Good day, ladies and gentlemen, and welcome to the Sarepta Therapeutics third quarter 2018 earnings 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. If any of you require assistance during the program, please press star then zero on your touchtone telephone. As a reminder, today's program is being recorded. Now I'd like to introduce your host for today's program, Ian Estepan, Vice President, Chief of Staff and Corporate Affairs. Please go ahead.
Thank you, Jonathan, and thank you all for joining today's call. Earlier today, we released our financial results for the third quarter of 2018. The press release is available on our website at www.sarepta.com. Joining us on the call today are Doug Ingram, Sandy Mahatme, Bo Cumbo, Dr. Gilmore O'Neill, Dr. Louise Rodino-Klapac. After our formal remarks, we'll open the call up for Q&A. I'd like to note that during this call, we'll be making a number of forward-looking statements. Please take a moment to review the slide on our webcast, which contains our forward-looking statements. These forward-looking statements involve risks and uncertainties, any of which are beyond Sarepta's control. Actual results can materially differ from these forward-looking statements, as any 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 risk and uncertainty, we encourage you to review the company's most recent quarterly report on Form 10-Q filed with the Securities and Exchange Commission, as well as the company's other SEC filings. The company does not undertake any obligation to publicly update its forward-looking statement, 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 third quarter 2018 results and corporate update conference call. Before I comment on the quarter, I am pleased to announce that Dr. Gilmore O'Neill has taken on an expanded role as Senior Vice President, Research and Development, as well as his previous Chief Medical Officer role. This structure will ensure that we have a seamless alignment across research through clinical development and approval as we accelerate our plans. As noted previously, Dr. O'Neill is with us this evening, as is Dr. Louise Rodino-Klapac, our Head of Gene Therapy. Now, as we will discuss this evening, we have had a very productive quarter, once again posting strong sales growth for EXONDYS 51 while we continue to advance our RNA platform and build our Gene Therapy Center of Excellence engine with a sense of purpose.
Starting with our RNA platform, we had another strong quarter of sales, with EXONDYS 51 standing at $78.5 million and tracking toward our full year guidance of $295 million to $305 million. I'm very pleased with the execution-focused approach of our commercial and medical affairs teams, as reflected in our performance. We are focused on identifying all patients who could benefit from EXONDYS 51 and working to remove any barriers that stand in their way. One of those barriers has been some misunderstanding about the FDA's Accelerated Approval pathway and the obligation to make therapies available. We were pleased to see The Centers for Medicare and Medicaid Services, or CMS, clarify some issues and correct misconceptions regarding the obligation of state Medicaids to make access available to patients. On June 27th, the CMS issued a notice to all states reminding them of the following.
First, therapies approved via the Accelerated Approval process have met the normal standard for safety and effectiveness and must be covered by state Medicaid programs so long as the manufacturer has signed the standard Medicaid rebate, which we did sign at the approval of EXONDYS. Second, states should not use the prior authorization and other utilization management methods other than to ensure the proper use of the therapy, for instance, to ensure that the therapy is used consistent with its label. There are still children who have been kept waiting for nearly two years for therapy. This is unacceptable and hopefully CMS's clarification will resolve roadblocks to their obtaining therapy. We continue to build our international presence with limited infrastructure, but dedicated colleagues in Latin America and Europe, and a Managed Access Program, or MAP, now live in some 44 countries.
We should continue to see a modest contribution from our MAP throughout 2018, with increasing contribution in 2019 and beyond. In the quarter, we also completed the reexamination of our marketing application with the Committee for Medicinal Products for Human Use, or CHMP, in an effort to bring eteplirsen to the European Duchenne community in need of therapy. While we were, of course, disappointed that we received a negative opinion, we obtained guidance that could provide a path forward. We will evaluate this and take advice from the European Medicines Agency in 2019. Make no mistake, we believe it is fundamentally wrong that children in Europe do not have access to therapies that are benefiting children in the United States.
Our goal, constrained only by science and regulatory process, is to bring all of our therapies to the greatest number of patients around the world who could benefit from them. Regarding our RNA pipeline, we are completing our rolling FDA submission for golodirsen, which remains on track to be completed by year-end with a target approval in 2019. Likewise, in the quarter, we met with the FDA, and we obtained their guidance and their concurrence on our plan to evaluate biopsies for another therapy, casimirsen. If dystrophin expression results are consistent with preclinical predictions, we plan to submit our NDA for casimirsen by mid-2019, with a target approval by the end of 2019 to the first quarter of 2020. To remind you, each of casimirsen and golodirsen serve approximately 8% of the Duchenne community, which means that taken together, they should be an even larger opportunity than exon 51.
If we are successful in our plans, by early 2020, we will have three RNA-based therapies that could serve nearly 30% of the Duchenne community in the U.S. We continue to make progress on our next-generation RNA technology, the peptide conjugated PMO platform or PPMO for short. To remind you, in animal models, our PPMO technology exhibited greatly improved cell penetration, exon skipping, and dystrophin production as compared to our current PMO technology. We are excited about our next-generation RNA platform, and our first program, focused on exon 51, is progressing well in our single ascending dose study. We should be on track to have dosing and safety insight by the first quarter of 2019, which will allow us to move to a multi-ascending dose and accelerate development.
We are also moving rapidly to complete our preclinical work and file INDs for another five PPMO programs, which along with our first, could serve approximately 43% of the Duchenne community. Let's turn to our gene therapy platform. We have made significant progress in building our gene therapy center of excellence engine. Before I discuss the particular gene therapy activities in the quarter, let us place this all in context of our vision to build a substantial gene therapy engine driving a stream of late-stage gene therapy programs to the community. Our vision is brought into focus by considering our micro-dystrophin gene therapy program, the largest late-stage gene therapy opportunity that currently exists.
In service of our goal of bringing this potentially transformative one-time therapy to the Duchenne community around the world, we are rapidly building a first-in-class gene therapy center of excellence, the greatest level of manufacturing capacity that the world has yet seen in gene therapy, and bolstering our already proven commercial health economics and medical affairs teams to be the leaders in gene therapy. If our micro-dystrophin program is successful, we will launch the program, and we anticipate some number of years of enormous growth as we treat the greatest percentage possible of the prevalent population of Duchenne muscular dystrophy around the world. That's a staggering 70,000 potential patients. We will fall back to treating the incident population, approximately 3,500 patients each year.
While the incident population is still very significant and the value to humanity will obviously be great, we will nevertheless have excess capacity when the prevalent population is finally treated, which also means we will have expertise and ability that could be leveraged to bring a better life to countless additional patients, that requires a vision, it requires a new model, not in the distant future, but actually right now. There is a solution to this, it is a gene therapy engine that through in-licensing and the build of our own constructs, advances dozens of programs to serve large groups of patients living with genetic-based disease. This is our vision, in relation to it, consider the following. First, while this vision does not require us to serve only rare disease, the opportunity in rare disease alone is enormous.
