14 and 15 years, which indicates both ambulatory and non-ambulatory patients are obtaining access to EXONDYS 51. Off note we last reported the average age of patients on therapy was 13 years of age. This increase suggests progress in securing reimbursement for non-ambulatory patients. From a compliance and persistence perspective we have previously reported that approximately 40% to 50% of patients opted to have ports placed prior to their first infusion. And this trend continued in the first quarter. Although port placements initially slowed down the time to first infusion, we expect this would lead to a better experience for the patient and result in better long-term compliance. Although we are still early in the launch, we are seeing high compliance rates and minimal discontinuations consistent with our clinical trial experience. At this stage of the launch we have not observed drug related side effects leading to discontinuations or multiple missed doses. From a managed care standpoint, reauthorizations are a standard part of the reimbursement process and to date we have not observed a major impact on persistence rates. We have previously highlighted that educating physicians, health care providers and DMD families about the importance of genetic testing, would be critical for a successful launch. We have completed preliminary market research which reveals our efforts have resulted in approximately 19% increase in genetic testing for patients since our initial pre-launch survey. As a result of this genetic testing a greater number of physicians now know which patients have mutations that are amenable to skipping exon 51. Another important genetic testing effort is to decode Duchenne partnership with PPMD [indiscernible]. They have reported a greater than two hundred percent increase in Q1 one 2017 versus Q1 2016 for new applications for genetic testing. These efforts have led to newly we diagnosed patients. We believe our educational efforts will continue to increase generic testing, diagnosis and treatment over time. As we mentioned during our fourth quarter conference call all the top tier DMD centers have submitted start forms. The number of exon 51 amenable start forms has continued to rise in total week over week resulting in an increased penetration rate throughout the first quarter. The steady flow start forms throughout the quarter was driven by continued patient demand increase physician confidence and new patient identification. Tier 1 and Tier 2 DMD centers which treat approximately 80% of the known DMD population are still consistently submitting star forms. In addition more to Tier 3 submitted start forms this quarter resulting in our total DMD prescriber base increasing by approximately 30% since Q4. There are currently more than 130 physicians submitting star forms. Active physician prescribing along with other positive trends continue to give us confidence in the overall trajectory of the launch and we are pleased with the success we're having today. We continue to have productive discussions with payors and have made significant progress securing reimbursement for patients. There's been a steady increase in starting patients on therapy with March being the highest month and we are seeing this trend continue into the second quarter. Based on our activities to date, we believe payors have a much better understanding of the disease, the number of patients eligible for treatment under their plan and the patients who would most likely benefit from EXONDYS 51. To recap, the commercial team has been focused and successful at obtaining exon 51 one eligible star forms supporting broad access for patients, maintaining patients on therapy and increasing genetic testing in diagnosis through eradication. Our goal is to provide access to as many patients as possible. Toward that goal, we are working on distribution agreements a manage access program in territories outside the United States and expect these agreements to be finalized in the coming months. I'm also pleased to announce the appointment of Sarepta’s General Manager of Europe, Andrew Robertson. Andrew’s hire represents a milestone in our story as he is our first after ex-U.S. employee and in charge of managing our EU commercial strategy and EU commercial operations. Andrew comes to Sarepta after having served as Regional Vice President and General Manager for Central Eastern Europe, Middle East and Africa at Shire International since 2010. Andrew also has previously held leadership roles at Celgene and Genzyme for both in the UK and Ireland. To conclude, this is an exciting time for us at Sarepta. We had made progress on multiple fronts and have had additional visibility with the launch of EXONDYS 51 in the United States and look forward to one day serving DMD patients around the world. And with that I will turn the call back over to Ed for closing remarks.

