SRPT - NASDAQ

Good afternoon, and welcome to Sarepta's Third Quarter 2025 Financial Results Conference Call. As a reminder, today's program is being recorded. At this time, I'll turn the call over to Tam Thornton, Director of Investor Relations. Please go ahead.

Thank you, and thank you all for joining today's call. Earlier this afternoon, we released our financial results for the third quarter of 2025. The press release and slides are available on the Investors section of our website at sarepta.com, and our 10-Q will be filed with the Securities and Exchange Commission on Thursday after market. Joining us on the call today are Doug Ingram, Dr. Louise Rodino-Klapac, Patrick Moss, Ian Estepan and Ryan Wong. After our formal remarks, we'll open the call for Q&A. I'd like to note that during this call, we will be making a number of forward-looking statements. Please refer to Slide 2 on the webcast, which contains our forward-looking statements. These forward-looking statements involve risks and uncertainties, many of which are beyond Sarepta's control. Actual results could materially differ from these forward-looking statements, and any such risks can materially and adversely affect the business, the results of operations and trading prices for Sarepta's common stock. For a detailed description of applicable risks and uncertainties, we encourage you to review the company's most recent SEC filings. The company does not undertake any obligation to publicly update its forward-looking statements, including any financial projections provided today based on subsequent events or circumstances. As noted on Slide 3, we will discuss non-GAAP financial measures on this webcast. Descriptions of these non-GAAP financial measures and reconciliations of GAAP to non-GAAP financial measures are included in today's press release and the slide presentation available on the Investors section of our website. And now I'll turn the call over to our CEO, Doug Ingram, who will provide an overview of our recent progress. Doug?

Thank you, Tam. Good afternoon, everyone. Thank you for joining us for our third quarter 2025 financial results conference call. Next slide, please. We have much to discuss this evening, but let's begin by reviewing the completion of our confirmatory study for our 2 ultra-rare disease CMOs, VYONDYS and AMONDYS, before coming back to our quarterly update. Next slide. I'm going to turn the call over to Dr. Rodino-Klapac very shortly, but let me first give some broad conclusions. First, we are very proud to have completed our primary confirmatory obligations, both AMONDYS and VYONDYS serve ultra-rare populations with total prevalence numbering for each no more than about 500 to 800 patients in the United States and an incident rate per year of maybe a few dozen patients. This disease is also heterogeneous and degenerates not over months or years, but literally over decades. These together make the powering and conduct of a placebo-controlled trial particularly challenging. I want to give a huge thanks to our investigators and then very importantly, to the brave families who have had the courage to enroll and risk a placebo arm for 22 months. Without this special community that we serve, we would not have completed this unusually onerous study. Second, when reviewing the evidence to support transition from accelerated to traditional approval of a therapy, one, of course, looks to the totality of the evidence. Here, the division recognized the challenges associated with this ultra-rare disease trial and set out a very specific standard for continuing marketing authorizations. As referenced in our VYONDYS approval material, the FDA gave us a very specific written language about voluntarily withdrawing marketing authorization, which would only occur if "no relevant analyses find sufficient evidence of a clinical benefit. As you will hear from Dr. Rodino-Klapac, we believe that we have met that standard and that we have sufficient evidence to discuss with the agency transitioning from accelerated to traditional approval. Consider as you will have seen in our press release, the study missed its statistical significance. However, the data demonstrated a consistent and clinically favorable trend across the trial population. Importantly, a portion of this study was conducted over the COVID pandemic period. And as with many studies over that period, the study results were impacted for a variety of reasons. During the pandemic, the rate of missed doses was unusually high with nearly all patients missing doses and approaching half of whom missed substantial consecutive doses. Participants in the study were also largely shut in and suffered deep conditioning and loss of mobility. All of this appears confound in the results. When one excludes the COVID participants, we see a meaningful treatment benefit slowing disease progression by about 30%, which Dr. Rodino-Klapac will further explain. Likewise, to enroll this study, we were required to admit a broad population from as young as 6 years old to as old as 13 years old, including those who clearly have confounding ceiling and floor effects. In the subgroup analysis of those likely to progress, there was a strong statistically significant benefit, and this was across not only the primary but the other endpoints as well. There is also a wealth of published real-world evidence for the PMOs as just a few examples of the multiple real-world studies across our PMOs, we see that when tracking VYONDYS over 6 years, there is an 88% reduction in risk of loss of ambulation with a Kaplan-Meier analysis of delay of about 3 years. Likewise, with both VYONDYS and AMONDYS, we see over time a significant attenuation in pulmonary decline and a significant delay in time to cough assist and ventilation. We see the same trend in our own study, ESSENCE. As part of the benefits they are seeing, patients are required to be infused weekly, a fairly onerous protocol and yet their compliance rate has been well over 90% commercially year over year over year. When one considers all of the evidence for benefit and then weighs a favorable stable safety profile has tracked over many years. We believe the risk benefit remains positive. We not only anticipate continuing marketing authorization, but we believe we have a good argument for traditional approval. Our plan is to schedule a meeting with the division to review the totality of the evidence. Dr. Rodino-Klapac will now discuss those results in more detail. Louise?