There are 7,000 rare diseases, 80% of which result from genetic mutations, and there is literally only one approved in vivo gene therapy today. The opportunity to help others is breathtaking. Second, if we are thoughtful and we select well-characterized genetic disorders, the theoretical probability of success of each program should be far greater from the earliest days than one might anticipate from small molecule R&D. Why would that be the case? It's because gene therapy is, in essence, a micro-engineering project. This is not passive drug discovery. We are not discovering therapeutic candidates through serendipity. We are literally building constructs to serve well-characterized problems. Third, consider accelerated gene therapy timelines relative to traditional pharmaceuticals.
As the FDA recently acknowledged in its gene therapy rare disease guidance in July, developers like Sarepta need to build programs that are, from the very first dose in a patient, intended to safely provide a benefit and should be built to be registration trials. This provides us with the opportunity to rapidly follow on our success with micro-dystrophin, with new therapeutic areas and new constructs, and the success that we build with each program should have read-through to the next program. Considering these elements, I hope you'll agree with me that our vision, while certainly audacious, is also quite realistic and achievable. With that vision in mind, let me discuss the progress we've made toward it this quarter. We made great progress first in our micro-dystrophin program in the third quarter.
As you may recall, we faced a clinical hold in the quarter based on an out-of-spec finding due to the use of research-grade plasmid. I am very proud to say that our team, quality, regulatory and research jumped on this issue, completed the work necessary to satisfy the FDA, and we were able to come off clinical hold in September, resulting in no delay to our program. This has to be one of the fastest and most efficient responses to a clinical hold in history, and it speaks reams to our team's ability to execute. Shortly after the close of the quarter, Dr. Jerry Mendell, our close collaborator and the principal investigator for our micro-dystrophin program, presented results of the fourth patient in our proof of concept cohort, and updated biomarker and functional data for all four patients at the World Muscle Society meeting in Mendoza, Argentina.
Results were entirely unprecedented across all measures. All patients showed robust micro-dystrophin expression, properly localized to the sarcolemma. All showed upregulation of the dystrophin-associated protein complex, an additional indication of the functionality of micro-dystrophin. All showed an unprecedented drop in creatine kinase, or CK levels, and all showed positive functional improvement that is markedly greater than natural history could have predicted. No serious adverse events were observed. Our results are limited to four patients, so it is incumbent on us to move rapidly to confirm these results in a larger, well-controlled study. Certainly, we are more than a little encouraged by everything that we have seen thus far. Finally, we requested a meeting with the FDA to confirm our approach to our pivotal trial and to our manufacturing plans.
That meeting will take place in the fourth quarter, our goal is to commence this trial, which will be a pivotal trial, by the end of this year. Going beyond our micro-dystrophin program, we have built out our engine with additional programs now equaling 14 and growing. As you may recall, back in May, we entered into a partnership with Myonexus Therapeutics, a spinout from Nationwide Children's Hospital, for five new programs under the broad umbrella of limb-girdle muscular dystrophy. There is potentially significant read-through from our micro-dystrophin program to our limb-girdle programs as they share a common inventor, a common capsid, similar disease state, and in three of the five, a common promoter. We are on track to dose all of the patients in our first cohort of our beta-sarcoglycanopathy, or 2E program this year, with biomarker results available in the first quarter of 2019.
Going on, in August, we entered into a relationship with Lacerta Therapeutics, a spinout from the University of Florida, an entity associated with nine top gene therapy researchers in the world that gives us three programs, all in CNS, the most advanced of which is Pompe disease. Next, shortly after the close of this quarter, we entered into an agreement with Nationwide Children's Hospital to gain access to Nationwide Children's gene therapy candidate, neurotrophin-3 or NT-3, to treat Charcot-Marie-Tooth neuropathies, including CMT type 1A. CMT, a serious life-limiting disease, is also the largest inherited neuromuscular disease in the world, we are excited to work with Dr. Zarife Sahenk, a true neuromuscular and gene therapy pioneer who has been dedicated to this program for over 15 years.
Even more recently, we entered into an agreement with Lysogene to gain rights to two gene therapy programs, including Lysogene's late-stage program to treat MPS IIIA, also known as Sanfilippo syndrome type A, a rare, fatal, inherited neurodegenerative lysosomal storage disorder. The pivotal trial for MPS IIIA is planning to commence by the end of 2018. As previously mentioned, our work has expanded our gene therapy platform to 14, more than that, please understand that most of these programs are quite advanced. Consider the following. We plan to commence our pivotal trial for micro-dystrophin by the end of 2018. We plan with Lysogene to commence the pivotal trial for MPS IIIA, again, by the end of 2018. We plan to complete the first cohort of our limb-girdle 2E trial by the end of this year, to commence our pivotal trial next year.
We will move with equal speed on the next four limb-girdle trials. Dosing in the CMT program should begin in the first half of 2019, likewise, dosing in the Pompe program will also occur in 2019. Now, our gene therapy aspirations require a robust approach to manufacturing. We previously announced that we developed a hybrid gene therapy strategy, building internal expertise while also building a federation of manufacturing relationships to ensure that we can rapidly scale to serve the community at large. Our first partnership announced was with Brammer Bio, a world leader in gene therapy manufacturing. As we have previously noted, our goal with Brammer is to have more gene therapy commercial capacity in about two years than, as we understand it, all of the gene therapy capacity that currently exists in the world.
We followed that up with the announcement this quarter of our manufacturing partnership with Paragon Bioservices, another world leader committed to gene therapy manufacturing. Our relationship with Paragon significantly expands our commercial capacity, gives us a second supplier for our micro-dystrophin gene therapy program, and bolsters our clinical and commercial capacity for our current and future pipeline programs, including, for instance, our limb-girdle programs. The approach that we are taking to manufacturing, relying as we are on a hybrid manufacturing model and a federation of gene therapy manufacturers, and in our most advanced programs of micro-dystrophin and limb-girdle, evolving from an adherent HYPERStack to a more robust but still adherent approach, is intended to ensure that we are moving rapidly with the highest probability of success to treat the maximum number of patients, assuming a very fast launch.
A healthy sense of humility, as one can see by our embrace of the best and the brightest in genetic medicine, scientists like Doctors Jerry Mendell and Kevin Flanigan, Barry Byrne, Zarife Sahenk, Charlie Gersbach, Serge Braun, our own Doctors Gilmore O'Neill and Louise Rodino-Klapac, and of course, our relationships with manufacturing partners, Brammer and Paragon. We overlay all of this with enormous sense of urgency. We insist on moving fast. Some may ask why we are so slavishly focused on speed of action. There are many reasons I could give. I could talk about the fact that genetic medicine has come of age. The opportunity is right in front of us, and we need to seize it, or perhaps I could discuss the competitive value in being first in curative therapies. Instead, let me use Duchenne muscular dystrophy, the center of our culture, as the example.