Thanks Bo. Based on the progress we've made in all areas of the business this past quarter, and certainly since last September, we continue to believe in our ability to execute and build toward a goal of becoming a leader in DMD and other neuromuscular diseases. An important component of this vision along with the development of our internal candidates that I previously outlined, is a multi-pronged partnering strategy that allows us to evaluate multiple different therapeutic approaches to treat DMD. Our most advanced stage development partnership is with Summit Therapeutics. Phase-out DMD is a Phase II clinical study evaluating ezutromid in patients with DMD. This 48-week, open label trial is ongoing in the UK and the U.S. and aims to establish proof-of-concept for ezutromid through the evaluation of muscle structure and health. Summit expects to complete trial enrolment of approximately 40 patients in the second quarter of 2017. The company expects to report the full analysis of the 24-week biopsy MRI and functional data in the first quarter of 2018. I also want to highlight our microdystrophin gene therapy partnerships with Nationwide Children's Hospital. Nationwide and Dr. Jerry Mendell, are ideal partners due to their expertise in gene therapy development. The gene therapy program started in 2009 and over the last eight years they have built a facility that can supply, design and produce recombinant adeno-associated virus or rAAV vectors. The facility supports production of eight different recombinant AAV vector serotypes. Dr. Mendell has been the principal investigator for both the follistatin gene therapy program for DMD, as well as the [indiscernible] program for spinal muscular atrophy. Over the course of the years, Dr. Mendell has optimized the construct specifically designed for DMD. The promoter was changed to MHC K-7 to enhance the activity of the construct. The construct can be systemically delivered to skeletal diaphragm and most importantly cardiac muscle and have shown high levels of expression in preclinical studies. Patients with mutations between Exxon's 18 and 58 or approximately 60% to 70% of the DMD population are potential candidates for treatment with gene therapy. The gene therapy program will enter the clinic in the third quarter of this year and we will provide more details about the clinical trial design in the coming months. Given the complexity of Duchenne muscular dystrophy we know it will require multiple approaches to cure this disease. Our partnering strategy, along with our internal development work, represents the most comprehensive approach to treating DMD. Before opening the call for questions I like to share a personal update. After careful consideration, I believe the timing is right to announce my intention to resign as President and CEO at the conclusion of my current employment term this year in order for me to focus my attention on the next series of key initiatives for Sarepta. These key initiatives include approval of EXONDYS in Europe, the advancement of our next-generation PPMO chemistry into the clinic. And finally, next-generation therapies for DMD such as gene therapy. With the approval of EXONDYS 51, and our successful transition to a commercial stage entity, as well as the initial steps we've taken for becoming a global company, I believe now is the right time to narrow my focus on the key areas of the business where I can have the most impact. Since transitioning to CEO of Sarepta, we have faced many challenges, but also achieved some of the greatest professional accomplishments not only in my career, but also in the history of the company. After putting in place a solid experienced team, I feel much more comfortable about our commercial progress to date and feel that my skills are best utilized for our key regulatory and scientific challenges that will allow Sarepta to grow into an international company. I'm announcing this now to provide ample time to work with the management team, the Board of Directors, and other senior leaders at Sarepta to find a suitable candidate that embodies really the culture of Sarepta and ensures a smooth and seamless transition. Following this transition period, I will continue to serve the company as an active Board member as Special Regulatory and Scientific Advisor. While we are proud of our collective contributions to the DMD community to date, there is still much work to be done. For that reason I look forward to continuing to advance the aforementioned initiatives in the near term as CEO to support the incredible team here and most importantly to serve the patients. And with that operator, please open the call for questions.

Thank you. [Operator Instructions] Our first question comes from the lien of Alethia Young of Credit Suisse. Your line is open.

Hey thanks for taking my questions. Congrats on the guidance increase. Ed I’m sorry to hear that. You navigated the company through a very tough time. So I guess two questions. One, what specifically have you helped educate the payors on getting a better understanding around that's kind of you think is now starting to play out for you. And then I guess second on your announcement and I mean what do you guys – what are you kind of looking for as CEO at this point that someone more commercially based and more scientifically based like maybe just help us get a flavor for how you're thinking about what the skills that should be for someone that follows, you think.

Sure Alethia thanks for the question. I think in regards to working with the payors this has really been a major focus not only for the medical affairs team, but also our reimbursement specialists and regional count managers. I’ve been involved with many direct conversations with Chief Medical Officers and even CEOs of companies trying to get them to understand. I think probably the biggest thing we've been able to do is when they have requested to learn more about the clinical data we've given them what we have so far as far as our clinical information. And so I think that's been the biggest step is that they realize that although our label is very much restricted to really talking about dystrophin, we do have clinical data and obviously we are continuing to do a lot of work in looking at patient-reported outcomes, looking at pulmonary function, echocardiograms. So we've really made a commitment to gathering more clinical data. And I think what we've been able to do is get them a little bit more understanding our full package. And I think when they do understand that it's been a much better conversation. And Bo any comments on that?