Thank you, Doug. I'll turn to the next slide. Today, we announced the top line results from our ESSENCE trial, the first placebo-controlled Phase III study of exon skipping therapies, VYONDYS 53 or golodirsen and AMONDYS 45 or casimersen to treat patients with Duchenne muscular dystrophy amenable to exon 53 or 45 skipping, respectively. To remind you, VYONDYS and AMONDYS are designed to address the underlying cause of Duchenne by restoring the messenger RNA or mRNA reading frame. The therapies use Sarepta's proprietary PMO chemistry and exon skipping technology to skip exons 53 and 45 of the dystrophin gene. Promoting the synthesis of a short and functional dystrophin protein is intended to slow decline in Duchenne patients. VYONDYS and AMONDYS were approved by FDA via the accelerated approval pathway in 2019 and 2021, respectively. Next slide, please. As shown on this slide, initiated in September 2016, the 225-person ESSENCE study was designed as a double-blind, placebo-controlled trial spanning 96 weeks, followed by a 48-week open-label extension, reflecting the scale, rigor and long-term commitment required to validate targeted treatments and select rare disease populations such as Duchenne. The trial was conducted across 75 centers in 24 countries. Next slide, please. In terms of baseline demographics, patients were well matched with 2:1 treated versus placebo with numbers of exon 45 and exon 53 amenable patients consistent with the prevalent Duchenne population. Functional baseline characteristics were also well matched. Now turning to the top line results on the next slide. ESSENCE demonstrated numerical superiority across the primary and most secondary endpoints. However, the study did not reach statistical significance on the primary endpoint, the 4-step Ascend at 96 weeks. Let me first highlight the key results, and then I'll provide more detail on each. First, and as mentioned, we believe COVID impacted study results. A post-hoc analysis of participants not impacted by COVID improved study results on the 4-step Ascend, with a lease square mean difference of 0.11 steps per second and a p-value of 0.09. Second, when a prognostic score is applied to identify the subpopulation at risk for decline on 4-step Ascend, a meaningful and significant treatment response is evident with a lease square mean difference of 0.186 steps per second and a p-value of 0.01. And importantly, there were no new safety signals with comparable AE rates between treated and placebo. AEs were largely mild or moderate. Next slide, please. As you will see on this slide and as I mentioned previously, although the data showed numerical superiority, the primary endpoint of this study was not met. Next slide, please. As Doug mentioned, COVID appears to have had an impact on study results. The study itself was challenged operationally during the COVID period with twice as many consecutively missed doses during COVID versus COVID-free patients and compressed clinical evaluation schedule. 43% of COVID-impacted patients had consecutively missed doses with an average of 8 missed doses. In addition, published studies specifically on the impact of the COVID pandemic in Duchenne have demonstrated a negative impact on function due to immobility, contractures and increased weight gain. On this slide, I've highlighted the COVID period that falls in the middle of the ESSENCE study, which began in late 2016 and completed in 2025. We define patients that began and completed their 96 weeks outside of this window as COVID-free. Next slide, please. Notably, a post-hoc analysis of the COVID-free participants improved study results on the 4-step Ascend primary endpoint as shown on the left, with a least square mean difference of 0.11 steps per second and a p-value of 0.09. This equates to an approximately 30% reduction in disease progression over 2 years on the 4-step Ascend. This is in stark contrast to those individuals impacted by COVID on the right. Had we seen this effect size in a sample size similar for the whole trial population, we would expect it would have reached statistical significance. Secondary endpoints also demonstrated improved study results in COVID-free participants. Next slide, please. Separately, we also performed