If we catalog all of the DMD children in the world, and they are all children or at most young adults, and then we looked again in two years, a substantial portion of them would no longer be with us. Death is the brutal reality of this cruel disease, and other rare diseases are similar, or in the case of MPS IIIA, even worse. If we take the leisurely pace of traditional pharma, if we accept the status quo, if we regress to the mean of our compatriots in the industry, by the time we get around to a therapy for these children, we will have lost an entire generation. Some might accept this as the inevitable consequence of development and regulatory bureaucracy. We do not.
To those who wonder why we agitate, why we count our timelines in hours and days and not months and years, I say this, meet a family living with Duchenne muscular dystrophy. I will now turn the call over to Sandy Mahatme for an update on our financial performance. Sandy?
Thanks, Doug. Good afternoon, everyone. Over the past year, we have executed on our business development strategy to become the leaders in gene therapy. With patients in mind, we have judiciously used our resources to rapidly expand our gene therapy pipeline to 14 compounds in development to treat devastating diseases, while simultaneously, potentially positioning investors for a return on investment that dwarfs industry standards. Guided by this philosophy, we will continue to forge strong partnerships with leaders in gene therapy over the coming months. We have also put our balance sheet to work to ensure that we not only develop the best drugs, but also have the manufacturing capabilities to supply them to patients. We signed two exclusive partnerships to become the largest gene therapy supplier in the world.
This gives us significant manufacturing capability, but also from a capacity standpoint, puts us at multiples over what a 2,000-liter reactor can deliver. We believe that these investments lay the foundation for building shareholder value for many years to come. Moving to the financials. This afternoon's press release provided details for the third quarter of 2018 on a non-GAAP basis as well as GAAP basis. The press release is available on the SEC as well as Sarepta websites. Please refer to our press release for a full reconciliation of GAAP to non-GAAP. I'd like to add a quick reminder here that our 2018 non-GAAP financials exclude net interest expense, depreciation and amortization expenses in connection with one-time items, as well as stock-based compensation. Net product revenue for the third quarter of 2018 was $78.5 million, compared to $46 million for the same period of 2017.
The increase primarily reflects increasing demand for EXONDYS 51 in the U.S. We reported a non-GAAP net loss of $37.1 million or $0.56 per share in the third quarter of 2018, compared to non-GAAP net loss of $10.7 million or $0.17 per share in the third quarter of 2017. In the third quarter of 2018, we recorded approximately $8.7 million in cost of sales, compared to $3.1 million in the same period last year. The increase was driven by higher inventory costs related to increasing demand for EXONDYS 51 during 2018, as well as an increase of $1.7 million in royalties payable to BioMarin as a result of the settlement and license agreement we entered into with BioMarin in July of last year. We expect our cost of sales in Q4 2018 to be consistent with this quarter.
On a GAAP basis, we recorded $86.6 million and $34.2 million in R&D expenses for the third quarter of 2018 and 2017, respectively, which is a year-over-year increase of $52.4 million. The year-over-year increase in GAAP R&D expenses was driven by upfront and milestone payments, increased patient enrollment in our late-stage clinical trials, a ramp-up of manufacturing activities for our PPMO platform, as well as an expansion of our research and development pipeline. On a non-GAAP basis, the R&D expenses were $64.2 million for the third quarter of 2018, compared to $31.5 million for the same period last year, which is an increase of $32.7 million. Turning to SG&A. On a GAAP basis, we recorded $53 million and $28.2 million of expenses for the third quarter of 2018 and 2017 respectively, a year-over-year increase of $24.8 million.
On a non-GAAP basis, the SG&A expenses were $42.5 million for the third quarter of this year compared to $22.2 million for the same period last year, an increase of $20.3 million. The year-over-year increase was primarily driven by continued build-out supporting our global expansion. On a GAAP basis, we recorded $7 million in net interest expense for the third quarter of this year compared to $200,000 of net interest income for the same period last year. The unfavorable change is driven by higher interest expense in Q3 of 2018, which is related to our debt instruments that we entered into in the latter half of last year. Turning to our cash position. We ended Q3 with approximately $794 million in cash equivalents, and investments.
This was a decrease of $156 million in our cash position from the prior quarter, was driven primarily by a $68 million expense related to new business development deals, as well as our manufacturing activities, and $33 million related to the payoff of our term loan, as well as related interest expenses. In addition, we have prepaid approximately $54.7 million towards future manufacturing expenses in connection with our gene therapy and RNA programs. From a cash perspective, we are well positioned to execute on our corporate objectives. With that, I'd like to turn the call over to Bo for a commercial update. Bo?
Thank you, Sandy. Good afternoon, everyone. We've now completed two full years of the EXONDYS 51 launch, I would like to take a moment to say thank you to the entire Sarepta team for all their hard work, dedication, and passion to bringing EXONDYS 51 to the individuals who need it. We've taken our key learnings over the last two years and are preparing to launch two additional exon skipping products, golodirsen and casimersen, as well as multiple new gene therapy products for Duchenne and limb-girdle muscular dystrophy over the next few years. We are proud of what we accomplished to date, we're ready for the future. Similar to previous quarters, we had a solid three months and remain on track to achieve our full year guidance of $295 million-$305 million.
The team has been able to successfully navigate challenges since approval and maintain patients on therapy without significant disruptions. As we move into our third year of commercializing EXONDYS 51, the majority of our efforts are focused on identifying patients amenable to exon 51 skipping, while continuing active dialogue with payers to support broad coverage and reimbursement decisions. We will continue to work with key offices to help educate around the importance of patient identification, early diagnosis, and potential treatment options. Top-tier centers continue to receive referrals or identify new patients amenable to exon 51 skipping and submit start forms as appropriate. We continue to call on the top-tier centers but have purposely expanded our efforts for the future.
A portion of our educational endeavors have shifted to large pediatric offices within key states, where we are helping to educate on the importance of early identification for children who have not yet been diagnosed with Duchenne. These efforts are now focused on supporting early testing and diagnosis and will ultimately shorten the timeframe of referrals from pediatrician offices to neuromuscular specialists. From an adherence and persistency perspective, throughout the last two years, we have seen high compliance rates and minimal discontinuations. We have also transitioned greater than 50% of patients to home infusion, which we believe has helped patients stay on therapy over time. Our national accounts and medical affairs teams continue to have ongoing engagement with both commercial and government-level payers around Duchenne, EXONDYS 51, and the new CMS guidance letter on the obligation of state Medicaid to make Accelerated Approval treatments available to patients.