Yes I think actually we've really – this last quarter we've really turned the corner. We're talking to some of the managed care plans. And really getting them to understand exactly how many patients we're talking. I think last quarter we talked about one of the plans that took a lot of education around because there was not an ICD-9 code, or ICD-110 code and they thought that they had all these patients. And after a lot of education and they’re actually speaking to the providers in the field and that's – a lot of that has taken place this quarter. The plan that I spoke to you last quarter has already put a policy in place, open to PI because they have a much better understanding now that it's – how many patients we're talking about and really understanding dystrophin and the significance of increasing dystrophin from baseline. So really it goes to the two different teams the national accounts teams, the medical affairs teams doing a lot of educating and really getting their hands around exactly what is dystrophin, how to use this drug and the epidemiology that they have within their own plans. Yes, so let me add in regards to your second question. I think I just want to make sure that I'm not going anywhere. I want to make everybody comfortable. I think the reason why I decided at this particular time is if you think about the achievements we've made in the last two years, it's been really fairly impressive. We were able to really get our entire – our regulatory process for manufacturing approved. We now have a global supply that we feel very comfortable about. Obviously, we got the approval of in the U.S. of EXONDYS 51. Bo and his team has done a great job for in a commercial launch with a difficult reimbursement environment. And also for me I've been able to really focus the company towards DMD research and not – and getting away from some of the infectious disease programs that – I wanted to make sure we were focused on one disease that we could supply it. We've also taken the PPMO, which was in the back shelf. We’ve brought it up to the front. It's ready for clinical development. And we've made some incredible progress and licensing in three new programs and we will be very active in continuing. So I think what makes sense I think and I appreciate the board being so flexible is that we can focus – have someone who can focus on the commercial aspects of the company and I can focus on really the research and the regulatory challenges. We really need to make sure we get approved in Europe. I've got to make sure that we have our PPMO up and running in the clinic. And our next gene therapy, I think if you remember Alethia I mean that's how I started my career in gene therapy. I'd love to see this happen in DMD boys. And so it allows me to really focus on this aspect and while someone else can focus on the commercial aspect.

Great, thanks.

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

Hey, guys. It’s Eric in for Anupam. Thanks for taking the questions. And let me extend my congrats on the quarter. Just wondering if you could provide some color on the upcoming AdComm related to essence in the potential protocol moment there. In particular, is a six minute walk has the primary end point something that might come up through reconsideration? Thanks.

No, actually this is a pretty straight forward AdComm. And in fact this is really very helpful. It's AdComm for the Pediatric Advisory Committee. The entire focus of the AdComm is on the use of ports in a placebo-controlled trial. One of the problems we had is that the FDA had made us put in a provision that the use of essential intravenous ports could not be allowed. The families and the patients objected to this because it was really a hardship for them and it was adding an enormous amount of stress on the boys having to try to find intravenous access in some of these boys every week. So in fact it was the IRB, UCLA that requested this. Dr. Perry Shieh was very supportive and he asked if he could do this and the patients asked to do this. So the question really is going to come down to the use of ports. We think this is advantageous to us very much because it then will have much better compliance during the trial. So this is actually a really good thing for us and we're very pleased that the FDA Pediatric Advisory Committee took this question up.

Great, that's very helpful. Thanks.

Thank you. Our next question comes from the line of Chad Messer of Needham.

Great, good evening and thanks for taking my questions. Ed, I just want to say congratulation on all you've accomplished as CEO. You’re certainly setting a high bar whoever replaces you and it's great. You'll still be around keeping an eye on a lot of the progress. So you said you're still getting more patient start points coming into the good rate and obviously treating more patients. Just wondering if you could comment on what's going on with the conversion rate? It's good we're making some progress here, but just wondering it’s sort of the averaged [indiscernible] out a start from – when they actually get treated as if that's improving at all.

Yeah I let me – since Bo is closest to the data, let me ask Bo to take care of this.

Yeah, we have had actually a pretty good quarter when we’ve talked about sort of managed care. We’ve had a lot of plans that come on. They have a lot of plans that put policies in place. And of course that always helps the conversion rates for the boys that are actually on that individual plan. Conversion rates change from plan to plan if a patient has one plan to another. But overall, it's increasing patients getting on therapy because we actually have more policies in place this quarter than the last. And to your earlier point, yes, star forms are continue to roll in. I think right out of the launch, we had many star forms coming in from Tier 1 and Tier 2 I think what's very exciting to see is we've now had an increase of greater than 30% of our prescriber base and start forms are coming in more from some of the tier 3 accounts as well. So it's a very positive trend for us heading into the second quarter.

