Sarepta Therapeutics, Inc. (SRPT) Q1 2018 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Sarepta Therapeutics First Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] As a reminder, this call is being recorded. I would now like to introduce your host for today’s conference Mr. Ian Estepan, Vice President, Chief of Staff and Corporate Affairs. Please go ahead, sir.

Thank you, Christy, and thank you all for joining today's call. Earlier today, we released our financial results for the first quarter of 2018. The press release is available on our website at www.sarepta.com and our 8-K was filed earlier this afternoon. Joining me on the call today are Doug Ingram, Sandy Mahatme and Bo Cumbo. After our formal remarks, we will open up the call for Q&A. I would like to note that during this call, we will be making a number of Forward-Looking Statements, please take a moment to review our slide on the webcast which contains our forward-looking statements. These forward-looking statements involve risk and uncertainty any of which are beyond Sarepta’s control. Our actual results could materially differ from these forward-looking statements as any and such risk can materially and adversely affect the business, results of operation and trading price of Sarepta's common stock. For a detailed description of applicable risks and uncertainties, we encourage you to review the Company’s most recent Annual Report on Form 10-Q and Annual Report on Form 10-K, filed with the Securities and Exchange Commission, as well as the Company’s other SEC filings. We filed our 10-K this afternoon on May 3, 2018 for the full-year of 2017 by the SEC required filing deadline. The Company does not undertake any obligation to publicly update its forward-looking statements, including any financial projections provided today based on subsequent events or circumstances. With that, let me turn the call over to our CEO, Doug Ingram, who will provide an overview of our recent progress. Doug.