In 2018, we have continued to see an increase in patients covered by Medicaid, which has increased the payer coverage mix to 50% commercial and 50% government. Previously, the mix was approximately 55% commercial and 45% government. Over the course of the last two years, we've continued to adapt our approach to the market and have had the flexibility to quickly resolve potential obstacles. We believe this is a strength of ours as we head into future launches and prepare for potential RNA and gene therapy approvals. As Doug highlighted, Sarepta's mission is to develop a precision genetic medicine engine where we can help improve the lives of patients suffering from rare diseases around the world. We're able to achieve this mission by collaborating with the most notable experts worldwide, continuously striving to advance our multi-platform pipeline, and keeping patients at the center of all conversations.
We currently have 24 programs in development, and we're not going to stop there. With each new program comes the responsibility of ensuring treatment access for patients. We are putting the framework in place from distribution networks, market access, sales, medical affairs, and patient support, which will allow us to reach patients globally. We have continued to strengthen our global presence in Europe, Brazil, and MENA by engaging with key opinion leaders and advancing our distribution networks. We have also started meeting with key opinion leaders throughout Japan to understand the landscape and assess commercial opportunities in the Asia Pacific markets. We are continuing to challenge the thinking of our commercial and medical affairs teams to ensure we remain flexible and adaptable in diverse markets.
We have the right people, individuals who are highly motivated and proactive, who work with a sense of purpose and possess the agile thinking to make decisions that are best for patients. In closing, the U.S. commercial success of EXONDYS 51 over the last two years has provided Sarepta the framework, the infrastructure, and the resources to support future global launches. We are thinking different. We are being bold and leveraging our knowledge to prepare ourselves for operational and executional success globally. Thank you for following our important mission. I will now turn the call back over to Doug.
Thank you, Bo. As you all may recall, as we tracked into 2018, we had a significant number of important inflection points in front of us. As we track to the end of 2018 and into 2019, the number of important milestones and inflection moments has only multiplied considerably. Over 2018, we have over doubled the number of talented and passionate Sarepta employees dedicated to this mission. We have increased our pipeline to some 24 RNA and gene therapy programs. Fueled by encouraging data, we have brought into sharper focus our strategic vision and charted out the path we intend to carve to achieve that vision. Precision genetic medicine is driving a revolution now in healthcare, and we intend to be the leaders of that revolution to the benefit of countless patients formerly bereft of potentially transformative therapies. With that, we will open the line for questions.
Certainly. Ladies and gentlemen, if you have a question at this time, please press star then one on your touch-tone telephone. If your question has been answered and you'd like to remove yourself from the queue, please press the pound key. We ask that you please limit yourselves to one question each. You may get back in the queue as time allows. Our first question comes from the line of Salveen Richter from Goldman Sachs. Your question, please.
Good morning. Thanks for taking my question. With regard to the CMT program, can you just comment on the proportion of the opportunity targeted here in the CMT type 1A program, then the construct, if you could just describe it for us and whether the gene needs to be truncated. Then finally, the endpoints and biomarkers we should be looking for here to determine clinical benefit. Thank you.
I'll pass it over to Louise to answer at least the last two. Louise?
Sure. CMT as a group is 1 in 2,500, CMT 1A is the most common form, which is about 1 in 10,000 individuals. Our program, or Dr. Sahenk's program at Nationwide Children's Hospital, uses NT-3, which fits into AAV, so it's not truncated. This is a secreted molecule. What she's doing is injecting directly into the muscle, using the muscle as a factory to create and generate NT-3. This allows for sustained circulating levels of NT-3, producing a therapeutic effect. NT-3 is important for nerve regeneration, and therapeutic effect, which she's shown preclinically, as well as an earlier phase I trial with just a recombinant NT-3 molecule. In this first phase I trial of 9 subjects, we'll be looking for endpoints using the CMT Pediatric Scale, the 100-meter timed test, electrophysiology, CMAP potentials, as well as circulating NT-3 levels.
Okay.
Thank you. Our next question comes from the line of Alethia Young from Cantor Fitzgerald. Your question, please.
Hey, guys. Thanks for taking my question. I just wanted you to maybe talk a little bit about. I get a lot of questions about kind of thinking about the pivotal design for the gene therapy study. Can you help maybe frame for us what the potential base case could be? A quick one question on, have you guys had the conversation with the FDA yet? Thanks.
I'll answer the second one first. The answer is we have it scheduled. It'll be this quarter. We will definitely have our meeting with the FDA this quarter. As I said during the opener, our goal is to commence the pivotal trial this year. As it relates to the pivotal trials, broadly speaking, it's consistent with what we've said in the past. We are proposing a 24-patient study, 12 and 12, a placebo, double-blinded study, one year on function, and obviously, we'll look at biomarkers as well, including expression levels. We're going to look at it in two ways. Our base case is that we could get Accelerated Approval.
This will certainly be one of the issues we'll discuss with the FDA, Accelerated Approval on the basis of expression, also powering the study in the hope that we would also see a functional benefit at the one-year mark, so we would actually confirm the Accelerated Approval at the end of the study, we'd get an approval that wouldn't just be accelerated. The only reason I say hope in that is that we have seen really, really exciting results out of the first four patients, of course, these results are entirely unprecedented, as we track into the pivotal trial, we want to ensure that we have both the opportunity to get approval on an accelerated basis, as well as the potential to get an approval on a functional basis. Okay.
Let me say one other thing as long as I'm talking, because the question then may come up, what about the age range in the label? The answer is going to be that our goal is to have the broadest age range possible, hopefully no limitation whatsoever on age. The way we're going to do that is we have a main study of 24 patients focused on a very tight group of four to seven-year-olds consistent with the original proof of concept cohort that we did. Then we're going to separately have a cohort to look at expression and safety in younger children, in older and heavier children, as well as some additional of the earlier exons that may be excluded from the main study. Our goal at the end is to cover the maximum number of patients available.
The one limitation we will almost certainly have is, of course, that there may be screen out for preexisting antibodies. The good news for us right now, as we sit here, we've screened a lot of patients, what we're seeing right now across all age groups is about a 15% screen out rate. We wish there was zero, 15% is much better than the literature would anticipate for other vectors, humanized vectors like AAV9 and the like.
Great. Thanks.
Thank you.
Thank you. Our next question comes from the line of Christopher Marai from Nomura Instinet. Your question, please.
Hi, this is Jackson Harvey on for Christopher. I was just hoping if you could expand a little bit on how we should expect the LGMD data to be released in the first quarter of 2019. Will that be through a call, or will it be presented at a conference? I have a follow-up question.
The short answer on that is that we haven't made decisions on the form of release of that data. What I can tell you is that it is our goal to have the entire first cohort fully dosed this year and to have the available data by the first quarter of next year. Exactly how, to what extent that gets released is something we're going to have to decide later.
Got it. The decision to work with Lysogene and this direct to brain approach. Do you see an opportunity for systemic dosing with brain penetration? Also, what was the rationale for exploring these direct to brain approaches? Thank you.
I can pass this over to Louise if you want to touch on this briefly.
