Sarepta Therapeutics Announces First Quarter 2019 Financial Results and Recent Corporate Developments

CAMBRIDGE, Mass., May 08, 2019 (GLOBE NEWSWIRE) -- Sarepta Therapeutics, Inc. (NASDAQ:SRPT), the leader in precision genetic medicine for rare diseases, today reported financial results for the three months ended March 31, 2019.

“Having built out our multi-platform portfolio of genetic medicine in the prior two years and set out our ambition for Sarepta, we stated at the commencement of 2019 that this would be a year of execution. While we have much left to accomplish in 2019, I am pleased to report and quite proud that the Sarepta team executed brilliantly in the first quarter,” stated Doug Ingram, Sarepta’s president and chief executive officer.

Mr. Ingram continued, “Our Q1 2019 and recent accomplishments include the following: we continued to deliver on Exondys 51 and serve the Duchenne community; having fulfilled our commitment to commence our clinical process placebo-controlled trial for our micro-dystrophin gene therapy program by the fourth quarter of 2018, we made great progress on enrollment and dosing and are on track to complete dosing in the second quarter; we announced impressive results for our first LGMD2E cohort, particularly encouraging when one considers that the dose was one quarter of our micro-dystrophin program, reflecting the elegance of our construct and the potential for read through to other programs; fulfilling our promise to build a positive, science-driven relationship with the FDA and define an accelerated approval pathway for our RNA technology, the FDA accepted for filing our golodirsen package, informed us there would be no advisory committee at this time, and gave us priority review; we announced positive results for our third RNA program for casimersen; and we advanced our gene therapy manufacturing platform, moving to the late stage process development for our micro-dystrophin program, securing a dedicated 75,000 square foot manufacturing facility with Brammer, which we plan to be operational in 2019, and are working with Paragon and Catalent to deepen our relationship and create, either through a joint venture or otherwise, a second dedicated gene therapy facility. And beyond that, we continue to build our vision as an enduring genetic medicine leader; today we announced a new partnership with Nationwide Children’s Hospital to advance a gene therapy treatment for LGMD2A, the most common type of LGMD, a program perfectly aligned with our strategy to build out an enduring multi-therapeutic gene therapy engine.”

First Quarter 2019 and Recent Corporate Developments

• Agreement with Nationwide Children’s Hospital for Rights to its Gene Therapy Program to Treat Limb Girdle Muscular Dystrophy Type 2A (May 8, 2019):  Sarepta announced an agreement with the Research Institute at Nationwide Children’s for the exclusive option to gene therapy candidate, calpain 3 (CAPN-3), to treat Limb-girdle muscular dystrophy type 2A (LGMD2A) also known as calpainopathy. LGMD2A is caused by mutations in the CAPN-3 gene and is the most common type of LGMD, accounting for almost a third of cases. Like Sarepta’s micro-dystrophin and five other LGMD programs, the LGMD2A program employs the AAVrh74 vector, designed to systematically and robustly deliver treatment to skeletal muscle, including the diaphragm, without promiscuously crossing the blood brain barrier, making it an ideal candidate to treat muscle disease. The CAPN-3 program is currently in pre-clinical trials and is led by Zarife Sahenk, M.D., Ph.D., an attending neurologist at Nationwide Children's, Director of Clinical and Experimental Neuromuscular Pathology at The Research Institute at Nationwide Children's and Professor of Pediatrics, Pathology and Neurology at The Ohio State University College of Medicine.
• LGMD2E Clinical Data Accepted for Late-breaking Oral Presentation at the 2019 MDA Clinical and Scientific Conference (April 8, 2019):  Sarepta’s positive clinical data from the Company’s Limb-girdle muscular dystrophy (LGMD) Type 2E gene therapy program was accepted as a late-breaker oral presentation at the Muscular Dystrophy Association (MDA) Clinical and Scientific Conference in Orlando, Fla. Louise Rodino-Klapac, Ph.D., Sarepta’s Senior Vice President of Gene Therapy, presented. In addition to the late-breaking oral presentation, six posters highlighting data from Sarepta’s RNA and gene therapy programs for Duchenne muscular dystrophy (DMD) and LGMD2D were also presented. In the LGMD2E study, two patients had elevated liver enzymes, one of which was designated a serious adverse event (SAE), as the patient had associated transient increase in bilirubin. These events occurred as patient tapered off oral steroids. Following supplemental steroid treatment, both patients returned to baseline and symptoms resolved within days. No other clinically significant laboratory findings or decreases in platelet counts were observed.
• Positive Expression Results from the Casimersen (SRP-4045) Arm of the ESSENCE Study (March 28, 2019): Sarepta announced results of its interim analysis of muscle biopsy endpoints comparing casimersen treatment to placebo in the ESSENCE study, also known as study 4045-301. Patients amenable to exon 45 skipping were randomized to receive a once-weekly intravenous (IV) infusion of casimersen dosed at 30mg/kg (N=27) or placebo (N=16) for 96 weeks. The interim analysis was performed on data from biopsies of the bicep muscle at baseline and on-treatment at Week 48. In the casimersen arm, mean dystrophin protein (% normal dystrophin as measured by western blot) increased to 1.736% of normal compared to a mean baseline of 0.925% of normal (p<0.001). A statistically significant difference in the mean change from baseline to week 48 in dystrophin protein was observed between the casimersen-treated arm compared to the placebo arm (p=0.009). Of the 22 patients receiving casimersen who have been tested for increased exon-skipping mRNA using reverse transcription polymerase chain reaction (RT-PCR), all have displayed an increase in skipping exon 45 (p<0.001) over their baseline levels, representing a 100% response rate. A statistically significant positive correlation between exon 45 skipping and dystrophin production was observed. The study is ongoing and remains blinded to collect additional efficacy and safety data. 
• Micro-dystrophin Study 101 Update (March 25, 2019): On March 25, 2019, Sarepta held a conference call regarding encouraging 9-month functional and creatine kinase (CK) data from baseline for the 4 patients in the Phase 1 open-label study of the Company’s micro-dystrophin gene therapy candidate for Duchenne muscular dystrophy.  