Alright, yeah. Key question I get. So I – just one other small quick ones on your summit partnership. I've been expecting another payment for ezutromid in the first quarter. I know they've kind of changed when they're going to readout data on that. Just wondering what the story is when that might be expected to be owed to them?

Yeah, Chad, so the payment is expected to be made towards the back end of the second quarter. It could potentially slip into the third quarter, but the likelihood is the back end of the second quarter. As a reminder it's a one-time payment, so it will not count for non-GAAP purposes. So it will just be a cash payment of roughly $22 million.

All right great, thanks and congrats on the quarter.

Thank you.

Thanks.

[Operator Instructions] Our next question comes from the line of Brian Skorney of Robert Baird.

Hey, good afternoon guys. Thanks for taking my question. I guess I’m wondering if you give a little color in terms of how progress is going and the split up between commercial and public pay. I know DMD patients can be a substantial – continue the Medicaid covered patients and what percentage of patients right now on a commercial make up a split of private versus Medicaid? How is progress with Medicaid going? And are you actually seeing meaningful patient commercial starts with Medicaid programs?

Yes, Brian. That's a good question. So it has been around 60:40 and that split between commercial and Medicaid and that’s stayed fairly consistent. What we’re seeing is that as you know the approval of Medicaid is on a state by state basis. So really over the last quarter, we've seen some significant improvement. There's always a delay before they have their meeting, so we have to wait for the meeting to occur before they can vote on approval. But yeah, the number of states that are now reimbursing on Medicaid continues to increase. And obviously, this is an important group and population and many of our patients are on Medicaid. So this is important. So I'll let Bo give his flavor for that.

Yeah, Brian, we've actually had some pretty good success this quarter and I think that success will continue heading into Q2. Most of the states do take about six months before they review a policy and we're up at that six month. So we've actually had a lot of plans this quarter or recently actually provided a policy in place. I think one of the biggest ones though that's really been exciting because a lot of the states are looking to this plant as California. California put out a policy that's very favorable. It’s broad access. And they reached out to a lot of the KOLs helped to design this policy. A lot of the KOLs throughout the country understand what California did and they're pushing their states to do the same. And a lot of the state plans are actually looking toward California of how they came up with this policy. So I think it's a very positive trend to come, obviously, we have a lot of work to do. And – but if we do have a lot more visibility heading into Q2 than we did in Q1.

Just to clarify that 60/40 split, that's what you're saying that would be the number of patients overall that you think are split up or is up the number – commercial starts you’re seeing.

That’s correct. Overall it will be 60/40, when you look at all the start forms. Obviously, there was a little bit of a lag in Medicaid at the beginning of launch, but they're catching up.

Great, thanks guys.

Thank you. Our next question comes from the line [indiscernible] of Goldman Sachs.

Thanks for taking my questions. This is actually Kerry on the line. Congrats on the launch numbers in progress. I just have a few questions. First, regarding the launch you have previously disclosed 250 start forms. Is there do you have – how is that number growing and do you have an update a number. And in terms of the conversion time, how are you seeing that changing. Is that approaching the kind of the 30 day end of the spectrum? And I have a follow up question. Thank you.

Yes, so it regards to we're not giving guidance on the start forms, but I think as you can see is reflected in the revenue, number conversions are certainly increasing. And that's been going at a very steady state. Obviously, they’re continues to be – this is a complicated process. And obviously, the time going through we expect that overall it will decrease, but go on to talk about – what is the time now from start form to reimbursement.

Yes, let's start first with the start forms. I think what I'm pleased with is we're seeing so many start forms continue to come in – especially in the Tier 3 are really now, it's starting to catch up. And I think also the other thing that's interesting about the launch. Is that even the Tier 1 and Tier 2s are finding more, one I just had dinner recently with one of the Tier 1 positions is a very well known position. It was actually this Tuesday. And she was talking about how, she went through her charts three different times and every single time, she’s found additional patients. And then we had another account that's a Tier 1 of our Tier 2 accounts, they though that they had only 10 exon 51 amenable boys. They brought in their geneticists, they brought came in and they went through every individual chart and they actually doubled the amount of exon 51 amenable boys. And so this is what we're seeing. This is actually leading to the increase or over time of start forms. From a time two conversion, it really is variable and I think I mentioned at the very beginning of the launch that we expect 30 to 90 days. And really it does play off from many boys like that. But obviously we've had boys that have had that have converted over less than a week and we also have boys at the other end of the range. When you think about some of the plans that actually have a policy like such as Antha we've talked about in the past. It does take longer. But even with Antha we have 30% of the boys that are currently have start forms on drug with Antha.