an analysis using a prognostic scoring method published by the well-respected CTAP, a collaborative trajectory analysis project group, which is focused on Duchenne. This method published after we commenced ESSENCE is used to identify the population most at risk for decline and consequently, a maximum treatment benefit can be identified by avoiding floor and ceiling effects. The method includes baseline age 4-step Ascend velocity, rise from floor velocity, 10-meter walk run velocity and corticosteroid duration and type. The 4-step Ascend was the most sensitive endpoint and reached statistical significance with this prognostic score applied. With a clinically meaningful lease square mean difference of 0.186 steps per second and a p-value of 0.01, this equates to a 35% reduction in disease progression over 2 years on the 4-step Ascend. Next slide, please. There were no new safety signals with comparable adverse event rates between treated and placebo, reinforcing the favorable and manageable safety profile observed with our exon skipping therapies. Adverse events were largely mild or moderate. We believe the totality of these data along with the real-world evidence are compelling for AMONDYS and VYONDYS, and we'll be sharing these data with FDA to support sNDA filings. Next slide, please. Of note, and as you will see here, a number of factors generated from real-world evidence supports casimersen, including a mean age of 15 years for casimersen-treated patients to meet a wheelchair versus 9.5 to 12.3 years in the literature for standard of care. It also shows a 2.6-year delay in time to reach FVC percent predicted of less than 60% for patients 10 to 18 years old versus matched control and a 70% reduction in mortality rate for our PMO. Next slide, please. On this slide, you will see how the real-world evidence supports golodirsen, including a 3-year delay in loss of ambulation versus external control, a 7.5-year delay in the need for nighttime ventilation and a 70% reduction in mortality. Next slide, please. As you can appreciate on this slide, the real-world body of evidence supports the effect of our PMOs on the trajectory of Duchenne, including an impressive 5.4-year increase in survival, a 3- to 4-year delay in loss of ambulation and significantly slower rates of pulmonary and cardiac decline. Next slide. Further, it's important to note that our exon skipping therapies have treated over 1,800 patients worldwide from infants to adults in their 30s, providing a robust foundation of clinical experience and real-world evidence showing PMOs have been associated with slowing Duchenne disease progression, including delayed loss of ambulation, preserved pulmonary and cardiac function and extending survival. With a patient adherence rate of more than 90%, the sustained use reflects the clinical value of our exon skippers. And we were also pleased to announce at this year's World Muscle Society meeting that a clinically meaningful attenuation of pulmonary decline was demonstrated in patients with advanced Duchenne treated with casimersen compared to matched external controls. And it's also important to note that most of our post-marketing requirements or PMRs have been completed. Next slide, please. In terms of next steps, with the completion of ESSENCE, we've submitted the top line results to the agency. We plan to submit a request to schedule a meeting with the division by the end of the year to review the totality of evidence and discuss the path to a traditional approval. Our findings will also be shared at future scientific forums with plans for publication in a peer-reviewed journal. I'd like to take this moment to thank the Duchenne community, clinical trial investigators and KOLs for their unwavering support these past years. Drug development often poses what can seem like unmovable obstacles. In the face of those obstacles, particularly in rare and ultra-rare disease, we remain steadfast in the science and focused on taking the best, albeit at times the more challenging path forward for the benefit of patients. We remain committed to our exon-skipping therapies and to the benefit they have provided and continues to provide to those living with Duchenne. I'll now turn the call back to Doug.