Sure. MPS IIIA, which is the primary target for Lysogene, is primarily a CNS disease that has profound mental retardation and minimal somatic manifestations. Lysogene tested this. They looked at targeting the white matter directly, intraparenchymal injection versus intraventricular, intravascular, and found that it resulted in significantly higher expression and broadest distribution throughout the brain. That was the rationale for that decision. However, this does leave the door open for later systemic delivery for the somatic defects as well.
Thank you. Our next question comes from the line of Anupam Rama from JPMorgan. Your question, please.
Hi, guys. This is Tessa filling in for Anupam this evening. Thank you for taking our questions. Thinking about the limb-girdle program, as we are thinking towards the early 2019 update, help us set expectations here for the scope of the data that we will see and how we should be thinking about the benchmark for a clinically meaningful change in gene expression in the 60-day biopsy data. Maybe relatedly, what can we expect to see on any other biomarkers or potential functional endpoints in the initial look? Thanks so much, guys.
Well, generally speaking, and Louise, you can follow up on this as well to ensure I don't misspeak, but broadly, we'll be looking at expression levels from a two-month biopsy. You'll note that in our micro-dystrophin program, we looked at three-month biopsies. This is a self-complementary construct, so it's more efficient, and two months actually seems like the appropriate time. It will be expression levels, and it'll be both expression levels of the protein of interest. We'll probably look at other ones as well, including the dystrophin-associated protein complex and I believe also dystrophin itself, because at least in preclinical models, and this has been Louise has already published this. In preclinical models, the restoration of the protein of interest also upregulates generally the dystrophin-associated protein complex and upregulates dystrophin as well. Louise, did I miss anything there?
No, I think you covered it all. Mainly, primarily looking at expression and restoration of dystrophin vector copies as we would similar to micro-dystrophin.
Thank you. Our next question comes from the line of Debjit Chattopadhyay from H.C. Wainwright. Your question, please.
Hey, thanks for taking the questions. Just a couple. Firstly, on the MPS program, the construct that's heading into the pivotal studies is different from the original construct that was studied, and specifically, the transgene is different and the promoter is different. Any thoughts on what caused the changes, and how do you expect that to translate into maybe a more pronounced effect? I'll touch on it briefly, and then Louise can give you probably a better, more nuanced answer. The short answer is that the two most significant changes that moved from the prior cohort to the current pivotal is first the use of a more efficient promoter, a promoter that appears, at least in animal models, to be more than three times more efficient than the prior promoter that was used. Then secondly, the dose itself.
Informed by the prior cohort, the dosing is actually going to be a full order of magnitude higher. Taken together, it's a potentially 30 times more efficacious therapy, at least 30 times more potent therapy. With that, Louise, I'm sure I've missed some of the nuance there.
No, actually, you covered it well. The promoter itself driving higher levels of expression were significant, and we anticipate a much higher effect from this new construct.
Great. Then on the CMT-related stuff, as you try to narrow down the patient population that's most likely to benefit from a gene therapy, any thoughts on the NT3 as a target for a whole range of other neurologic or neuromuscular indications? Thank you so much.
I think there is a lot of potential opportunity that we're exploring with that. We're talking to Zarife Sahenk about that even as we speak.
Thank you. As a reminder, ladies and gentlemen, please limit yourselves to one question each. Our next question comes from the line of Matthew Harrison from Morgan Stanley. Your question, please.
Great. Thanks for taking the question. I will ask only one. I just wanted to follow up, Doug, on a comment you made earlier related to the pivotal program for DMD. The, what I'll call peripheral studies in four to seven-year-olds and the younger cohort and the older cohort and maybe some of the other exons, are you expecting them all to start at the same time and have data around the one-year mark with the sort of pivotal cohort? Are these going to be later studies, and I guess, how would that impact your filing plan?
They will start a little bit later than the commencement of our initial study, but they will be comfortably completed before the end of our study and the submission and the approval of our study, which obviously, as we've said before, ambitiously, our goal is to try to get an approval by the end of 2020. You may say, how is that the case? Because for those patients, our proposal is not to run a full-year study for those, but actually, since those are really safety studies and expression-related studies, to look at three-month biopsies on those patients. Look at safety, look at three months biopsies, then follow those patients.
If we get good concurrence from the agency on that, then obviously these cohorts can all be completed comfortably within the timelines as we sort of build out our flight path to an approval in the U.S. and then around the world.
Thank you.
Thank you. Our next question comes from the line of Gena Wang from Barclays. Your question, please.
Thank you. I will also only ask one question. Regarding the manufacturing, I know you signed a contract with both Brammer Bio and the Paragon. Just wondering, how will these two companies share experience during their optimization process? Will both of them focusing on adherent cells, and how will the manufacturing capacity be split in the future?
Remember, Paragon is a secondary manufacturer to Brammer. We've already tech transferred out to Brammer, and we're actually completing the process development work with Brammer, and that'll all go to the benefit of tech transfer to Paragon as well for our micro-dystrophin program. Remember, with our Brammer program alone, our goal was on a standalone basis to have sufficient manufacturing capacity to fully serve the market at launch. Paragon's our secondary source and backup as well, both in U.S. as we move around the world. Of course, remember, beyond that, Paragon has the opportunity to provide us with capacity far beyond Duchenne muscular dystrophy, most acutely in limb-girdle and 2E and the like. Of course, the plan both for Paragon and for Brammer for both limb-girdle and for Duchenne muscular dystrophy, micro-dystrophin is adherent.
It's iCELLis units as Sandy discussed during his discussion. Of course, the reason for that is that we can create capacity with a much lower risk with reducing the numbers of unknown steps. I think that's the way we're approaching that. Also remember one thing, how do we stitch together sort of Brammer on the one hand, Paragon on the other, perhaps another partner down the road? The answer is that we have a hybrid manufacturing model. We are not simply essentially contracting with contract manufacturing organizations that entirely outsource everything. We actually are building our own expertise, and we look to Brammer, and we look to Paragon, and we look to others not to be outsourced service providers, but to actually be partners with us, with our employees, with our experts sharing information.
It'll all inure to the benefit of the entire federation of manufacturers and to our own internal experts driven by Bill, our head of manufacturing.
Thank you. That's very helpful.
Thank you.
Thank you. Our next question comes from the line of Vincent Chen from Bernstein. Your question, please.
Great. Thanks for taking the question. Thinking toward the upcoming PPMO readout, I was wondering if you could provide a bit more detail on the cadence and progress of the PPMO dose escalation study. For example, how many doses do you intend to evaluate? How many patients are treated at each of these different dose cohorts? What degree of run-out is required at each dose? What safety assessments are done? What toxicities will be considered dose limiting and potentially halt further progression? What needs to happen for each additional dose cohort to be opened, and how quickly would you expect to progress to the next dose after one dose cohort is opened? Finally, if you can, where are you in this study?