Thank you, Ian. Good afternoon and thank you all for joining Sarepta Therapeutics' first quarter 2018 financial results and corporate update conference call. We have much to cover today including our financial performance the CHMP trend vote and our upcoming R&D day. But before covering all of that, I hope you will indulge me as I make a few brief comments about the state of genetic medicine innovation, and in the context of the transaction we announced this afternoon, the intention of Sarepta's participate in shaping the future of genetic medicine. At Sarepta, our mission has always been ambitious to relieve the suffering of those inflicted with DMD and other devastating diseases. We are fortunate to be standing with the biotech industry at a moment where after nearly a half century of hope, innovation, breakthroughs, setbacks, learnings, and breakthroughs, the long held promise of gene therapy to dramatically change the course of disease is becoming a reality. Sarepta intends to play a central role in shaping that reality. We will only achieve this by continuing to allocate the right resources, persisting and overcoming obstacle, and marching towards a future where many fatal genetic diseases which have robbed families first of hope and then have loved ones are transformed into the treatable obstacles. We took a major step forward in that direction today as we announced an exclusive partnerships with Myonexus Therapeutics, a clinical stage biotechnology company, developing transformative gene therapies for Limb-girdle muscular dystrophies also known as LGMD. Limb-girdle is a group of distinct, degenerative life-threatening neuromuscular diseases while the various forms of the Limb-girdle have distinct phenotypes. Like DMD, they involve muscle degeneration and wasting, eventual wheelchair assistance and far too often death from cardiopulmonary complications before the age of 30. The pipeline of five of Limb-girdle gene therapy candidates in development by Myonexus target some of the most severe and common forms of the disease and includes 3 clinical and 2 preclinical programs. Myonexus' a lead program is generated encouraging preclinical safety and efficacy data and utilizes AAVrh.74 vector, the same vector used in the micro-dystrophin gene therapy program, Sarepta is developing with Nationwide Children’s Hospital. Of note, Dr. Louise Rodino-Klapac is one of our principle investigator and co-inventors of the micro-dystrophin gene therapy trial, and she also is the inventor of the portfolio of the Limb-girdle candidates, is the co-founder of Myonexus and serves as a Chief Scientific officer. We will commence the first clinical trial with MYO-101, being development for Limb-girdle 2e, in mid 2018 and we will report gene expression data in late 2018 to early 2019. MYO-101 is design to restore the beta-sarcoglycan protein in the affected tissues and reverse the effects of the Limb-girdle to ED patient. Systemic delivery of the therapeutic vector in pre-clinical models has restored full length beta-sarcoglycan and demonstrated significant expression levels restoring function in mice, no significant safety issues were observed in pre-clinical studies. Turning to the terms of the agreement. In addition to an upfront option payment, Sarepta will pay certain milestone payments that will be used to fund development and will have an auction to purchase Myonexus at a set price after it has had an opportunity to review the clinical results of this trial. This partnership fits brilliantly into our strategic vision for a number of reasons. First, it aligns with our mission of bringing life changing therapies to patients with rare diseases through the development of genetic medicine and specifically gene therapy. It was developed by gene therapy luminary, Dr. Rodino-Klapac and her team, a group we know well and respect immensely. It bolstered our already deep genetic medicine pipeline of 16 compounds to now 21 compound, and it begins to fulfill the commitment we made in January 2018 at the JP Morgan Healthcare conference to expand our therapeutic focus beyond DMD. To support the successful execution of our deep pipeline, we have been focusing on increasing our talent base across all the visions, but particularly focused on our research, development, regulatory and access functions, we set a goal at the beginning of this year to add a new employee every business day to the first quarters of this year, and I am pleased to say that the team has met the goal and we’re significantly augmenting our time. To accommodating our growth, we have also doubled the size of our U.S. headquarters in Cambridge, Massachusetts, and we have acquired additional property in endeavor. Now moving to our first quarter highlights and other recent corporate development, we are pleased to announce that we’ve recorded sales of $64.6 million in the first quarter and we remain on track to achieve our previously stated 2018 guidance of $295 million to $305 million for EXONDYS 51. We remain confident in the trajectory of the launch especially in light of our performance in the first quarter. As we also managed well through the disruptions relating to moving a permanent J Code and working through the natural chop in the first quarter of the year as patients often change health benefit plans. We are also pleased with the progress we have made in advancing our pipeline. At JP Morgan, we outlined our key inflection points for 2018, and I will now provide an update on how we are tracking so far against these milestones. In February of 2018, we announced the outcome of our Type C meeting held with the FDA's Division and Neurology products to solicit the Division's guidance on the development pathway for our therapeutic candidate golodirsen, a PPMO engineered to treat dose DMD patients who have genetic mutations subject of skipping exon 53 of the DMD gene. We remain on track to complete a rolling NDA submission by year-end 2018, seeking accelerated approval based on an increase in dystrophin protein as a surrogate endpoint and with a target approval in mid 2019. If we receive accelerated approval, ESSENCE would serve as a confirmatory study. We are in talks with the division about potential enhancements to ESSENCE including our proposal to analyze 48 week biopsies for patients amenable to skipping exon 45 with the goal of accelerating the development of casimersen one of the two therapeutic being studied in ESSENCE. We will not know this is possible as an avenue until we’ve had further discussions with and we have taken advice from the division. The next milestone is the status of our eteplirsen filing in Europe. As referenced in today’s press release and consistent with last quarter’s remarks about the challenge we faced with our marketing authorization application, the committee from additional products for human use also known as CHMP of the European Medicines Agency rendered a negative trend vote for our MAA for eteplirsen following our oral explanation last week. Let me provide some context. First, our team accompanied by world’s leading DMD outside experts did a fabulous job of presenting the benefits in clinical results of the eteplirsen including the positive results across three studies and multiple meaningful functional endpoints. You can find our presentation including our analysis across three studies in our 8-K disclosure. The slides include the results for six minute walk test, loss of ambulation, North Star Ambulatory Assessment and pulmonary function data. In preliminary discussions with EMA to gain inside into the trends out, we understand that the CHMP has not concluded that eteplirsen is not sufficiently effective, well that its risk benefit is not sufficient, but rather that Sarepta has not yet met the regulatory standard for conditional approval particularly based on eteplirsen concerns regarding the use of external controls rather than placebo controls in the study and the functional importance of pulmonary endpoints in ambulatory patients, one of the most important measures upon which Sarepta showed significant benefit across all three separate studies. Sarepta appreciated the opportunity to present its data and the robust discussion with the CHMP. Nevertheless, we firmly believe that eteplirsen should be expeditiously made available to patients in Europe waiting for eteplirsen. We will seek a reexamination and we will request to the Scientific Advisory Group also known as SAG made up of DMD and neuromuscular specialists, be call to provide expert guidance and insight into, among other things, the validity of the external controls used and the importance of significantly slowing pulmonary decline in patients suffering with DMD. And follow-up discussions with EMA, this past week is our understanding that the reexamination and related SAG should be granted. It is our understanding that the reexamination process will likely be completed by year-end 2018. So, if there is no confusion, let me be clear, we are committed to bring eteplirsen our next generation RNA therapies and our gene therapies to patients around the world including Europe. We will continue to build our global presence and our way that advances the growth of our pipeline, and as we get better clarity on the commercial launch, we will build our infrastructure to support and appropriately time commercial presence as well. Moving onto our next milestone for the year. We look forward to hosting our first R&D Day on Tuesday, June 19th. The day will highlight our product development strategy and provide an in-depth review of our pipeline programs. Our R&D Day will be webcast live on our website. In addition to a review of all of our generic medicine programs, we look forward to presenting our micro-dystrophin safety and expression data from at least two patients enrolled in our current gene therapy clinical trial underway with Dr. Mendell and Rodino-Klapac of Nationwide Children's hospital. An additional milestone in 2018 relates to our next generation RNA platform, the PPMO otherwise known as the peptide conjugated PPMO. We look forward to announcing progress later in the year on our single ascending dose study for our first PPMO candidate SRP-5051, which is designed to treat patients with DMD amendable to skipping EXON51. The successful PPMO offers the potential for significantly improved efficacy with less frequent dosing for patients. In addition to SRP-5051, we are conducting IND-enabling preclinical trials on five additional PPMO candidates covering patients with mutation amendable to EXON's skipping for EXON's 53, 45, 52, 50 and 44. Our first six PPMO candidates would address about 43% of the DMD population. Beyond this, we are working on our approach to bring the PPMO therapies to be extremely where EXON mutations and we are engaging in a policy level discussion with the FDA to discuss how to efficiently bring ultra-rare EXON PPMOs for patients with DMD. In addition to being a promising next generation platform for DMD, if we were able to generate successful proof-of-concept data, PPMO offers potential utility in a broad range of other diseases. We intend to build out a strategy for the use of our PMO and PPMO technology in other rare diseases over the course of this year. The team continues to execute against the milestones that we set forth at the beginning of the year. For the balance of the year, our goal is to continue to execute with the same level of focus and commitment against our remaining milestones and to continue to fight for patients with DMD who are waiting for therapy in the United States and the rest of the world. And with that, I will turn the call over to Sandy Mahatme for an update on the financials. Sandy?