Thank you, Louise. All right. Next slide, please. Let's move now to performance. Notwithstanding unprecedented disruptions in the quarter, ELEVIDYS and the PMOs together posted solid net product revenue of $370 million for the quarter. Our Chief Commercial Officer, Patrick Moss, will provide more color on that in a moment. As to the ELEVIDYS label, we have had very productive dialogue with OTP, and we expect the label change process with FDA to be concluded very soon. Dr. Rodino-Klapac will discuss our expectations for the label very shortly, along with our planned trial for the prophylactic treatment of sirolimus. As it relates to our portfolio, we are very enthusiastic about our siRNA platform as the rest of biotech appears also to be enthused with the increasingly derisked potential of siRNA. Louise will discuss our progress on that in a bit. Finally, I would note that in the quarter, we took several important actions to strengthen our financial performance and align our resources with our strategic focus on supporting our current therapies while we advance our largely siRNA-based pipeline. Our CFO, Ryan Wong, will provide color on those actions in his remarks. And with that, I will turn the call back over to Louise again to make some remarks on ELEVIDYS and on our pipeline. Louise?

Thank you, Doug. And the next slide, please. Moving now to our ELEVIDYS and pipeline updates. Next slide. To update you on the safety label process for ELEVIDYS, as previously discussed, we've agreed to a black box warning for ALI and ALF. Also, consistent with the action we've already taken to pause shipments to non-ambulatory patients, we've agreed with the FDA that non-ambulatory will be removed from the indication and usage section of the prescribing information. Once we have an understanding of the risk-benefit analysis for sirolimus, we will discuss with FDA if data are sufficient to resume dosing non-ambulatory patients. Next slide, please. As you're aware, we convened an expert committee to discuss ALF and the potential of adding additional immunosuppression regimen for the non-ambulant population. Earlier this month, the committee, which consisted of numerous globally recognized, highly experienced medical specialists, including neuromuscular physicians with ELEVIDYS treatment experience, hepatologists and specialist experience in immunosuppressive therapies, shared their findings at WMS in which they analyzed and reviewed ALF safety data to identify early indicators of ALI and define populations at elevated risk for ALF. They evaluated and recommended strategies to prevent and mitigate ALI and ALF, emphasizing early risk recognition and patient stratification, a focus on intervention, clinical pathways and risk-based management, optimized clinical management approaches for ALI and ALF, including prophylactic immunosuppression and monitoring parameters. Based on these discussions and analyses, the committee endorsed modifying hepatic biomarker thresholds in ALI to facilitate timely intervention. They also recommended enhanced liver characterization of baseline to better understand risk factors of developing ALI. In terms of ALI prevention, they recommended adding prophylactic sirolimus as a second agent to the current corticosteroid regimen versus increasing corticosteroid doses, and this is 1 to 2 weeks prior to infusing ELEVIDYS. In terms of ALI management, the committee recommended prompt initiation of IV corticosteroids if patients do not respond to oral corticosteroids. Lastly, they emphasized the need to generate real-world and clinical data. Toward that end, and as we've communicated previously, Cohort 8 of our ENDEAVOR study is designed to demonstrate the effectiveness of additional prophylactic immunosuppression in non-ambulatory patients receiving ELEVIDYS. We are in discussions with FDA about the design of the study and hope to be able to commence it soon. Next slide, please. Also of note at this year's WMS meeting were the results of an independent study led by Dr. Jonathan Soslow from the Department of Pediatrics at Vanderbilt University Medical Center. The study included 20 Duchenne patients who received ELEVIDYS. The first 14 patients received ELEVIDYS with a standard protocol, including corticosteroids, but no additional immunosuppression. The 6 subsequent patients underwent a modified immunosuppression protocol with sirolimus. The objective was to show the initial safety, tolerability and efficacy of sirolimus prophylaxis. What the results demonstrated was that a low dose of sirolimus prophylaxis appeared to be safe and well tolerated in the Duchenne patients receiving ELEVIDYS, and there were no observed increases in liver enzymes in the 6 patients treated with sirolimus. Next slide, please. Moving now to our pipeline updates. Next slide and beginning with our LGMD Type 2E program. Regarding SRP-9003 for LGMD Type 2E, we recently presented positive Phase III emerging data at the WMS meeting. The study met its primary endpoint, demonstrating a significant increase in beta-sarcoglycan expression. In addition, restoration of other sarcoglycan complex proteins in both ambulatory and non-ambulatory patients was demonstrated. Further, our safety and tolerability results were consistent with previous results. We are encouraged by these data to support SRP-9003's clinical benefit in patients living with LGMD Type 2E. To determine the path forward, we have scheduled a meeting with the FDA this quarter. Following this regulatory dialogue, we will assess the requirements and determine the appropriate next steps for the program. Lastly, we turn to our promising siRNA pipeline. The recent activity in this space underscores the significant opportunity for this modality, and we are excited by our potential best-in-class approaches. Our DM1 and FSHD programs continue to advance rapidly. Enrollment is progressing well in both trials. For DM1, enrollment in the SAD study is complete and Cohort 4 of the MAD study at 6 mg per kg is currently enrolling. For FSHD, enrollment of the SAD study is complete and Cohort 6 of the MAD study or 12 mg per kg will begin enrolling this month. While we previously expected to release single dose ascending data by the end of the year, our team is currently prioritizing the transfer and validation of assays necessary to provide high-quality PD data. As a result, we now anticipate sharing these initial results in the first quarter of 2026. We also plan to initiate our trial for Huntington's disease by the year-end. This program utilizes a subcutaneous route of administration, allowing for deep brain regions like the striatum, particularly affected by Huntington's. In addition to the second-generation DM1 candidate selected at deal close, which has the ability to cross the blood-brain barrier and address the cognitive aspects of DM1. We have also selected 3 of our research targets, which we plan to discuss at a later date. We continue to be excited by our differentiated approaches with siRNA and look forward to updating you in 2026. I'll turn the call over to Patrick Moss for an update on our commercial performance. Next slide. Patrick?