I'm sorry. That was off the top of your head? It's a traditional 3-by-3 single ascending dose study. To be entirely frank, I would've liked to have a more exotic approach to our single ascending dose study, but unfortunately, I did not have the benefit of Dr. Gilmore O'Neill when it was originally designed. I think we would be a little more creative in that approach today. We're progressing well, I'd say. We haven't really discussed the exact doses we've gotten to. We haven't hit any kind of serious adverse events or anything concerning, and we should have dosing insight by next year. With that said, perhaps, Dr. O'Neill, you could provide some additional insight.
I think your questions define or reveal a familiarity with dose escalation in phase I. As Doug said, we will have insights in the first quarter of next year, I should say. We are actually evaluating other ways to accelerate our dose exploration and move into patients at potentially therapeutic ranges in next year. I think the key thing to say also is that we know what the target organs, based on our non-clinical tox are. We are monitoring those closely, not just looking for tolerability, but actually monitoring chemically for those known target organs, and we've not seen anything to date.
Great. Thank you very much.
Thank you very much. Good questions.
Thank you. Our next question comes from the line of Tazeen Ahmad from Bank of America. Your question, please.
Hi, good afternoon. Thanks for taking my question. Doug, in your prepared statements, you talked about some of the programs that you plan on moving into the clinic. One of them was for Pompe disease. You had also said that it's important to try to be as fast as possible to get drugs to market and the importance of being first. Given that there are quite a number of companies already that have talked about their plans to move into the clinic for their own Pompe disease assets, how are you thinking about Sarepta's chances there, and what do you think would distinguish your ability to develop a drug versus anything else that might also be in development? Thanks.
I will turn this over to Dr. O'Neill to comment. Before I do, let me say this. We are taking a unique approach to Pompe disease. The approach that we're taking to Pompe disease is CNS driven. That is different than the other programs that exist out there. This is a differentiated program with that.
I think Doug has actually said, given the key differentiating answer. In some cases, speed. First of all, speed matters because these are sick patients who actually are waiting for the drugs. I think the second, obviously, is where the differentiation is clear. It actually is very important. I think where there is clear differentiation, then I think there is room. Certainly, first of all, we are moving aggressively, and secondly, there is clear differentiation because this is CNS delivered. I think it's important to remember that Pompe disease is not a purely muscular disease.
In fact, it's a neuromuscular disease with a significant impact, certainly in the context of Pompe disease, on the anterior horn cell and motor neurons, which is why we believe that this differentiated approach to CNS delivery is a critical and possibly very, probably likely to be the most meaningful delivery approach that we can bring to this disease. That's why we believe that we have that edge here and can bring real value to patients.
I think one other thing to remember, another potential differentiator for us is that we have Dr. Barry Byrne, who is the inventor and the driver behind this. One of the things that I've said many times, including tonight, is that we are going to approach the mission ahead of us with an enormous sense of humility, leaning heavily on the experts around the world. To that end, as you may remember, we stole from Nationwide Children's Hospital. As much as it pains Dr. O'Neill every time I use the word steal, Dr. Louise Rodino-Klapac in her lab, and Dr. Barry Byrne is one of the world's experts in gene therapy, which gives us an enormous additional level of confidence that we have something with the Pompe program.
Okay, thanks. Do you think that would help your rate of enrollments being CNS delivered as well?
I don't know if we've really considered that, frankly. I don't have an answer one way or the other. Apologies for that.
Okay. Thank you.
Thank you so much.
Thank you. Our next question comes from the line of Joseph Schwartz from Leerink Partners. Your question, please.
Great. Thanks very much. I was wondering if you could quantify how much misconceptions about reimbursing drugs which were approved in an accelerated manner have held back EXONDYS sales. How many DMD patients would you estimate have not been able to access EXONDYS as a result, and have you noticed any change since the CMS clarification?
It's still a little bit early days, and the process is slow with state Medicaid, to be fair. It is a very state-by-state related issue. Some states, frankly, some of the larger states, have very good policies and have done a brilliant job of getting patients on therapy. States like Texas and California and Florida have had very good policies. Actually, those are some of the larger states as well. There are definitely been a significant number of states and patients, not the majority, but a significant number, that have had misconceptions.
I think a lot of it is driven by misconceptions on what an Accelerated Approval is, notwithstanding the fact that Accelerated Approval is a concept that's existed in the regulations for a very long time, and therefore weren't fully cognizant of the requirement of state Medicaid to provide access to drugs approved through the Accelerated Approval process. Not to unduly delay that. I'd say it hasn't been an enormous impact, but over time it will be, and it's all to the benefit of patients, many of whom, frankly, a minority, but many of whom have been waiting since the very approval of EXONDYS to get on therapy.
Great. Thanks for taking my question.
Thank you.
Thank you. Our next question comes from the line of Ritu Baral from Cowen. Your question, please.
Hey, guys. Thanks for taking the question. Mine is on the MPS III Sanfilippo program. One, this represents a little bit of a departure from your neuromuscular focus being a lysosomal storage neurological disease. What does that say to your overall, I guess, near-term clinical focus? 2, what is that pivotal trial going to look like, especially given the controversy around what pivotal endpoints can be and what neuroprog scales are acceptable?
Okay. I'll let Louise answer the trial and endpoint-related questions. What it says about our approach is meaningful. What it says is that we are going to build this gene therapy center of excellence and then this gene therapy engine, and we're going to focus on what we know, and we're also going to focus on adjacencies to the areas that we're in. If you think about it, we start with DMD, so we're neuromuscular. When we move beyond DMD and moving to other neuromuscular diseases, something like limb-girdle muscular dystrophy is a brilliant next step. If you think about neuromuscular generally, then obviously thinking about CNS is not a significant departure. It is different than neuromuscular, but not an enormous departure.
We started with Pompe, which is a CNS approach to a neuromuscular manifestation, then, of course, going to Lysogene is 1 step further CNS driven. We'll do more things opportunistically like that. That's the way we're going to grow over time. As I've said before, we have 14 gene therapy programs today. I think, over time, probably in the next few years, it would not surprise me at all that we have as many as 30 gene therapy programs. As it stands right now, we're really focusing in on in-licensing, but we are building a gene therapy center of excellence around Louise's lab in Columbus, Ohio, and they will be creating our own constructs as well.
I think between the mix of in-licensing and our own constructs, I think, it is really very possible in the next couple of years we have as many as 30 programs fueling this engine that we have with hopefully near-term results and a series of launches. It will be neuromuscular, it will be CNS, and it will be in kind of an evolutionary way, moving into adjacencies to both of those areas over time. Because if you think about it, the expertise in gene therapy is significantly focused on delivery. This is the delivery, like a rocket ship of a payload, and we can build new payloads, and we have increasing expertise around the rocket ship itself, and we'll start building payloads in CNS and neuromuscular, and I'm quite confident over time beyond that.
Thank you. Our next question comes from the line of Joel Beatty from Stifel. Your question, please.