Thanks Doug. Good afternoon everyone. Some of the highlights for the first quarter of 2018 include a $64.6 million of net product revenue and approximately $1 billion in cash and cash equivalents and investments on hand as of March 31, 2018. Now moving to the financials. This afternoon's press release provided detail for the first quarter of 2018 on a non-GAAP basis as well as a GAAP basis. The press release is available on the SEC and on our website. Please refer to our press release for a full reconciliation of GAAP to non-GAAP. I would like to note that we have made some adjustments to our non-GAAP presentation. We now exclude net interest expense and depreciation and amortization expenses from our non-GAAP financial presentation as we believe this presentation best reflects our financials. In the first quarter of 2018, we reported a non-GAAP net loss of $17.9 million or $0.28 per share compared to non-GAAP net loss of $31.4 million or $0.57 per share in the first quarter of 2017. I will now go through each P&L line item. Net product revenue for the first quarter of 2018 was $64.6 million compared to $16.3 million for the same period for 2017. The increase primarily reflects increasing demand for EXONDYS 51 in the U.S. In the first quarter of 2018, we recorded approximately $5.6 million in cost of sales compared to $200,000 in the same period of 2017. The increase was driven by higher inventory costs relating to increase in EXONDYS 51 during 2018 as well as accrued royalty payment of $3.1 million to BioMarin as a result of the settlement and license agreements we entered at BioMarin in July of last year. We expect our cost of sales to modestly increase in the last quarter of this year due to depletion of material that were expensed prior to approval. On a GAAP basis, we recorded $46.2 million and $29.1 million of R&D expenses for the first quarter of 2018 and 2017 respectively, a year-over-year increase of $17.1 million. On a non-GAAP basis this R&D expense is were $43.3 million for the first quarter of 2018 compared to $26.7 million for the same period of 2017, which is an increase of $16.6 million. The year-over-year increase in growth -- the year-over-year growth in non-GAAP R&D expenses was driven by increase patient enrollment in our late stage clinical trial, a ramp of manufacturing activities for our PPMO platform and expansion of research and development pipeline as well a collaboration cost sharing with Summit. Commencing on January 1, 2018, we had started sharing 45% of the costs related to Summit's research and development for the utrophin program. Turning to SG&A, on a GAAP basis we recorded $43.3 million and $26.2 million of expenses for the first quarter of 2018 and 2017 respectively, a year-over-year increase of $17.1 million. On a non-GAAP basis, the SG&A expenses was $33.7 million for the first quarter of 2018, compared to $21.1 million for the same period for 2017 which is an increase of 12.6 million. The year-over-year increase was primarily driven by continued build out supporting our R&D and commercial expansion. On a GAAP basis we recorded $4.5 million in net interest and other expense for the first quarter of 2018 compared to a $125.3 million of net interest and other income for the same period of 2017. The unfavorable change is a result of a gain of $125 million from the sale of the Priority Review Voucher in Q1 of last year partially offset by higher interest expense in Q1 of 2018 related to our debt instruments entered into the latter half of 2017. We had approximately a $1 billion in cash, cash equivalents and investments as of March 31, 2018. In addition we have prepaid approximately $15.5 million towards the 2019 manufacturing expenses. With that, I’d like to turn the call over to Bo, for a commercial update. Bo?

Thank you, Sandy. Good afternoon everyone. We are very pleased with the progress the team has made over the last six quarters of the EXONDYS 51 launch. We had a strong first quarter and remain on track to achieve our full year guidance of $295 million to $305 million. During the first quarter, many biotechnology companies often faced headwinds that impacted revenue. As Doug previously mentioned, we faced headwinds related to our permanent J Code and typical health plan enrollment cycle. The team was able to successful navigate these challenges and maintain patients on therapy without significant disruption. Our U.S. commercial efforts are still focused on identifying patients amenable to EXON 51 skipping and driving prescriptions, continuing active dialogue with payers to support broad coverage and reimbursement decisions, and ensuring all patients with DMD have a current genetic test and are appropriately identified for exon skipping amenability. We were pleased that we are seeing continued adoption across all age groups, the average age of patients on therapies 13 years old, which is slightly decreased from last quarter. This trend is due to more patients at a younger age starting therapy in the first quarter of 2018. We do not expect the average age of patients to dramatically change until newborn screening for Duchenne becomes standard medical practice, which would identify 100 of new patients eligible for EXONDYS 51 and other exon skipping or gene therapy products. From an adherence and persistency perspective, we continue to see high compliance rates and minimal discontinuation. All Tier 1 and Tier 2 centers which treat approximately 75% of the DMD population continue to prescribe EXONDYS 51. These centers continue to identify new patients amenable to exon 51 skipping and submit star forms. We continue to call a top tier centers, but have expanded our efforts to reach additional size to educate physicians on EXONDYS 51 and the importance of identifying exon 51 amenable patients. This initiative is intended to identify patients on non-DMD centers of exons. While the patient demographics have remained fairly consistent throughout the launch, the mix up patients on commercial and government plans has slightly changed. The mix was approximately 55% commercial, 45% government and in Q1 of 2018 compared to 60/40 in Q4 of 2017. As Doug previously mentioned, the data that was used during our discussions with the EMA is also being used as appropriate with our medical affairs organization in ongoing engagement with payers. As a result, payers have a better understanding of the disease and patients who will benefit from EXONDYS 51. Our mission is to develop precision genetic medicine that improves the lives of all patients with DMD. During the reexamination period with the EMA, we will continue to strengthen our global presence in Europe by solidifying our relationships with KOLs, partnering with advocacy groups and advancing our distribution network. Our focus and commitment to providing EXONDYS to amendable patients in Europe has not wavered and we remain fully dedicated to bring this therapy to patients around the world. The commercial success of EXONDYS 51 has provided the framework and infrastructure to support launches of future therapies for rare diseases. We are incredibly excited to enter into a new therapeutic area. From a commercial perspective, the partnership with Myonexus Therapeutics makes strategic sense because with success we would be calling upon the same neuromuscular experts with whom we have relationships and who both -- who treat both Duchenne and Limb- girdle muscular dystrophy. Our market research supports that Limb-girdle patient population has a similar epidemiology to that of Duchenne. If successful, we look forward to serving these patients. Between our gene therapy programs for both DMD and Limb-girdle muscular dystrophy, our team is preparing to launch up to six different gene therapy programs within the two year window of time. This is in addition to our multiple PMO and PPMO based programs for Duchenne, which if successful could be launching over the same period of time. In addition, we will plan for the potential of combination therapy with our RNA programs being the cornerstone of Duchenne treatment. We are preparing ourselves for operational and executional success and are very excited about the future, as Sarepta now has one of the deepest rare disease pipelines in biotech. Given the work we have done to-date and in multiple opportunities before us, our position as global leaders in precision generic medicine has never been stronger. We are paving the way to bring new medicines to patients with rare neuromuscular diseases. And with that, I will turn the call back to Doug for closing remarks.

Thank you, Bo. At the risk of reputation, let me again say, the 2018 has proven to be a year of transformation for Sarepta driven by a stage team of catalyst and support of our vision to become a leader in precision generic medicine and positively impact the lives of patients who suffer from DMD and other rare diseases. These past several months have been filled with progress along with new challenges that we will address and tackle. We will continue to focus on relentless execution advancing our pipeline with urgency and fighting to overcome obstacles and bring therapies to patients with DMD around the world. We look forward to our upcoming R&D Day in June which will showcase the depth and breadth of our pipeline programs, our science, our collaborations and the many milestones we intend to achieve in 2018 and beyond. And with that operator, can you please open the call for questions?