Thank you, Louise, and good afternoon, everyone. My comments today will focus on 3 areas: a review of our Q3 performance, my thoughts on the ESSENCE results and our expectations for the trajectory of ELEVIDYS. Next slide, please. Total product revenue for the quarter was $370 million, including $131 million in ELEVIDYS net product revenue and $239 million in PMO net product revenue. The pause in shipments to the ambulatory population, which resumed following the FDA's recommendation, created meaningful disruptions to patient access. Some infusion dates were canceled, requiring some families to reinitiate the logistical process, antibody testing, rescheduling appointments and reconfirming insurance authorization. New patient identification efforts were also delayed as a result of physicians requiring clarification on the reasons for the voluntary pause. Despite these challenges, our teams responded swiftly and decisively, working closely with sites and families to ensure continuity of care. Importantly, demand for ELEVIDYS proved resilient amongst those patients that had scheduled infusions with some infusions resuming within a week of lifting the pause on ambulatory shipments. We also continue to engage our key stakeholders, including payers. We've had productive discussions with payers since the pause and have not seen unfavorable shifts in coverage for ELEVIDYS. In the ambulatory population, approximately 220 million lives have a path to coverage. We continue to fight for our patients and to date, we're not aware of a single permanent denial for coverage. Our PMO franchise delivered strong demand based on performance this quarter. Performance also benefited from additional shipping days in the Q3 calendar compared to the upcoming fourth quarter. Now turning to the ESSENCE study. We look forward to connecting with physicians, patients and payers to share the data at upcoming congresses and through additional compliant channels. We believe the totality of the evidence demonstrating the value of our PMOs will be viewed by HCPs and families as proof of an innovative treatment option that can have an impact on the trajectory of the disease. Our PMOs have generated a significant amount of real-world evidence supporting the efficacy of these products. The real-world evidence, coupled with the data set from ESSENCE, only solidifies our view about the importance of these treatment options for patients living with Duchenne. As evidenced by our Q3 performance, we have successfully restarted shipping for ambulatory patients, and we have begun to see new ELEVIDYS enrollment forms submitted. However, the disruptions in the market this year, combined with the typical seasonal dynamics in Q4 will temporarily impact demand generation and the influx of new enrollment forms. Due to the resulting delays, we expect the Q4 infusion volumes to be flat to slightly down from Q3. Despite these near-term dynamics, we remain confident in the long-term opportunity for ELEVIDYS and are comfortable reiterating our guidance that the ambulant population alone represents an annual revenue opportunity with a $500 million floor. Our conviction is based on the wealth of data demonstrating the benefits of ELEVIDYS. Further, based on our ongoing dialogue with providers, we do not anticipate the inclusion of the box warning in the final label to have a significant impact on prescribing behaviors, and our field teams are fully equipped to support informed conversations with all stakeholders. The data continues to reinforce this long-term view. We are energized by the reception to our data presentations at this year's World Muscle Society, in particular, the 3-year functional outcomes data for ELEVIDYS has resonated strongly with health care providers, reinforcing the durability of benefit and the therapy's potential to slow disease progression. Now to remind everyone, we have now treated greater than 1,100 patients with ELEVIDYS in both the clinical and commercial setting, providing patients with an effective therapy that is designed to impact the trajectory of their disease. Taken together, these results underscore the strength of our portfolio and the resilience of our commercial execution. This team has led an incredible launch through undoubtedly turbulent times, and I have the conviction that this team will continue to deliver results. We remain deeply committed to supporting patients and families, and we are confident in our ability to navigate the near-term dynamics while advancing our mission to transform the lives of those living with this devastating disease. As I continue to meet with HCPs and hear family stories, I am moved by how our therapies are having a positive impact on the lives of patients living with Duchenne. I'll now turn the call over to Ryan Wong to discuss financial results. Ryan?