Yes, and I think in my experience that if you think about it is that over time, as the plans get more custom and you have reviewed all the data that time for conversion and reimbursement will go down. And I think we're – hopefully we will see that reflected later in the second half of the year.

Thank you. And I just had a one final question. So with regards to the SRP-4053 study reading at the summer. What is the – what is your plan and what is the regulatory outlook for the program. And what is the progress of the FDA validation of your dystrophin assays. Thank you.

So we've had a number of discussions and have gone back in force with the FDA. And really the focus is we wanted to make sure that they were comfortable with the protocols and that once we had the final data there wouldn't be any issues in regards to the way the samples were process and read. So we're very close to that and expect that will be starting soon. Remember this is a Phase 2 study and the study will be – it has been extended. So the only data we will be having is dystrophin. And really the focus of the dystrophin is we want to see in our – really in another exon skipping PMO backbone. We want to see – are we seeing the same amount of dystrophin maybe saw with exon 51? So really is going to be focused on the dystrophin production, we won't be having any readout as far as a clinical and that will occur later. So we'll really be focused on, do we see similar amounts of dystrophin based on what we saw on EXONDYS 51.

Okay, thank you.

Our next question comes from the line of Tim Lugo of William Blair.

Thanks for taking my question. I’d also like to pass on the best wishes for your next phase of the company. And for the PPMO program are you going to start normal healthy studies when you begin dosing that in patients or do you think you can go straight into DMD boys and do you have any – what are the exons you will be targeting initially?

Yes, so obviously it’s a complicated process. Our plan is really to do because this really is a new molecular entity because when we add the peptide on it, it is not simply a PMO anymore it’s really a new drug. So we will be obviously required to do a single ascending dose and our plan right now is to do that in normal healthy volunteers to really and that really is going to assess the safety we’ll have pretty good understanding of the PK and then hopefully that will expedite the process of going into a Phase 2, which we will do in DMD patients. Right now, we are accessing this and obviously we haven’t had any discussions with the FDA or the EMA at this point yet. But very likely we are considering doing a head to head comparison EXONDYS 51 boys to be able to really know in a very definitive way how much better the PPMO chemistry is compared to the PMO. Once we make that determination I think our plan would be to very quickly take the entire platform into PPMO but we really need that first initial study to see how much better and also to really understand the safety. So when we I would say by mid-2018 when we start this study we’ll have a much better idea when DMD boys, some of the comparisons between these two compounds.

All right. Thank you.

Thank you. Our next question comes from the line of Debjit Chattopadhyay of Janney. Your line is open.

Hey, good afternoon gentlemen. Thanks for taking my questions and Ed you clarity on leadership style will be missed. Now since you wanted to focus primarily on the pipeline and the EMA approval could you walk us through what exactly the EMA has asking especially as it relates to six month clock stop that you are planning to ask for. Do they need substantial more data or is the data that you’re collecting would be sufficient. Thanks so much.

Sure. So the major reason for the clock stop is the – we need to submit the admin data and that data won’t be ready until closer to the six months. So we want make sure we have enough time to give them all the information they need in regards to the final admin data. What we are going to be using this time to make sure that we are continuing to analyze data that we currently have – there is no plans to start give any new data or any new studies right now. And obviously it’s a little bit too early we will be having more direct face to face meetings with them to over go and really understand what the requirements will be. I think it’s important to remember obviously this is for conditional approval there is always more challenges with conditional approval. It is not for a full approval. So we really want to understand what kind of a data set they will require. So I think we’ll have a better understanding later in the year when we have those discussions with our repertoire and co-repertoire. Thanks so much Ed and good luck.