Thank you. [Operator Instructions] Our first question comes from the line of Brian Skorney of Robert W. Baird. Your line is open.

I guess just when we think about the new license that you taking on with gene therapy and that's under and I understand it's coming from higher children. What is this imply in terms of the factor that you're working with for micor-dystrophin? I mean is this factor? Is this a sign of confidence on this program that you're seeing safety or you're seeing any sort of metrics that would indicate that this is a working in these two kids? Have you seen any daily out from these two kids?

This is Doug. So two things, first as we look to Myonexus, we do have great confidence in our relationship with Myonexus because of our experience, not only with Nationwide Children's Hospital and not only with Dr. Louise Raodino-Klapac who by the way is very likely one of the most successful and prolific gene therapy luminaries that exists today, but also because of frankly our experience with the vector AAVrh.74 gives us a lot of confidence moving forward. So this transaction could not be better suited for Sarepta. Internally, we call this project twin and reality I think how think this is project, Goldilocks [ph], it is a perfect next step for this company in gene therapy. And as it relates to what we're seeing, let me just say that we're excited for June 2019 and we look forward to the opportunity to present our entire pipeline and data to the community on June 2019.

I guess this is a follow-up to dig a little bit more in terms of what is known today. I mean I guess the first biopsy as definitely been done. Has a Western blot already been run on that biopsy? Or is the plan to run the Western blot on the first two biopsies simultaneously?

Two things, one we said four children so far have been dosed because we are dosing once a month. And as you know, we're dosing at significant potentially therapeutic levels 2 times 10 to the 14. And so far things are going quite well there, and we are taking biopsies and reviewing along the way and what I would say generally is that we're excited to present data to the community on June 2019 and to explore where we are in June 2019 in depth.

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

Unfortunately, I am in Europe but good news on gene therapy. One, just I wanted you to kind of give a comparison on the Nippon Chemistry [ph] versus yours. It seems more like the Nippon Chemistry is like eteplirsen with the anti-sense, but just wanted your thoughts on that? And then the second one, I just wanted to kind of talk about in Europe and the PROMOVI trial you have underway. Is there a way that you can kind of make that work for Europe? Just more color on what maybe the next step would be, if the review doesn't work?

I Apologize, I missed the second question. And the first question, Nippon is morpholino now, so it's less like just a person in a morpholino. And that's about what, but we know they don't -- they haven't presented any real data yet. So, there's very little we know about the program in that. And I apologies on the second question?

Yes, it's on Europe. So you know, you have PROMOVI, I believe, right. It's still underway. So I guess I'm just trying to figure out. Is there a way that you could sort of use something like that? Or if you get, if the review doesn't go well in Europe, how do we think about what the next step would be there?

Yes, that's an excellent question. I can tell you in conversations with representatives from the EMA, they are also considering the same issue. So, there wouldn't be other possibilities for developing additional analysis and evidence in the event that the approach that we're currently taking with our current NDA filing was unsuccessful on a re-exam and then we know the EMA is considering some of those issues as well with us. But our current approach, first and foremost is to, when we thought we have the ruling after the trend vote, which will happen towards the end of May, then we'll commence the reexamination process, request a SAG or otherwise known as a Scientific Advisory Group process. And then, and then hopefully see if we can -- we can change the perspective through that, through that approach. If not, then we're going to have to regroup and consider what additional analyses through evidence that we can develop that could speed this therapy to children in Europe that are waiting for it. Because again, I will say, and I know it sounds self-serving, but having then present, I think that, the eteplirsen presentation and discussion was impressive and only makes us more resolute that children in Europe amenable to exon 51 skipping or have availability of eteplirsen otherwise noted EXONDYSIS 51 in the United States, soon or rather from later.

And just a follow-up, is that where you review timeline four months I mean I know I think it was that with another company I dealt with, but just wanted to get your view on that?

Yes, that is exactly correct. So our understanding is that it's approximately four months. So the entire re-exam including SAG as we understand, it ought to be complete before the end of 2018.

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

A couple of questions on micro-dystrophin gene therapy. Just wondering when we look towards June 19th. How interpretable I guess additional data beyond micro-dystrophin expression will be? Will we see or be able to interpret functional data or any biomarker data or anything else related to micro-dystrophin? And then just wondering and obviously it can maybe first I am confidence in the vector and the approach based on the Myonexus' deal. I am just wondering if anything you or the physician group maybe seen clinically or even pre-clinically that might improve confidence and the durability of the gene therapy in muscle overall? I'll hop back in the queue.

Yes thank you for the question. So, first of all as relates to the data, so what we will see in June 19th is a couple of very important issues that terminal issues. We'll see obviously dystrophin expression through Western blot. We'll also see both localization and distribution through immunohistochemistry. So, we'll get not only to the extent of which dystrophin is being expressed and the amount of dystrophin is being expressed, but also we will get localization at the sarcolemma and the distribution which will give us a strong view at least preliminary on the functional nature of the dystrophin that's being produced. We'll also likely get some biomarkers. So we'll likely get to look at to biomarkers and make some conclusions on biomarkers. As it relates to functional endpoints, we'll remain to be seen this will be only a few months out for both these children. So, the likelihood that we'll have functional endpoints given their young age and the like that would be interpretable probably at the lower. So I would expect a little less on that than biomarkers, and what we're really looking for right now is just dystrophin expression localization and therefore implied function. As it relates to durability, we have a fairly significant amount of preclinical work to give us some comfort about long-term durability. And we'll see a lot of that on June 19th and there will be discussion from both Dr. Mendell and Rodino-Klapac as relates to that. I think one of the most significant issues that relates to durability will be the amount of expression. So I know there is already been preclinical work, it says a relatively robust expression levels that the probability of having long term durability is much higher. And so obviously there will be sort of virtue of cycle if we have robust expression then, obviously we can start getting comfortable, but even with some diminution overtime, that durability will be sufficient to continue to confer significant functional benefit. So that's kind of the way we're looking at June 19th.