Thank you, Patrick, and good afternoon, everyone. This afternoon's press release provided details for the third quarter of 2025 on a GAAP basis as well as a non-GAAP basis. Please refer to the press release available on Sarepta's website for a full reconciliation of GAAP to non-GAAP financial results. Next slide, please. I'd like to start my remarks today by thanking the Sarepta team for their commitment and diligence as we executed well against the revised strategy and refocused pipeline that we announced in July. Importantly, we took proactive steps in the third quarter to enhance our near-term liquidity and to improve our balance sheet and debt profile. We monetized strategic investments, completed a debt exchange, which reduced maturities due in 2027 from $1.15 billion to $450 million and significantly reduced our go-forward cost structure. In Q3, we were cash flow positive. Cash and investments increased from $850 million to $865 million. And from the strengthened financial foundation, we will continue to advance our pipeline and strategy. I will now touch on the key highlights from our third quarter financial results. Next slide, please. Total revenues were $399 million in the quarter, which consisted of $370 million in net product revenues and $29 million of collaboration and other revenues, which relates to contract manufacturing and royalty income from our partnership with Roche. Q3 cost of sales totaled $151 million, up from $92 million in the same quarter prior year. The increase reflects higher ELEVIDYS cost of goods due to depletion of previously expensed inventory and increased [indiscernible] costs. Additionally, we recorded $22 million in charges for write-offs of deposits tied to certain ELEVIDYS manufacturing suites and take-or-pay shortfall payments. Following the pause in shipping to the non-ambulatory population, we acted quickly with our strategic manufacturing partner to align ELEVIDYS production with near-term demand. As a result, we have deferred manufacturing commitments and payments from the first half of 2026 to 2027, while maintaining what we expect to be sufficient inventory to meet global demand. Moving on to expenses. Let me start with the restructuring charge reported in Q3. Following our July business and strategy update, which included a reduction in force and reprioritization of our pipeline, we incurred $41 million in restructuring costs, of which $35 million related to severance and other onetime termination benefits and the remainder related to the accelerated depreciation of certain impacted assets. Moving next to R&D. In the third quarter, GAAP R&D expenses were $219 million and non-GAAP R&D expenses were $207 million, both essentially flat to prior year. Nearly half of our reported R&D expense relates to the $100 million milestone paid to Arrowhead for meeting certain enrollment and safety thresholds in our SRP-1003 DM1 program. Turning to SG&A. We reported $92 million and $77 million on a GAAP and non-GAAP basis, respectively, representing a year-over-year decrease of 28% and 23%, respectively. These decreases were driven by lower compensation expenses as well as lower commercial spend following our cost restructuring efforts. Looking ahead to the remainder of the year, we expect combined non-GAAP R&D and SG&A expenses of approximately $420 million to $430 million in the fourth quarter. This includes $200 million payable to Arrowhead for the second DM1 milestone, which we anticipate recording in Q4 with payment due in the first quarter of 2026. For the full year, our guidance for combined non-GAAP R&D and SG&A expenses is approximately $1.86 billion. Excluding the Arrowhead transaction costs and DM1 milestones together totaling $884 million, our underlying expense guidance is roughly $976 million. Recall, our 2025 guidance prior to our July business and strategy update was between $1.2 billion and $1.3 billion, which means we have reduced planned expenses by nearly $300 million from the midpoint. This reflects our commitment to disciplined capital allocation, and we remain on track to meet our restructuring targets into next year. Lastly, in Q3, we reported an operating loss of $103 million and $36 million on a GAAP and a non-GAAP basis, respectively. Adjusting for the $41 million restructuring charge and the $100 million DM1 milestone, our underlying business would have reported a GAAP and non-GAAP operating profit of $37 million and $54 million, respectively. Additionally, adjusting for the $584 million Arrowhead upfront transaction cost, our underlying business has delivered a robust year-to-date GAAP and non-GAAP operating profit of $436 million and $561 million, respectively. In closing, with our financial performance and the actions we took in the quarter to strengthen our financial foundation, we believe we are well positioned to execute our strategy and meet our financial obligations even under revenue stress test scenarios. Looking ahead, our capital allocation priorities remain focused on investments that drive demand for our on-market therapies and advance our SNA platform towards potential near-term value inflection points. And now I'll turn the call back to Doug for closing remarks. Doug?

Thank you, Ryan. Let's open the call for questions, and then I'll make some closing remarks.

[Operator Instructions] We'll go first to Anupam Rama at JPMorgan.

I had just a quick question on ESSENCE. You guys talked a lot about some of the additional analyses and the COVID impact here. What other endpoints should we be looking for in a publication and/or medical conference presentation, FDA package that you think that would be supportive of some of the data that you presented here today?

Yes. Thank you for that question. I'll turn this to Louise.

Yes. Thanks for the question. So first, we'll be looking at the totality of evidence. So ESSENCE will be one part of that. But as we mentioned, the real-world evidence data is significant over many, many years and showing a benefit. In terms of ESSENCE, this is the top line. We have other secondary endpoints that include functional endpoints and also biological endpoints like expression, which are not complete yet. So all of that will be in the final CSR will be presented to the agency, and then that will be presented in a medical meeting. But as I mentioned in my remarks, the primary and secondaries favored the PMOs. And in terms of COVID, we saw the similar result that we saw with the primary, in which case you saw improvement with those endpoints when you looked at the COVID-free population.

We'll go next to Gena Wang at Barclays.

Maybe I'll just follow up regarding the COVID-free population. When we look at the p-value, it is still relatively high. It's 0.09. So like how do you think the FDA will look at the data sets here? And what could be the potential outcome with the FDA decision? One could be full approval? Should we also be worried about the drug could be pulled off the market as a potential worst-case scenario?