Conference Call
The Company will be hosting a conference call at 4:30 p.m. Eastern Time to discuss Sarepta’s financial results and provide a corporate update. The conference call may be accessed by dialing (844) 534-7313 for domestic callers and (574) 990-1451 for international callers. The passcode for the call is 5198075. Please specify to the operator that you would like to join the “Sarepta First Quarter 2019 Earnings Call." The conference call will be webcast live under the investor relations section of Sarepta's website at www.sarepta.com and will be archived there following the call for 90 days. Please connect to Sarepta's website several minutes prior to the start of the broadcast to ensure adequate time for any software download that may be necessary.

Financial Results

On a GAAP basis, the Company reported a net loss of $76.6 million and $35.4 million, or $1.07 and $0.55 per basic and diluted share for the first quarter of 2019 and 2018, respectively. On a non-GAAP basis, the net loss for the first quarter of 2019 was $53.8 million, or $0.75 per basic and diluted share, compared to a net loss of $17.9 million for the same period of 2018, or $0.28 per basic and diluted share.

Net Revenues

For the three months ended March 31, 2019, the Company recorded net revenues of $87.0 million, compared to net revenues of $64.6 million for the same period of 2018, an increase of $22.4 million. The increases primarily reflect the continuing increase in demand for EXONDYS 51 in the U.S.

Cost and Operating Expenses

Cost of sales (excluding amortization of in-licensed rights)
For the three months ended March 31, 2019, cost of sales (excluding amortization of in-licensed rights) was $12.1 million, compared to $5.6 million for the same period of 2018. The increase primarily reflects royalty payments to BioMarin Pharmaceuticals (BioMarin) and higher product costs as a result of increasing demand for EXONDYS 51, as well as an inventory write-off related to certain batches of product not meeting the Company’s quality specifications. Prior to the approval of EXONDYS 51, the Company expensed related manufacturing and material costs as research and development expenses. As a result, the Company sold more product with no cost during the first quarter of 2018 compared with the same period of 2019.