Hi, thanks for taking the question. It's on the pivotal trial of the micro-dystrophin gene therapy program. Could you share some thoughts on what the magnitude of benefit of the trial is powered to detect on both the biomarker endpoints and the functional endpoints?
Well, I'm really sorry. I missed it. Paul, you can just repeat the question one more time? I apologize for that.
Sorry. For the micro-dystrophin gene therapy program, what magnitude of benefit is the trial powered to detect on the biomarker endpoints and the functional endpoints?
Well, it's powered to see a statistically significant difference both on the biomarkers, obviously on dystrophin expression, which I don't think anyone's going to believe is a difficult powering, and also on function as well. Based on, informed by what we see in the first four patients, it is powered to see a statistically significant difference on functional difference. One thing I would like to go back and do, because it didn't get answered in the last question was, I think the endpoint related questions, and maybe Dr. Gilmore O'Neill might touch on this.
Yeah. Actually, I think it was either myself or Dr. Louise Rodino-Klapac, but I think the prior questioner had asked about the outcomes for the MPS IIIA or the Sanfilippo, and so we'd be looking at sleep, agitation, and other behavioral outcomes. We believe that we can actually see, we'll be able to actually demonstrate clear benefit with that approach. Obviously our partners have had the opportunity to discuss this with regulatory agencies. I think between the discussions they have with regulatory agencies and the potency of their approach, I think that this is a very reasonable approach with a good likelihood of success. Sorry for hijacking your question to go back to the prior question.
That's fine. Thank you.
Thank you.
Thank you. Our next question comes from the line of Liisa Bayko from JMP Securities. Your question, please.
Hi. Yeah, a total departure in question, then one more for Sandy. Can you just give us some color on how to think about R&D and SG&A spend next quarter and into next year? Thank you. I mean next year, actually. Thanks.
Yes. You should see a quarter-over-quarter increase going into next quarter as increasing number of programs come online, especially in PPMO. Next year, we haven't really come up with our long-term strategic plan as yet, we'll be in a much better place to guide on it early next year, Liisa. You should see an increase there as well simply because of the number of people, as Doug indicated, we have almost double the size of our employee base, both in the U.S. as well as in some foreign locations. Then as our gene therapy programs start increasing in size, you should see an increased spend on manufacturing in that area as well. Again, it's a little too early to guide on that.
Okay, thank you.
Thank you. Our next question comes from the line of Martin Auster from Credit Suisse. Your question, please.
Hey, guys. Thanks for taking my question. Congrats on all the BD activity this quarter. I had a question for you about, I was just curious about the competitiveness of some of those recent gene therapy deals and what you see as your differentiation landing some of these assets. Also wanted to know if you have any appetite for more advanced clinical stage gene therapy assets that have had some clinical data already produced. Thanks.
Yeah. A couple things on that. Very interesting. One of the things we're doing right now, to use a silly overused bromide, is making hay while the sun shines. We have the ability to in-license programs that are comfortably within our balance sheet and very late stage. One of the things that's interesting about that is that some of these have been quite competitive, and we were not the high bidder. The reason for that, I think, is a couple fold. One, I think if you want to talk to Lysogene as one example, they see our shared vision. They see that we not only have built quickly an expertise in gene therapy, we have a vision for doing things rapidly, in gene therapy, and we're very committed to these programs. I think that gives us a competitive edge.
I think the second thing that gives us a competitive edge is that we are a very good partner. It is not a secondary thing. It is literally part of our strategy to be a good partner. If someone was looking to do an in-license or other deal with us, and they cared about the asset they had, for instance, like Dr. Sahenk worked on something for 15 years, and they were going to due diligence on us, and they called someone like a Dr. Jerry Mendell, I'm quite confident that he would sing our praises about our ability not only to advance things and move with the urgency that he would expect, but also that we work with him, that we're respectful of him, that we understand his expertise, and we align with his mission.
I think because of that, we really, frankly, had an outsized level of success so far. There are two other things I'd say on that. Let's talk a little bit about whether we would do a bigger deal or with another public company. The issue there, interestingly enough, and I'm not saying we never would, but the interesting thing that we're getting from some of the in-licensing right now are very late-stage assets at a fraction of what one might get if we went out to a company that was, for instance, had already done an IPO, was public. One of the unusual things about gene therapy, I think right now is the following.
If we were in a typical small molecule-based company and we went and did an academic in-license or a company that just spun out from an academic institution, we would be in-licensing a program that was 12 or 14 years potentially from the market with the probability of success in the single digits at best. Gene therapy is not like that. We go and do something like we did Myonexus. Myonexus was just freshly spun out of Nationwide Children's Hospital, and we'll have our entire cohort of our first cohort at what we believe to be therapeutic doses done this quarter. The ability to actually in-license assets that are later stage with a fairly significant probability of success is inconsistent versus history, and I think we're taking advantage of that right now. That's not going to continue forever, right?
The competition is going to increase over time. We're kind of taking advantage of what seems to be a fairly inefficient market in that regard. That won't remain the case forever. The good news for us is that we are building our center of excellence. We'll be building our own constructs. We'll be the masters of our own destiny at that point. We'll certainly always be looking to other business development in-licensing. I think we have a core competency in that. We don't have to rely solely on that as we get our gene therapy center of excellence propped up, and that'll be by February of 2019. Yeah, sure.
Thanks for the insights on that. Appreciate it.
I think Sandy had something else to add.
Just to add to that, to answer your question, some of those deals were bitterly competitive, and it went to the very end, and we were very pleased with our ability not just to compete with other public biotechs but also Big Pharma. I think it's primarily for two or three different reasons. Firstly, our manufacturing expertise that we have and our ability to be able to supply our partners with the drug that they need. That really differentiated us in a very big manner. Doug also referred to the speed of execution of the entire team from clinical, legal, and obviously business development to get these deals done. Lastly, as we've said before, we continue to forge strong partnerships to become the leaders in gene therapy.
What has occurred now is because of our relationships with the various KOLs and our success in business development, we're getting a lot of inbound inquiries that lets us both be more selective in terms of the quality of the deals that we want to do, but also ensures that the cadence of business development deals that we are getting keeps increasing. You will see us continue forging these partnerships over the upcoming months and years.
Thanks.
Thank you. Our next question comes from the line of Brian Abrahams from RBC. Your question, please.
Hi, this is Bert on for Brian. Thanks for taking our question, and congratulations on all the progress. My question is on the DMD gene therapy program. Given the known effects of increased activity and exercise on CK levels, do you see CK levels as kind of the best way to measure the durability of the gene therapy? Do you think more focusing on the functional gains or even repeated biopsies would be a better way to judge the durability?