Thank you. Our next question is from Salveen Richter of Goldman Sachs. Your line is open.

Thanks taking my questions. So just a couple for me. So one on in light of this partnership today, how do you see Sarepta evolving as a company? Are you just broader muscular dystrophy company or with the bunch of technologies that you're going to pursue? Or do you see yourself expanding into other disease areas?

Thank you very much for that. So first of all I want to say this before I move on because I just want to make sure we never lose sight of the fact that we are a DMD company. So, as we will extend beyond DMD, I don't want anyone to get the impression that we ever leaving DMD. We are focused on and committed to bringing a better life to children around the world who suffer from Duchenne muscular dystrophy across its hopefully as many exons, exon mutation is possible. But beyond that we do have the intention of becoming a very significant and meaningful genetic medicine company over time. And then we mean we likely do that in two ways, so on gene therapy, we are building a significant gene therapy expertise across a number of different ways and from a talent perspective, from asset perspective, from a manufacturing perspective, et cetera. And then we will bring on assets that make sense, additional gene therapy assets and targets that makes sense to continue to drive benefits to folks that have rare disease, and it made very well as it relates to gene therapy, go even beyond neuromuscular disorders. And we'll look at that on a case by case basis. This is a perfect next step today with, with a Limb-girdle because it is one step over, it's not an enormous reach. And the beauty of Limb-girdle is I should say is epidemiologically, it is about the same size as DMD and we have five gene therapy programs in Limb-girdle and that represents about 70% of Limb-girdle. So look, look at thing as sort of compare that to DMD and eteplirsen for instance, it's 13% of DMD and we're -- Limb-girdle will be about 70% of about the same epidemiological size. And I would imagine with gene therapy, we will do other neuromuscular disorders and maybe even move beyond other neuromuscular disorders, if that makes sense. On the RNA side, once we see -- there's two ways to look at the RNA side and we're doing the work right now and building out our strategy right now, particularly as we see positive signals in our PPMO, we have the opportunity to move into other rare disease areas with our PPMO as well. In that area we will likely focus our attention and interest and dedication to what we really know well, which is neuromuscular and also CNS. And if we see positive signals in PPMO, I imagine there'll be those who will be interested in partnering with us even beyond that, we would certainly consider that at the time. And then if you look across the you just think about the future and the vision of Sarepta across the pipeline, understand that and particularly as it relates to DMD, there is a real values be to be deep player in RNA as well as deep player currently in gene therapy because there was a real opportunity to benefit these children and hopefully not just children now, but also adults as people age by giving them combination therapies of exon skipping to benefit them and then also gene therapy to transform them both pre-gene therapy and post-gene therapy. So that's the way we're looking at our vision into the future.

And then at your R&D Day, will we see data on three patients out to three months? Or what will we see data on more patients? What about the two other DMD programs that you were conducting? And then with the Myonexus' program, any clarity you can give us here about the preclinical data that you've had to-date? And then, with regard to your vector construct, how similar these to the Nationwide micro dystrophin program?

So first of all let's walk through it. As it relates to the micro-dystrophin program, so we'll have at least five patients dosed by June 19th, but we'll have -- well actually a biopsy data that will be analyzed on certainly likely on two. There will be a hope that we could have three, but it's unlikely just given the process and the timing of taking biopsies and getting the Western blot and this chemistry done. So it is almost certainly the case that we'll have two patients that will be able to present biopsy data on with respect to that. And then I'm sorry the other two questions were. Yes, so the on the construct, the short answer is, again as Dr. Louise Rodino-Klapac was the co-inventor of micro-dystrophin as well as the inventor of the Limb-girdle construct [indiscernible] et cetera. There is enormous similarity. One of the interesting things about Limb-girdle is, it is in many ways not just been a typically but also underlying very similar to DMD. This is the very complex that is associated dystrophin and in fact not in all five of them, but I think three of the five, they result in a lack of dystrophin which is why they have a significantly serious phenotype. So there is a lot of construct similarity between these two not just in the vector of course AAVrh.74 which we're having. We're getting increasingly confident about, but also just the way they were built and the effect. And then the neuromuscular and the promotors are similar et cetera. So they're very very similar. And I think you have the third question I apologize for that.

Just anything you can give us on the preclinical data here?

Yes. So the preclinical data is, and we will discuss this in depth on June 19th and that will be a very poor job of discussing it now. Other than to note that as relates to I think at least two maybe three of the constructs, there preclinical data and there is actually in two of them IM data on two patients. So this was back at a time, it's a little bit earlier where there was intramuscular injection that's first step that was being done [indiscernible] and the industry does it a different way now where we go straight to infusions because of the fact that IM essentially inoculate the children to future gene therapy programs and isn't the right approach. But they were -- IM approach is with respect to children on at least two of these programs and there was very positive proof of concepts on both. They were -- there was both great expression as well as well it's correlated a functional benefit. But it was from an IM perspective. So, we're moving with MYO-101, our most advanced program into the clinic with patients and an infusing way with potentially therapeutic levels that will give us really robust potential data by the end of 2018 into the first quarter of 2019.

Thank you. Our next question is from the line of Anupam Rama of JP Morgan. Your line is open.

Maybe I just couple of logistical questions on the EU regulatory process. What kind of input do you guys have on the Scientific Advisory Group that's going to be convened? And I believe that after the trend vote, the 30 days letter you get a final vote. But does that shift to year-end or '18 now? Or is it viewed as two separate processes? And in the final question like of kind like what gives you confidence that, that new situation could result in a win here the second time around?