Research and development
Research and development expenses were $90.6 million for the first quarter of 2019, compared to $46.2 million for the same period of 2018, an increase of $44.4 million. The increase in research and development expenses primarily reflects the following:

• $18.8 million increase in clinical and manufacturing expenses primarily due to a ramp-up of manufacturing activities for our micro-dystrophin program and initiation of certain post-marketing studies for EXONDYS 51. The increases were partially offset by a ramp-down of the PROMOVI trial in EXONDYS 51 and the Phase 1/2 trials in golodirsen;
  
  
• $11.4 million increase in compensation and other personnel expenses primarily due to a net increase in headcount;
  
  
• $8.3 million increase in facility- and technology-related expenses due to our continuing expansion efforts as well as change in methodology in allocation of technology expense;
  
  
• $3.0 million increase in stock-based compensation expense primarily driven by increases in headcount and stock price;
  
  
• $2.2 million increase in pre-clinical expenses primarily due to the continuing ramp-up of toxicology studies in our PPMO platform;
  
  
• $1.2 million increase in sponsored research with institutions such as Nationwide Children’s Hospital; and
  
  
• $2.9 million decrease in collaboration cost sharing with Summit as it is winding down activities on its Utrophin platform.

Non-GAAP research and development expenses were $81.4 million and $43.3 million for the first quarter of 2019 and 2018, respectively, an increase of $38.1 million.

Selling, general and administration
Selling general and administrative expenses were $60.6 million for the first quarter of 2019, compared to $43.3 million for the same period of 2018, an increase of $17.3 million. The increase in selling, general and administrative expenses primarily reflects the following:

• $10.4 million increase in compensation and other personnel expenses primarily due to an increase in headcount;
  
  
• $3.2 million increase in facility- and technology-related expense primarily due to continuing global expansion offset by a decrease in technology expense due to a change in allocation methodology; and
  
  
• $2.6 million increase in stock-based compensation primarily due to increases in headcount and stock price.

Non-GAAP selling, general and administrative expenses were $47.8 million and $33.7 million for the first quarter of 2019 and 2018, respectively, an increase of $14.1 million.

Amortization of in-licensed rights
For both the three months ended March 31, 2019 and 2018, the Company recorded amortization of in-licensed rights of approximately $0.2 million

Other loss

Interest expense and other, net

For the three months ended March 31, 2019 and 2018, the Company recorded $0.2 million and $4.5 million, respectively, of interest expense and other, net. The decrease primarily reflects increases in interest income from higher balances of cash, cash equivalents and investments and amortization of investment discount as a result of an increase in interest rates.

Cash, Cash Equivalents, Investments and Restricted Cash and Investments

The Company had approximately $1.4 billion in cash, cash equivalents and investments as of March 31, 2019 compared to $1.0 billion as of March 31, 2018. The increase is primarily driven by the proceeds of the public offering of common stock in March 2019 offset by cash used to fund the Company’s ongoing operations during the first quarter of 2019.

Use of Non-GAAP Measures

In addition to the GAAP financial measures set forth in this press release, the Company has included certain non-GAAP measurements. The non-GAAP loss is defined by the Company as GAAP net loss excluding interest expense/(income), income tax expense/(benefit), depreciation and amortization expense, stock-based compensation expense and other items. Non-GAAP research and development expenses are defined by the Company as GAAP research and development expenses excluding depreciation and amortization expense, stock-based compensation expense and other items. Non-GAAP selling, general and administrative expenses are defined by the Company as GAAP selling, general and administrative expenses excluding depreciation and amortization expense, stock-based compensation expense and other items.

1. Interest, tax, depreciation and amortization

Interest income and expense amounts can vary substantially from period to period due to changes in cash and debt balances and interest rates driven by market conditions outside of the Company’s operations.  Tax amounts can vary substantially from period to period due to tax adjustments that are not directly related to underlying operating performance. Depreciation expense can vary substantially from period to period as the purchases of property and equipment may vary significantly from period to period and without any direct correlation to the Company’s operating performance. Amortization expense associated with in-licensed rights as well as patent costs are amortized over a period of several years after acquisition or patent application or renewal and generally cannot be changed or influenced by management.

2. Stock-based compensation expenses

Stock-based compensation expenses represent non-cash charges related to equity awards granted by Sarepta. Although these are recurring charges to operations, management believes the measurement of these amounts can vary substantially from period to period and depend significantly on factors that are not a direct consequence of operating performance that is within management's control. Therefore, management believes that excluding these charges facilitates comparisons of the Company’s operational performance in different periods.