Thank you for the question, Gena. I'll make a couple of comments, and then I'll turn it to Louise. First of all, 0.09, I know that the standard is typically 0.05. Interesting enough, FDA leadership very recently noted with respect to rare diseases that 0.05 is relatively arbitrary and actually cited 0.09 as being potentially acceptable p-value. It says that 91% of the time, you're seeing a drug effect, particularly for rare disease. But I would also note that one of the reasons that we're seeing a p-value of 0.09, and we're not seeing a p-value closer to or better than 0.05 is that while 168 patients are included in the analysis here, 57 patients were excluded because they were -- their results were affected by the pandemic. And of course, that lowers the powering of the study substantially. So I think in light of the fact that we had to significantly lower the powering of the study to look at 168 versus for the additional 57 we would have otherwise seen, I think 0.09 is pretty darn impressive. And the effect, of course, not just the statistical significance of 0.09, but the effect is really important as we were showing a reduction in decline of 30%, which over the long run will be very, very important to these families. And one of the nice things about having these therapies commercially available for so long is that we get to see what happens over the long term, as you saw with respect to just one example of many VYONDYS, you look at that for 6 years, and these kids are seeing literally almost 3 years of delay in being in a wheelchair and the time to ventilation is significantly different. So I think the outcomes are a couple fold when we talk to the FDA. I really do not believe that there's a risk of losing marketing authorization, it would make very little sense given both the benefits we've seen with this therapy and considering this extraordinarily beneficial safety profile that we've seen over many years and when considering the standard that the FDA was very specific with us about as they approved VYONDYS in particular, and they were talking to ESSENCE and they said, the standard is you will be -- you will commit to voluntarily withdrawing marketing authorization, but only in a scenario where no relevant analyses would confirm a clinical benefit. Of course, we don't have that between the real-world evidence and the evidence we see here. So that -- I don't really think that is in the cards in the rational world. And then the real question is, can we transition this therapy from an accelerated approval to a traditional approval. We certainly think we have a good argument around that. We've been spending an enormous amount of time gathering data that supports this, and we think it would be the most efficient approach, but that will require discussions with the agency, and I can't make a prediction on that in advance of having good solid discussions and review of data with the agency. Now I said, Louise, I'm going to turn it over to you, and I will do that, but I did go on a bit of a monologue there.

Yes, I think you covered it well. Thank you.

We'll go next to Tazeen Ahmad at Bank of America.

Mine is on the upcoming Arrowhead data. I wanted to get a sense of what level of data to expect from these early programs that you're looking at. Importantly, these indications, DM1, FSHD, et cetera, are ones that other companies are pursuing. Can you give us a sense of what level of data to expect so that we can potentially start to compare and contrast with the other programs that are ahead of you in development?

I'll turn this to Louise.

Sure. Well, of course, so we'll be sharing data with a single ascending dose study, and we'll be looking at safety and then we'll also have safety data for the multiple ascending dose by that time. So we'll have PK data, that's serum PK, muscle PK. And then as I mentioned in my remarks, we are working to validate and transfer the assays, the PD assays. And so that is knockdown for DM1 and looking at splicing. And then for FSHD, we're obviously looking at downstream FSHD gene. So these are assays that we want to validate and have through, through our pivotal studies. And so we're working hard to make sure that these are in a good place so that we -- when we present our PD data, can be carried through throughout our studies. So we're excited to see this result and present it to you early next year.

We'll move next to Brian Abrahams at RBC Capital Markets.

This is Kevin on for Brian. So we just had a couple on the proposed sirolimus study. Maybe can you just provide a little bit more color on any key sort of trial design features left to discuss there with the agency, how confident you are in the protocol that you've previously presented? And what if anything could be tweaked there? And would you still anticipate a potential readout in the first half of next year for that study?

Sure. Louise?

Sure. I think in a general sense, the protocol design is -- will be similar to what we presented. We haven't finalized it with the agency. But in general, in terms of the numbers of patients and the protocol for sirolimus, that hasn't changed. So it's been minor back and forth on the protocol itself. So as soon as we get that study started, we are ready to enroll quickly. Patients are lined up. And so by -- as you mentioned, in the first half of next year, we'll start to have data on the effectiveness and then in the second half of the year is when we'll have the full data set for the trial based on starting the trial soon. So we're hoping to get that initiated in the near term.

Our next question comes from Joe Schwartz at Leerink Partners.

Previously, I think you mentioned that there were around 75 infusion centers around the U.S. that were up and running, although to different degrees. So I was wondering how many are active once again after the pause? And how much variance is there across these centers in terms of the numbers of patients they're treating with ELEVIDYS now?

Patrick, you can take this one.

Sure. Well, when we look at the top sites, they continue to treat. Now those less experienced sites. During the pause, they want to understand really the information that caused us to pause. But what we've seen now is the majority of those sites are also starting to submit enrollment forms as well.

We'll go next to Andrew Tsai at Jefferies.

I appreciate the update. So going back to the PMO franchise, can you remind us when the MISSION data is for EXONDYS 51 and how you would define success or failure in that study since I believe it's a dose response study, so there's no placebo arm.

Yes. Thank you very much. So that's a really interesting nuance. And Louise, you're going to correct me. I believe the readout date for MISSION is 2026. So to your very good point, MISSION is a post-marketing commitment that we have with respect to EXONDYS, but unlike ESSENCE and unlike VYONDYS and AMONDYS, it is not a confirmatory study. So there is no confirmatory study for EXONDYS and that was purposeful. The FDA in some of their memos indicated that what they really wanted to see was not a confirmation study, but rather a dose-ranging study. So there's -- essentially, it's dose ranging between 30 mg per kg, 100 mg per kg, even up to 200 mg per kg. And so the result of that is really a dose. Is 30 mg per kg the optimal dose or is 100 mg per kg the optimal dose? So that's the consequence of that study. It's not a confirmatory study, and that will read out in 2026, and we'll go from there.