So couple of things, first the Scientific Advisory Group will be chosen by the -- obviously by the CHMP and EMA. There obviously are limited number of the luminaries in DMD in Europe, so we can envision who some of those potential participants would be, but I think they're going to focus on trying to find physicians who are general thought leaders in Duchenne muscular dystrophy as well as some neuro -- other neuromuscular participants. You are right about the process, so there -- what we're announcing right now is a trend vote. It's not the actual vote. The actual vote will occur towards the end of May, 30 days after the oral explanation. But you know from, -- for our planning purposes, we don't envision that the final vote will be in different than the trend vote. And then we'll have 15 days thereafter to commence the reexamination process and that will be approximately a four month process. The SAG or the Scientific Advisory Group process will occur within that construct that will occur within that reexamination process. So that will all occur fairly rapidly inside of that process. There's always the opportunity independent of that to look for scientific advice, you know, separate from what we're currently doing because the re-exam, so you understand cannot, doesn't permit us to provide additional evidence. You're not allowed to do that in the re-exam. So this is really looking at the analysis and reanalysis of the data that we've done in the re-exam. And then as far as confidence goes, I want to be very clear about this. I don't want to create the false impression that you know that we don't have a significant challenge in front of us. As we have said. I Think, you know, hopefully many times leading up to the oral explanation, the standard is very high as set by this DHMP for this review and that doesn't change in the reexamination, so it remains a very challenging issue. The one thing that we are at least hoping for is that we will all get additional insights from the true Duchenne muscular dystrophy experts given that we are told that we will get a SAG in connection with the re-exam. That at least gives us some hope that that will get, that are reasonable being formed by Duchenne muscular dystrophy expertise. But I don't want to create the false impression that we don't have a significant challenge on our hands, we do and we have a significant challenge on our hands. We're going to, we're going to, you know, give it a full throated reexamination effort; we are hoping that a SAG will be -- the SAG will be meaningful and hopeful and helpful in that process. And we'll have that done by the end of the year, and then separate part from that we’ll begin to consider what additional steps we could take apart from the re-exam if the re-exam itself is ultimately unsuccessful.

Thank you. Our next question is from Matthew Harrison of Morgan Stanley. Your line is open.

If I could just maybe shift to ESSENCE for a second, so can you just talk about what the steps are to adjust that study to be able to use the 48-week biopsy for exon 45? And what sort of consultation you have to take with the FDA to be able to do that? And sure about the pluses and minuses for that study would be, if you were to do? And then separately, could you just also talk a little bit about from EXONDYS 51 from the commercial side, maybe just be a little bit more specific about the permanent J Code headwinds and exactly do you expect that the persistence of the second quarter or you think that's completely finished now in the first quarter?

Okay, so I am dealing first with the first question. So, the short answer on the ESSENCE and the modification, and ESSENCE is that we are going to -- we're calling it Type C meeting with the agency. We've already teamed up with the division and we're going to have a Type C meeting where we discuss the mechanisms and protocols that will be associated with looking at the biopsies from 25 EXON 45 amendable patients that have been treated with casimersen for one years and looking at dystrophin expression. The goal of all of this, so we're quite clear is that in the event that we are able to do that and in the event that casimersen dystrophin expression is robust and at least in preclinical models, which so far have shown themselves to be very predictive of what you'll see in human clinical trials, if we should see robust casimersen expression. So by the way in preclinical model casimersen is about as efficient in the production of dystrophin as golodirsen was, and as you know golodirsen was 3.5 times as efficient as eteplirsen. And so that's the goal of all of this. What is the issue and why do we need to make sure, we're very helpful when talk in depth with the agency about that and that's a very simple thing. ESSENCE is going to be the confirmatory trial for golodirsen. So we're in a really good relation with that. And it will also by the way in the event that we'll be able to do this become the confirmatory trial for casimersen as well. And so we want to make sure that we walk through these issues with the division and ensure that we have their buying and doing this and their comfort that we're not going anything through our protocol, that would compromise the integrity of ESSENCE. Because in the event that we compromised the integrity ESSENCE, we would compromise the ability to get approval for golodirsen and ultimately casimersen, so that's the concept there. We only know the FDA's view obviously when we have Type C meeting and then hopefully either they agree with this or they have additional protocol concepts that will obviously adapt to. But in the event that the agency is very uncomfortable with this then we would do it, because it would compromise both casimersen and golodirsen. If we can't do it just to be clear, it would put casimersen approval only about nine months after golodirsen. So it really would be valuable to the 8% of children that are EXON 45 amenable and waiting for therapy. So on the commercial slide, I'd say broadly speaking then I'll turn it over to Bo. Broadly speaking that this is J Code issue was a Q1 issue, it's not a Q2 issue at all, but we'll let Bo provide additional color around this.

Doug has it correct, yes, switching from a temporary J Code to a permanent J Code, all the patients have medical benefits will switch over. And it's really majority of Q1 a little bit into Q2, but for the most part it's over.

And Doug, if I can just follow up to briefly. So on ESSENCE, is the issue and unblinding issue that they will be worried about? Or can maybe just talk maybe a little bit more specifically about what you think that the issue maybe? And then, is there a timeline here for the Type C meeting? And when you think you'll be able to provide feedback to us on, if you can make a modification or not?

So, you hit the nail exactly on the head. So, the concern would be whether we created the right sufficiently vigorous protocols around look at biopsies, so that we have avoided any concerns with compromising the trial through some unblinding that would compromise the integrity of the trial. So that's the issue. We think we have good protocols for it. We think we've been very thoughtful about it, but we really want to sit down with the division, get their input and should they agree with us. If they don't, but they have alternative ideas, adapt them obviously and then we'll make the call. The process between, you know, asking for. So we are in the process right now of requesting the meeting, so we should have, there's a set date, we don’t have a meeting set yet we're requesting the meeting even as we speak, so, we probably are at least three months or so out from our ability to provide a meaningful update. Certainly by the end of the year we'll know exactly where we are and maybe by the third quarter we'll have a good view on where we are, but we'll keep you informed as we’re moving along with it.

Thank you. [Operator instructions] Our next question is from Joseph Schwartz of Leerink Partners. Your line is open.

So you've obviously been making some progress with follow-on candidate. So, how sufficient is the oligo manufacturing that you've been putting into place? And do you think you can keep chase with multiple PMO approvals? We've been hearing that some CMOs are pretty stretched with all of the activity in the industry and your oligos are on the more demanding side of the complexity spectrum?

We haven't and I'll let -- Sandy, can comment on this issue. We have no current concerns regarding supply issues with our oligos. We're in great shape.