3. Other items

The Company evaluates other items of expense and income on an individual basis. It takes into consideration quantitative and qualitative characteristics of each item, including (a) nature, (b) whether the items relate to the Company’s ongoing business operations, and (c) whether the Company expects the items to continue on a regular basis. These other items include up-front and milestone payments. The Company excludes up-front and milestone expenses associated with its license and collaboration agreements from its financial results and research and development expenses because the Company does not consider them to be normal operating expenses due to their nature, variability of amounts, and lack of predictability as to occurrence and/or timing. Up-front payments are made at the commencement of a collaborative relationship or a license agreement anticipated to continue for a multi-year period and provide the Company with intellectual property rights, option rights and other rights with respect to particular programs. Milestone payments are made when certain development, regulatory and sales milestone events are achieved. The variability of amounts and lack of predictability of collaboration- and license-related up-front and milestone payment makes the identification of trends in the Company’s ongoing research and development activities more difficult. The Company believes the presentation of adjusted research and development, which does not include license- and collaboration-related up-front and milestone expenses, provides useful and meaningful information about its ongoing research and development activities by enhancing investors’ understanding of the Company’s normal, recurring operating research and development expenses and facilitates comparisons between periods and with respect to projected performance.

The Company uses these non-GAAP measures as key performance measures for the purpose of evaluating operational performance and cash requirements internally. The Company also believes these non-GAAP measures increase comparability of period-to-period results and are useful to investors as they provide a similar basis for evaluating the Company’s performance as is applied by management. These non-GAAP measures are not intended to be considered in isolation or to replace the presentation of the Company’s financial results in accordance with GAAP. Use of the terms non-GAAP research and development expenses, non-GAAP selling, general and administrative expenses, non-GAAP other income and loss adjustments, non-GAAP income tax expense, non-GAAP net loss, and non-GAAP basic and diluted net loss per share may differ from similar measures reported by other companies, which may limit comparability, and are not based on any comprehensive set of accounting rules or principles. All relevant non-GAAP measures are reconciled from their respective GAAP measures in the attached table "Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures.”

About EXONDYS 51

EXONDYS 51 uses Sarepta’s proprietary phosphorodiamidate morpholino oligomer (PMO) chemistry and exon-skipping technology to skip exon 51 of the dystrophin gene. EXONDYS 51 is designed to bind to exon 51 of dystrophin pre-mRNA, resulting in exclusion of this exon during mRNA processing in patients with genetic mutations that are amenable to exon 51 skipping. Exon skipping is intended to allow for production of an internally truncated dystrophin protein.

Important Safety Information About EXONDYS 51

Hypersensitivity reactions, including rash and urticaria, pyrexia, flushing, cough, dyspnea, bronchospasm, and hypotension, have occurred in patients who were treated with EXONDYS 51. If a hypersensitivity reaction occurs, institute appropriate medical treatment and consider slowing the infusion or interrupting the EXONDYS 51 therapy.

Adverse reactions in DMD patients (N=8) treated with EXONDYS 51 30 or 50 mg/kg/week by intravenous (IV) infusion with an incidence of at least 25% more than placebo (N=4) (Study 1, 24 weeks) were (EXONDYS 51, placebo): balance disorder (38%, 0%), vomiting (38%, 0%) and contact dermatitis (25%, 0%). The most common adverse reactions were balance disorder and vomiting. Because of the small numbers of patients, these represent crude frequencies that may not reflect the frequencies observed in practice. The 50 mg/kg once weekly dosing regimen of EXONDYS 51 is not recommended.

In the 88 patients who received ≥30 mg/kg/week of EXONDYS 51 for up to 208 weeks in clinical studies, the following events were reported in ≥10% of patients and occurred more frequently than on the same dose in Study 1: vomiting, contusion, excoriation, arthralgia, rash, catheter site pain, and upper respiratory tract infection.

For further information, please see the full Prescribing Information.

About Sarepta Therapeutics
Sarepta is at the forefront of precision genetic medicine, having built an impressive and competitive position in Duchenne muscular dystrophy (DMD) and more recently in gene therapies for 6 Limb-girdle muscular dystrophy diseases (LGMD), Charcot-Marie-Tooth (CMT), MPS IIIA, Pompe and other CNS-related disorders, totaling over 20 therapies in various stages of development. The Company’s programs and research focus span several therapeutic modalities, including RNA, gene therapy and gene editing. Sarepta is fueled by an audacious but important mission: to profoundly improve and extend the lives of patients with rare genetic-based diseases. For more information, please visit www.sarepta.com.