That's a great question. I think that there's an enormous confounding variables with the use of CK. First, CK is variable. As an example, you look at, there are phenotypically non-muscular dystrophy Becker's patients that show significant spikes in CK. It's already a bit of a variable endpoint. On top of that, to your very good point, we have seen a pretty strong correlation between increases in exercise. These kids appear to be, and again, I want to be careful, it's open label, but they appear to be very active relative to a matched Duchenne child. We definitely see exercise-related increases in CK, and then we see them fall right back down when the kids rest. It does make it difficult. These are early days, and we're pondering, but it does make it difficult to use CK, for instance, as a reliable endpoint.
There'll definitely be a secondary endpoint in the trial, but
Yeah. Gilmore O'Neill here. I think that there are a couple of points to make. First of all, the CK, what we do see is the overall trend, and not just more than trend, puts us down in the range of the Beckers, including with the spikes. I think that's an important point, and that's actually very reassuring. I think the second thing is that no one would ever want to design a study where it's contingent on one outcome measure. With regard to durability, I think there are multiple ways that we'd be able to look at that and that we're actually designing into our program, which I think you've outlined. Function, CK trend, possibly controlling actually also for activity levels prior to CK, et cetera, these are all approaches we will use. Overall, the most important thing will be functionality.
We've actually been surprised, and I shouldn't say surprised, that's the wrong word, pleasantly tantalized by the data, the really robust data we've seen so far in the four subjects from a functional point of view. I think all of that helps us, makes us feel confident about how we design our trial using functional outcomes for looking at durability, but we'll be looking at the totality of the data.
Durability is a very important issue in the long term. The good news, however, the preclinical models give us a lot of confidence on durability. We've seen both, obviously starting with the mouse model, then moving on to Golden Retriever models, and moving all the way up to non-human primate models.
We've seen significant multi-year durability.
Durability.
No diminutions in durability over very long periods of time. Then when you couple that with the kinds of expression that we're seeing, there seems to be a very high probability that we're going to have a very, very durable product. Of course, that all has to be looked at over time.
Great. Thanks so much.
Thank you.
Thank you. Our next question comes from the line of Tim Chen from BTIG. Your question, please.
Hi. Thanks. Hey, Doug.
Hi.
Has the age of the patients taking EXONDYS 51 changed at all? Is it still around 13 years of age?
It's 12.9.
Just one follow-up. I think you guys mentioned there was a slight change in the commercial government payer mix. What was the change?
It's now 50/50 split between commercial and government, which is when I say government, it's almost all Medicaid, and it's just increased number of patients that are coming on board from Medicaid plans.
Yeah.
Do you guys expect that to basically be the split going forward pretty much 50/50?
Yeah. We actually expected the split to be 50/50 two years prior to launch, then at launch it was 60/40, and it's moved up. This is how every one of my launches have ever been. Medicaid's lag, commercial plans at the beginning of the launch, then they catch up. This is exactly what we thought would happen two years ago, and we're seeing it play out.
Okay, great. Thanks.
Yep.
Probably ironically, particularly with the CMS letter, gives us some opportunity over the coming couple years.
Yeah. It could get a little bit more to Medicaid, but on average, 50/50.
Thank you. Our next question comes from the line of Tim Lugo from William Blair. Your question, please. Tim Lugo, your line is open. You might have your phone on mute.
Hi, hopefully you can hear me.
You can. Yep.
Yep, we can.
Okay, great. Could you discuss maybe commercially how you're laying the groundwork for gene therapy? The industry has obviously seen more scrutiny around pricing. This will obviously be a premium price product. How are you prepping for payer discussions and maybe some of the pushbacks from what should be a robust demand?
We're doing a lot. The short answer is a lot of work. We're not only working on the models itself, we're reaching out and beginning to have dialogue with payers and governments and others along the way. Really, the interesting thing about gene therapy, let's be clear, is, yeah, and one of the things we're working on as an organization is the following. The fact is that from a typical health economic perspective, if you run our gene therapy program or any gene therapy program that would look like ours through a model, it will be very easy to get to a good number, a very good number for us.
ICER, as an example, themselves did a theoretical gene therapy analysis at a recent meeting, and they had enormous numbers in the millions of dollars for a gene therapy that was a theoretical gene therapy that was transformative, that would take the place of a therapy that was $200,000 a year. When they did that, ran the math on that from even an ICER model, it was an enormous value. The issue that we're going to work on over the next two years is not the typical value proposition that you have to struggle with, but rather the structural issues. The real issue is, not that whether the value's there. I think that's going to be fairly easy. That's just a mathematical exercise, I think we're going to do brilliantly in that.
Is the structure ready for big transformative moments that will benefit us all health economically and benefit society, but they come in one form as opposed to chronic therapies. The irony is, if we don't put a lot of thought into this, our system is built around chronic therapies. What we all want as a society is big transformative potential cures, but our structure may not be brilliantly adapted to it. If you're going to be the leader in gene therapy as we believe our destiny is to be, we've got to play an enormous role in helping to figure that out, we're doing a lot of that work even right now and having a lot of dialogue with folks right now, including beginning to have dialogues with governments, payers. Frankly, those people have put a lot of thought already into models and the like.
It's a work in progress, but it's something that we're very deeply involved in right now as an organization.
Yeah, Tim, I'll just follow up with what Doug said is, we're actively thinking about this and doing work now. We're going to keep everything very close to the chest. We're in a competitive situation, and we're planning on making sure that Sarepta's micro-dystrophin drug gets to all the kids first.
Understood. Thanks.
Thank you very much.
Thank you. Our next question comes from the line of Yanan Zhu from Guggenheim Securities. Your question please.
Hi, thank you for taking the question. Wanted to ask about the Europe for EXONDYS 51. Is there any specific data that in your mind could potentially help you to pursue approval again? Do you think that the micro-dystrophin gene therapy program can have a better chance to get there first?
The good news is we're not gonna choose between them because we're going to go like mad on both, and then we're going to go like mad on golodirsen and casimersen as well, and then other gene therapy programs. As it relates specifically to eteplirsen, we did get some guidance from CHMP that's been very helpful. We're being a little careful about sharing various hypotheses right now for the simple reason, to be honest, that we don't want to die a thousand deaths as we think this issue through and work with it. I will say that as disappointed as we are, and I don't want to pretend like we weren't disappointed with the outcome of the re-examination. Of course, we were for more than anything else for patients in Europe that are waiting for this therapy.
We did get good guidance from our rapporteurs and from CHMP. Based on that, we're going to take scientific advice from EMA in 2019. I think we'll have a better understanding of what the pathway looks like. There might be opportunities that could be more efficient than, for instance, another study or waiting for the outcome of a long-term study.
Yep.
Thank you.
Thank you very much.
Thank you. This does conclude the question and answer session of today's program. I'd like to hand the program back to Doug Ingram for any further remarks.
Thank you all very much. Thanks for your good questions and for sticking with us this evening. We have a lot to do over the coming months and years, but we've got the right team in place, and we're focused. We're going to not only to think big, but we're going to focus on execution over the coming quarter and then the following year and then years beyond that. Thank you all very much for your questions this evening.
Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.