Yes, that's really what I would say as well. We really have no concerns, we have a significant capacity that we’ve built up with multiple backups and you also have an inventory built up of both sub-units as well as APIs for all our three lead programs, which is obviously 51, 52 and 45 for both PMOs and PPMOs. So, Joe, we have no concerns in the manufacturing front.

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

[Myle Spencer] on for Tim Lugo. Congratulations on the [indiscernible] it fits in really well with the gene therapy, [indiscernible] the field. Just two questions so if we can turn to GALGT2 therapy. The primary end point for that trial is still antigen. I am curious to see what additional end points or what the primary therapeutic portfolio, if you like, of what you are looking for in that trial to progress that for? And also when those patients are going to transfer from the JoVE femoral artery injection into the more mainstream I'd say that you same with the market [indiscernible] programs?

So as it relates GALGT2, so two things. One, for your first question is excellent one that we need to do more work on before we get to the point and actually looking at the biopsy data and making any of that, which is we've got to come to a view and in we're certainly informed by Dr. Flanagan, who I think already has a pretty advanced view on what success looks like when we look at the biopsies. GALGT2 is really fascinating because we're, it's a, it's an interesting alternative to micro-dystrophin. It might have great utility even beyond DMD given the fact that the thesis is that not only does it increase utrophin expression, which acts as a surrogate for dystrophin, but it also should strengthen the sarcolemma and a general sense because it recruits proteins. But we've got to do a lot of real thinking before we go out and talk about what success looks like there and what exact expression we're looking for this something that we're going to have to struggle with or bet with Dr. Flanagan. As relates to moving over essentially the full infusion, so as one of the reasons where that in a sense we're on pause. Dr. Flanagan dosed one child. The child is doing brilliantly, no issues from a safety perspective. But he does believe that we really out of the moving to a full infusion. And it's actually in the process of getting his IND updated, so he can do both full infusion and also accelerate the pace of patients faster than just once a month. So, we're in that process right now. So the goal is actually to go from this forward to get at the IND updated into go full infusion as opposed to this lower limb perfusion which is where we're right now with the IND.

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

So both of you lead gene therapy programs and as well as the recent partnerships, they all use $1.74. So assuming age and exercise induced vectors expression loss, how view all your KOLs with three treatment side use? Or is there long-term goals supplementing with exon skipping primarily with PPMO?

Both strategies are inside of our pipeline. So we're doing work. So bring the latter part first, there is already existing literature that describes the potential benefit that exists from a combination of gene therapy and exon skipping through PMOs or PPMOs. We're actually doing additional work to actually round up that hypothesis and look at the benefits. As related to re-dosing, we are actually looking already with Dr. Louise Rodino-Klapac and Dr. Mendell about strategies in the future for re-dosing. Dr. Rodino-Klapac has done historical work that's then she has some very good thesis on how that can be done and we're funding that even as we speak. So obviously it's a bit out, but it is definitely our goal. We are able to become successful with micro-dystrophin. One of the things we're going to certainly want to do is look down the road or re-dosing, if it turns out in 20 or 25 years. These kids -- could these adults then would benefit from the re-dose.

So the PPMO program, are you half way through sending the dose part right now?

On the PPMO, yes, we're definitely. We'll halfway to no, unfortunately with the single dose study which is a very traditional 3x3 study, it's just it is very conservative and therefore relatively long process for dose escalation. We really started extremely sub therapeutic levels and removing up very -- as you can imagine. So people would ask are how do we feel about it and the actually we feel great about it, but I wouldn't take a ton of comfort around the fact that we're seeing that we don't have issues right now simply because we are still significantly sub-therapy there. It will be the end of the year before we have real significant insight.

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

Maybe one for Bo real quick. Just on the exon this number. Any ex-U.S. map sales in that number? And then when should we anticipate any color on that or inclusion of ex-U.S. sale? And then perhaps one for Sandy because that's squeezing in there, the gene therapy product with Myonexus and your DMD program, I assume it's been made Nationwide. How should we think about manufacturing the build out when will that occur?

Even at the JP Morgan conference, we hinted around that the ex-U.S. sales were going to be insignificant, and that's exactly what it was on this case. We're going to hit the target of $295 million to $305 million this year and maybe a few million dollars will come from ex- U.S. sales, but it will be insignificant just as it was this quarter. So the majority of sales happen from U.S.

And thanks for your question, Chris. In terms of gene therapy, GMP manufacturing, we've made a lot of progress. I'll quote your words as you said, $100 million goes a long way to fixing the gene therapy manufacturing problem. And that's exactly the way we see it. We've assembled quite a few people in our gene therapy manufacturing group and we will have a significant update in the near term. So, stay tune.

Thank you. Our next question is Ritu Baral of Cowen and Company. Your line is open.

So just continuing client debate about the degree of micro-dystrophin expression needed to constitute success for when you unveiled the data in June. Doug, you mentioned localization, distribution as variables and also the higher the better for durability. Is there a number that you have in your head, when you say, yes, this is a home run. Is there a number where you say, okay, maybe we have to think about dosing up and given the given the seemingly good safety you've seen so far, like why not, why not do that now? Why not dose up?

So first of all on dosing just to go there, so we -- the one of the great things about working with Dr. Rodino-Klapac as well as Dr. Mendell and Nationwide is that we really do stand on the shoulders of just a time of preclinical work that justifies the safety of our vectors. So as an example, we have the ability from a safety margin perspective to dose up. We're at 2 times 10 to the 14, which interestingly is the highest dose that anyone has ever received in gene therapy. We could actually dose up to 6 times 10 to the 14. The reason that we're not doing that is simply because in preclinical models 2 times 10 to the 14th is shown very robust expression in animal models. And so our current thesis is that 2 times 10 to the 14th isn't appropriate dose for robust expression. In the event that we didn't see robust expression, we should reconsider that, but that is not our working thesis right now. And then what is success? You know, there's two ways to look at it. If you -- we informed by what we know about dystrophin, you could actually have fairly modest expression and still believe it's robust. So I think as we all know, very small amounts of increased dystrophin and properly localized confers benefit not only you know that in eteplirsen and golodirsen, but we know that from nature. You could look at exon 44 amendable children, they have only background amounts of exon skipping that they get naturally just like confers by eteplirsen and golodirsen and casimersen. And they show either somewhere between no undetectable amounts in Western blot to what we've done, which has shown that even after 19 years they might have around 2%, and they have a clinical phenotype that is significantly different. They stay on wheelchair about, three to five years long. So small amounts matter, so what we're trying to looking at, if you look at it from that perspective, you know, we would say 5% would be significantly higher higher than anyone ever been able to achieve with dystrophin production and we clearly get benefit. I don't think we would consider 5% -- we consider 5% acceptable, we would consider it a home run by any stretch. 10% of above I think would be home run from, on a Western blot perspective for micro-dystrophin. Now, I will also say for those who go check background. In animal models, we're seeing significantly greater expression than that, but that it isn't what we need for success. So, I'd say, if we saw 10% we would have a very significant therapy on.