Forward-Looking Statements

In order to provide Sarepta’s investors with an understanding of its current results and future prospects, this press release contains statements that are forward-looking. Any statements contained in this press release that are not statements of historical fact may be deemed to be forward-looking statements. Words such as “believes,” “anticipates,” “plans,” “expects,” “will,” “may,” “intends,” “prepares,” “looks,” “potential,” “possible” and similar expressions are intended to identify forward-looking statements. These forward-looking statements include statements relating to Sarepta being on track to complete dosing in our micro-dystrophin gene therapy program in the second quarter of 2019; the potential for read through of our first LGMD 2E cohort results to other programs; our plan that the manufacturing facility with Brammer be operational in 2019; our plan to deepen our relationship with Paragon and Catalent and create, either through a joint venture or otherwise, a second dedicated gene therapy facility; our goal to build out an enduring multi-therapeutic gene therapy engine; the AAVrh74 vector’s design to  systematically and robustly deliver treatment to skeletal muscle, including the diaphragm, without promiscuously crossing the blood brain barrier, making it an ideal candidate to treat muscle disease; exon skipping’s design to allow for production of an internally truncated dystrophin protein; and our mission to profoundly improve and extend the lives of patients with rare genetic-based diseases.

These forward-looking statements involve risks and uncertainties, many of which are beyond Sarepta’s control. Actual results could materially differ from those stated or implied by these forward-looking statements as a result of such risks and uncertainties. Known risk factors include the following: we may not be able to meet expectations with respect to EXONDYS 51 sales or attain the net revenues we anticipate for 2019, profitability or positive cash-flow from operations; we may not be able to comply with all FDA post-approval commitments and requirements with respect to EXONDYS 51 in a timely manner or at all; the expected benefits and opportunities related to the agreement with Nationwide Children’s pertaining to CAPN-3 may not be realized or may take longer to realize than expected due to challenges and uncertainties inherent in product research and development; Sarepta’s dependence on certain manufacturers to produce its product candidates, including any inability on Sarepta’s part to accurately anticipate product demand and timely secure manufacturing capacity to meet product demand, may impair the availability of product to successfully support various programs; success in preclinical testing and early clinical trials, especially if based on a small patient sample, does not ensure that later clinical trials will be successful, and initial results from a clinical trial do not necessarily predict final results; our data for golodirsen, casimersen, SRP-9001, the LGMD programs and/or other programs may not be sufficient for obtaining regulatory approval; if the actual number of patients suffering from DMD, LGMD, pompe disease, CMT and/or MPS IIIA is smaller than estimated, our revenue and ability to achieve profitability may be adversely affected; Sarepta may not be able to execute on its business plans, including meeting its expected or planned regulatory milestones and timelines, research and clinical development plans, and bringing its product candidates to market, for various reasons, some of which may be outside of Sarepta’s control, including possible limitations of company financial and other resources, manufacturing limitations that may not be anticipated or resolved for in a timely manner, and regulatory, court or agency decisions, such as decisions by the United States Patent and Trademark Office with respect to patents that cover Sarepta’s product candidates; and those risks identified under the heading “Risk Factors” in Sarepta’s most recent Annual Report on Form 10-K for the year ended December 31, 2018 and most recent Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission (SEC) as well as other SEC filings made by the Company which you are encouraged to review.

Any of the foregoing risks could materially and adversely affect the Company’s business, results of operations and the trading price of Sarepta’s common stock. You should not place undue reliance on forward-looking statements. Sarepta does not undertake any obligation to publicly update its forward-looking statements based on events or circumstances after the date hereof, except to the extent required by applicable law or SEC rules.

Internet Posting of Information

We routinely post information that may be important to investors in the 'For Investors' section of our website at www.sarepta.com. We encourage investors and potential investors to consult our website regularly for important information about us.

(1) As of January 1, 2019, the Company adopted the requirements of Accounting Standards Codification 842, Leases, using the modified retrospective method as of the effective date, and as a result, Other Assets and Liabilities are not comparable to the prior periods presented.

Source: Sarepta Therapeutics, Inc.

Sarepta Therapeutics, Inc.
Investors:
Ian Estepan, 617-274-4052
iestepan@sarepta.com

Media:
Tracy Sorrentino, 617-301-8566
tsorrentino@sarepta.com