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

Hi, thank you. Thanks Ed and again congratulations for all the work already been done. Question I had was just on the presentations you did at MDA, some of the long term data you have with boys over four years now, in physicians that we are talking to lack of progression whether its more than ambulatory or non-abmulatory, its very important to them for getting boys on this drug and it seems you are having this data, I know it is not part of your label but how much does that play into your discussions with payers and also just pharmacoeconomic benefits that go with boys staying ambulatory versus becoming non-ambulatory any thoughts there? Thank you.

Yes. I think you bring a very good point. And really we would have hoped that therapies now would completely reverse the disease and we would stop it completely. I think as expected what we're seeing is slowing down on the progression of the disease and this is really important for patients. A good example, if the data that we're seeing in respiratory is confirmed and we'll be looking at this at our larger population of non-ambulatory boys. It means potentially that these boys could be off of ventilator for years. I suppose to what would happen in the natural history. That's a huge benefit for quality of life. The other things we'll be looking at and we've been working with various different companies and working with the patient groups to develop a quality of life measurement and observable related outcome. Where we can look at things like the ability, not only to walk, but the ability to use your hands for important things like typing on a computer, using a cell phone, using an electric wheelchair, feeding yourself, transferring from a wheelchair. So even people who are further advanced, some of these improvements and slowing down the progression can be significant. And I think we learned several things as part of this trial that the 6-minute walk test is, it doesn't capture all of the aspects of the disease. So what we're trying to do is become smarter and get better data on especially the non-ambulatory status. So we can present this to an insurance careers and say, this is what the drug is doing. This is what the benefit of the drug is. And I think that's going to be really a focus for us, trying to collect as much clinical data as possible, to get people comfortable that they understand what to expect from this drug.

Great, thank you.

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

Good afternoon, everyone. Thanks for taking the question. I wanted to just follow-up on a previous question on Medicaid versus as our private plan. So what is the difference in conversations that you have or the process – differences in the process between the Medicaid plan and the conversations you have like private payors. And then though as you mentioned, people are looking to have – other states are looking to have Medicaid evaluated and approved the drug. Can you give us a little more clarity on how they did that, whether national payrolls and more important versus regional payrolls as we look across the Medicaid plans?

Yes. I think the process is really very similar. It doesn't matter if it's a commercial payor or Medicaid, the only difference is obviously the Medicaid is done on a state by state basis where is a commercial payors are often much more national and have – aren't necessarily restricted to geographic area. I think the one aspect that has been the most helpful for the insurance careers whether it's Medicaid or not. It really want to listen to the experts in the field. So people who are taking care of these boys, who have experience with the drug and that's really what they want to hear. And I don't think it matters, if it's a national or – that part in international or regional expert. And I just want to talk to someone who has an appreciation. What I can say is that careers and insurance careers in the Medicaid have been asking us for list of physicians both in their region and nationally who have experience with the drug. So what we try to do is just make sure that we can facilitate those discussions between the physicians and really to physicians at Medicaid and the physicians at the insurance careers. So it’s a physician to physician discussion. And that's really been the most effective. Bo, any other comments?

No. I think Ed summed it up very nicely. The only major difference really that I see is well, Medicaid is going to take a little bit longer and sometimes they play out into the public, because they have open hearings, but the open hearings that physicians are showing up to Ed's comments and talking about the benefits that they see in their experience on clinical trials or other boys on drugs. And I think that's providing a lot of confidence for the state to make appropriate decision.

So that’s how medical good at and this is the case, then is there any reason we shouldn’t expect maybe somewhat the late timelines, but potentially the same outcomes as your discussions with private plan.

Ritu, could you repeat your question, you broke out.

Is that how medical good at with the type of hearings and what they focused on and if that’s the case just sort of comprised that with somewhat of a lag, the outcomes with all the Medicaid programs would be same as your discussions with the private plants.

Yes. Medi-Cal did a very good job at reaching out to all the major centers in the state and really gathering their information and probably they took the time in Q4 and early Q1 to really understand the disease state, to understand the drug. We will get patients that would benefit from the drug and then make a decision. So they actually reached out to all the different sites. One of the things that – and a lot of the states have really taken notice of how they did it. And actually to be fair, some of the states were thinking about this very differently, at the beginning and then paused and obviously took a hard look at what Medi-Cal did and are trying to re-evaluate how they are doing it, so they say to Florida, I know recently, pulled all their KOLs and had conversations with them. I think a couple of other states did as well and really they are taking the step from Medi-Cal. So I think ultimately these boys will get on therapy and there will be broad coverage and there will be based of speaking to clinicians and understand the disease.