And Doug does that factor in the durability comment you made earlier, like do you need 15 to ultimately study stated 10?

I think that's a really good point. I think that's why I think, if we have 5%. I think we have 5% dystrophin which is at 3 months, which is literally 500% higher than we see with golodirsen at one year. That will be very significant thing that would give us some pause as long term durability. When to try percent become 4% or 3%, how many years is that there? But really good point, 5% or better yet 12% or 13% or 14%. We could start getting comfortable that even if there is a lot of durability over the long term we'll stay above the therapeutic amount for quite some time. And then the other thing that I would say again going back to what we seen in other models, so Dr. [Voyd] is an example has a paper on this issue, which is on the durability issue, we stand at an interesting place as a company because we have RNA and gene therapy. And we have the ability to use exon skipping which will enhance durability. What Dr. [Voyd's] paper shows is at least in animal model, if you use Exon skipping in advancement gene therapy, you reduce any loss of early vector something like 8 times than the hypothesis is, if you use some form of exon skipping in your PPMO or PMO afterwards, you're very likely going to increase the long-term durability. So, you're standing at an interesting place given the fact that we have a multi-platform generic medicine approach to DMD.

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

I just had one quick question. Assuming you have positive data from the gene therapy programs and the update we get in June. How do you saw CV, the next step in terms your clinical trials? What would you go to -- would it be a trial analogous to what you around the golodirsen, the Phase 1/2, which could then get to the accelerated approval. Just any thoughts and color there would be really appreciated?

So let me say that, we are going to give an update on June 19th about our approach to gene therapy and to the extent that we have positive data our approach to bringing that therapy is rapidly as possible to patients in the United States and then ultimately around the world. So I don't want to go into any detail now on that simply because we are working through some of issues and we're going to save that for June 19. Other than to say this, it won't come as a surprise those who know our approach. We feel a great sense of responsibility to patients suffering from Duchenne muscular dystrophy in the United States and around the world. We understand that every day, these patients around the world and they're just some 70,000 or 80,000 of them are suffering irreversible damage that even gene therapy won't fix, we can top the decline. And so we feel a sense of moreover responsibility to move rapidly. What you will see on June 19th in the events that we have positive data is a plan that will, will be very ambitious in our efforts to bring this therapy to patients they are waiting it.

Thank you our next question is from Lisa Bayko of JMP Securities. Your line is open.

Hi this John on for Lisa. Thanks for taking the question. Just a quick follow-up on CHMP vote. You just noted that the trend vote was negative. I was wondering what the actual vote was on? And what the voting results were? Thank you very much.

We don't have that, so we don't have that vote with the final vote. We just know that the trend vote was -- we know that the trend vote was negative and we also know that representatives from EMA were quite direct with us that the vote was not a vote that the therapy was ineffective or that the risk benefit was established to not be there, but rather it was a lingering questions around the issues associated with the use of external controls and the three studies, as really number of issues, but these are the biggest one it seems, is that issue. And the second significant issue is that we have three studies and across all three studies both the ambulatory and non-ambulatory, we showed a significant arrest of pulmonary decline in both end ambulatory and non-ambulatory patients. You can see this because there's an 8-K that has the entire presentation in it. And, I think there were questions from the reps who were about the clinical meaningfulness of pulmonary decline and the resting pulmonary decline. And that’s why our hope is that that in re-exam with the SAG, we can get additional insight into the clinical importance of slowing pulmonary decline which of course we believe is important given the fact that these children with Duchenne muscular dystrophy, almost, almost always die as a result of either cardiac or pulmonary issues.

Thank you. Our last question is from Yun Zhong of Jefferies. Your line is open.

Hi, thanks for taking the question and this might be a follow-up question to your previous question on ex-U.S. And I believe you talked about and expanded access program in Europe and at one point just I wondered, if you are able to share any information on the current status of that program? And also on the re examination, is it possible at all that you can submit any new information data? Or is it going to be purely based on whatever you have presented?

So, I’ll answer the latter question and then the first question. Bo, can you provide additional color on managed with access program from that prelim. As it relates to the re-exam, the short answer is that you can’t provide new evidence. So I understand you can probably provide new analysis and preexisting evidence and data, but we can’t provide additional evidence. For instance we have additional for PROMOVI patients that an additional -- evidence from additional PROMOVI patients as that trials ongoing. But we can’t insert that into the re-examination process that would have to have into a separate process that we would certainly consider in the event that we were unsuccessful in the re-examination. And with that, I would turn it over to Bo to comment on the map program.

Yes, we set up on that map program but really in Europe it goes very slowly, it goes slowly across the globe. And really 2018 we are not expecting a lot of sales, as I mentioned to Chris earlier, this year would be insignificant from a map program. We setup basic infrastructure. Now we have been hiring MSLs medical directors to support the staff as the, but it's going to be insignificant in 2018 off regardless.

Thank you. And that does conclude our Q&A session for today. I like to turn the call back over to Mr. Doug Ingram for any further remarks.

Thank you everyone for joining today's call. I appreciate that you're joining us and appreciate the questions. We look forward to updating you on our ongoing progress in the coming months including our R&D Day, which as we said is scheduled for June 19th. Have a lovely evening.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program and you may all disconnect. Everyone have a great day.