Very helpful. Thanks everyone.

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

Hi, good afternoon thanks for taking the question. First of all maybe could you elaborate on what fraction of those first 250 start forms have been converted into treated patients. And then secondarily, how much of a slowdown are you experiencing due to placement of the port. Is that occurring mostly Q1 sites or is that across the board. And then finally do you anticipate any delays or interruptions with treatment due to adoption of ports after a patient has started drug? Thanks.

Yes, Chris, I’m sorry you broke up a little bit as well but the question was really about discontinuations due to the ports and then also sort of the replenishment rate of start forms.

Yes, the fraction of the 250 start forms you had I guess at the January – how many of those have been converted into patients on drug.

We are not providing sort of an update on the number of start forms that converted to infused boys but I can tell you that the replenishment rate has been highly successful, I mean for replenishing every week over week has been increasing. And I think many of the boys that we had in Q4 obviously are transitioned drug. We have actually have boys in the approximately 35 different states now. That are on commercial drugs, so I mean in some states won’t have boys because they are smaller states but we are seeing a really robust commercial launch across the board and I think your second question was about discontinuations.

Well, just in terms of how much these ports potentially, one slowdown adoption and then two are there going to be patients on drug currently that want to swap over to the port having previously started drug is that going to create any delay or interruption in treatments?

Yes, the first question regarding timing, it does take a little bit of time. It takes two months and we have been into this sort of on the Q4 call, port replacement once they decide to get a port, you have to have a port consult, then you have to have the surgery et cetera. There is a delay sometimes it is two weeks, sometime it is six, it really depends on taking get the port consult or not. So there is some delay, we are not going to say is that is actually from a compliance standpoint it has turned out to be a very, very good thing for these children because they are getting their infusions on a regular basis, they are not having to get stuck multiple times to try to find the veins the compliance rates have – we feel that as of right now we feel the compliance rates have gone up because of this. And as for boys that are scheduling ports that are already on therapy typically no because they are on therapy they are finding the veins then they get a port consult and they get the surgery and they actually infuse sometimes either the day or the day after. So really typically we would not see any missed doses if everything is scheduled correctly. Ed, is that appropriate.

No, I think what we are seeing Chris, is that they are finding better sources for the placement of the port, so it is either done by a general surgeon or it is done by interventional radiologists and I think it kind of split 50-50 between who does it. So I think what the big factor is now besides – basically the clinical people who schedule the ports they're getting very good, they know the surgeons who know how to do especially the pediatric replacement. So I think it's getting better, and I think its both side. I think long-term it's a great thing for us to have the course in place because the boys don't get nervous about having to go and have an intravenous stick to have a new placement every week for an IV. And so overall I think it's going to help it. And I think with boys who are on therapy, I mean they have access but they're choosing to care report. So typically you’d schedule that way in advance you still receive your weekly infusion. So I don't anticipate that that's going to really interfere significantly with their compliance.

Okay, got it. And then with respect just to the EMA and the ADME data that repeat the question. Could you elaborate maybe further on that, does that have to do it perhaps there – concerns about PMO technology, not being different but some of it going with it with care report look at or how should we think about that because it’s just a small data set at pediatrics? What sort is triggering that additional look of data?

Well, in regards to ADME study that’s a standard they always require. So there's nothing unusual and we just need to make sure that that is submitted during the review process. And obviously so we'll have to wait to get that in. So that's not anything really unusual. I think in regards to the overall ME approval obviously I think the biggest factors it is a small data sets and clearly this is not new news and it's for our conditional approval. So I think we'll wait to see what other kind of information they would like obviously they're going to be a lot – there's going to be a lot of questions in regards to the manufacturing these are typically are. And there's a whole host of things that are included. So I think right now we're still early in the review process and when we have those discussions we're going to see what other things they may want us to do as far as any analysis or any data. So I think we’re still kind of waiting to see.

Okay. Thank you.

Our next question comes from the line of Dae Gon Ha of Leerink Partners.

Hi, guys. Thanks for taking my question calling in for Joe. Just one quick one from me, so you mentioned increase in SG&A primarily driven by the commercial initiatives and the legal. So could you maybe comment on sort of the legal situation on the EU side and how that's progressing? Thank you.

Yes, so what we’ve said in the last quarter call was that our SG&A is trending slightly upwards and we said about $20 million to $24 million of expenses over and above what we had last year, so taking it up to approximately $92 million for the year. Now bear in mind that most of those expenses related to either our commercial initiatives or our medical affairs expenses. So the portion that’s been spent on legal is very, very small. What we are focused on is trying to resolve the IP issues in Europe because our goal is to ensure that the drug is available globally. We don't expect the legal expenses to be significant, so the guidance that our given SG&A is primarily commercial and medical affairs as I indicated.

Are there any near-term or mid-term catalysts to look forward to in terms of resolution of the IP?

No, obviously we’re – it’s something that is a focus and as we approach our expanded access programs in Europe, we're committed to resolving this issue but nothing in immediate horizon.

Great. Well thanks for taking my question and thank you for your leadership.

Thank you.

Our next question comes from the line of Matthew Harrison of Morgan Stanley.

Hello this is Dave Lebowitz in for Matthew Harrison. Thank you very much for taking my question. I just had a really quick question previously you had given the breakdown on which patients – about the proportion of patients that we’re getting reimbursement on a case by case basis versus those who are included in formulary and those plans that did not include patients in formulary. And if you could just update that it would be appreciated. Thank you.

Yes. When we look at it by the total star forms that we have into the system of approximately 80% of all the star forms I have currently will even be covered by API have restricted coverage or case by case basis. So we feel very confident with the coverage that we're heading into Q2 and Q3.

Is there a breakdown between how many are case by case versus those that are included in plan.

No, I don't have that.

Okay. Thanks for taking my question.

Our next question comes from the line of Matthew Epler of RBC Capital Markets.

Hi, guys. Thanks for taking the question. So I wondered if you could provide it with any color on what kind of trends you're seeing in terms of the average weight of patients who are starting on commercial supply as well as what the mix is of ambulatory and non-ambulatory patients. And then also how you expect that these two things might change over the next 12 months or so. Thank.

Yes, we're not providing guidance on weight but we did in the script we talked about the average age of boys currently on their knees now and between 14 and 15 years of age. And this is up from the JPMorgan conference and we announced it was about 13. So we don’t collect the whether they are ambulate or non-ambulate. So that’s the kind of information but you could expect just based on the Natural History there would be certain number of boys at that age group would also be non-ambulate.

Got it. Okay, thanks.

Thank you. Our next question comes from the line of Steve Brozak of WBB. Your line is open.

Well, congratulations, Ed I’m looking forward to reading about the Hobart business school case study on what just happen but – since most questions have been answered. I do have one, the European obviously approval is next. You had remarkable efficacy from clinicians and the patient groups that were out there and obviously now you’ve got clinical data that’s rolling in. Can you give us any kind of feedback as to what you're seeing on the European clinical and patient advocacy? And what some of the hallmarks I think you're seeing there are places.

Well, I think the process in Europe is different than the U.S. When it comes to reimbursement on a country by country level, the – really the patient advocacy is so critical. I think however where we've made significant inroads is we've had longstanding relationships with the patient advocacy groups they understand the drug, they understand the commitment that we've made to the patients. And we also have remember many sites in Europe that are currently using our drug and have experienced many of them have been in other studies with us. And so we have a number of clinicians that have experience with not only EXONDYS 51, but also with our exon 44 and exon 53 compounds. So we wouldn't expect, again typically what the – you may will do in CHMP is a call and these experts. They won't be obviously because they've been involved in some of the studies. They're not coming with us specifically, but they want to ask how – what's their information and they typically also will ask patients, certain patients when the patient community to talk about their experiences. And clearly we have a lot of the patient advocacy. So it's a different process. It is not really prone to pressure from the efficacy community and because this is a isolated international body, that is run by 28 different countries. So it can't be influenced by one country. Only the reimbursement is an influence, but I think what we have enabled to do really over the last couple of years is really make a lot of good relationships, I think with the physicians and also with the patient groups. And we expect them to be very supportive, but it will be very different from what you saw in the U.S.

Great, well. Again, thank you for a job well done.

You're welcome.

Thank you. And I would now like to turn the call back to Dr. Kaye for closing remarks.

Okay. Thank you, everyone for joining today's call. And we look forward to updating you on our progress on the next quarterly call. Our commitment to patient health will continue to be the first and foremost of our primary goal. Have a great evening.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the call. You may now disconnect. Everyone, have a wonderful day.