We'll take our next question from Salveen Richter at Goldman Sachs.

This is Tommie on for Salveen. Just wondering about guidance, if there's anything that you can say on full year for ELEVIDYS and about the stress tests that you've done in the past with the $900 million PMO, $500 million ELEVIDYS. And separately, just on ESSENCE, in the context of recent events, we're just wondering if your confidence that the FDA won't move the goalpost here.

I'm sorry, what was the last question? Move the goalpost for?

For ESSENCE.

Yes. I feel confident based on the fact that it was in writing. The standard that we were given was in writing. In fact, we had to commit back to them in writing that, that would be the standard. It did not come from a reviewer. It came from, in the first instance, the head of the neuro division and then it was cited by the supervisor for over neuro. So I think this was a very well-established standard that we have. Plus the fact is that these therapies have been on the market for a number of years. We have extraordinary real-world evidence on their use. As I think we mentioned before, this is one of the most onerous protocols for a therapy, you could imagine for commercial therapy, these young men and boys have to be infused on a weekly basis and yet families in recognition of the benefits they're seeing are -- have a compliance rate year over year over year that's greater than 90% commercially and the safety profile for these therapies is just -- is exceptional, I think, would be the fair way to say it. So I don't imagine that there'd be any reason why the division would want to change its standard. It would seem to be unnecessary. As it relates to guidance, we're not in a place to give broad guidance right now, but we feel on the stress test concept, we continue to feel comfortable on that stress test we talked about. That is not our guidance for next year. We're going to come together on that. I'm looking at Patrick when I say that. But we're -- we certainly feel very comfortable about that kind of baseline concept of $500 million for ELEVIDYS. Anything else you want to say about that for the rest of the year, Patrick?

Nothing new to add. Thank you.

We'll go next to Gil Blum at Needham & Company.

So when should we expect to receive data from -- expression data from patients receiving prophylactic sirolimus? And would any be provided from the [ ISD ] that was conducted separately?

Louise?

The expression data would -- assuming the study started soon would be late next year just in terms of saying the biopsies and analyzing them. In the study that Dr. Soslow conducted, biopsies were not part of that. I think that is something that he's looking at, but that was not part of the original study design.

I think that it's a very good question and a very interesting one. The primary reason that we're looking at the use of prophylactic sirolimus is the evidence we have preclinically and some of the early clinical data that it will greatly enhance the safety profile of this therapy, particularly for non-ambulatory patients. But one of the things we've seen preclinical, we have not seen clinically yet because we have -- no one's taken -- performed a biopsy yet. But preclinically, we've seen the opportunity to potentially greatly enhance expression, which in turn may significantly enhance benefit and durability and the like. So we're very interested in seeing in addition to the safety issue, which is without a doubt the primary reason for conducting this study, seeing some of that expression data as well, and that will be a next year event.

Next, we'll go to Yanan

Great. Just maybe a quick follow-up to a prior question. To what degree does FDA's reaction to ESSENCE spill over, for example, to EXONDYS 51? Is there a possibility that the decision or reaction positive or negative, is there a mechanism for it to also apply to 51 because there's no formal 51 confirmatory studies? And also wanted to -- curious, in your mind, what is the relevance of the precedent of NS Pharma, their confirmatory trial and that outcome, whether that has any implication to your situation?

I think the only thing I'd say about NS Pharma, and we don't know a ton about the details other than I think it's certainly proof that this division is being rational and isn't being excessively punitive for those who may not know, NS Pharma had a study for a PMO. That study did not hit stat sig, I think there were some reasons for that. And I think the division has been quite thoughtful about that. And that happened some time ago, and they certainly don't seem to be moving to do anything irrational. To your first question, the question is an interesting one. Do you think the outcome of ESSENCE has some read-through in some way to EXONDYS? And the short answer is, no. It does either positive or negative. I don't think it gives us a great mechanism to immediately make EXONDYS traditional approval if we're able to get traditional approval for VYONDYS and AMONDYS. And likewise, I don't think it has any other negative read-through to EXONDYS at all for the simple reason that the ESSENCE is specifically for 2 therapies, VYONDYS and AMONDYS that we're in that study and EXONDYS doesn't have that kind of study. Again, EXONDYS was approved with a post-marketing commitment to look at dose ranging. We'll have an opportunity to talk about transitioning to a traditional approval with EXONDYS, but only after we've completed our post-marketing commitment to look at that dose-ranging study of the 30, 100 and even up to 200 and then look at the benefits of that versus the downsides of extra dosing and the time it takes to infuse. So we'll look at all of that, and that will be its pathway to a traditional approval if things go well there. But ESSENCE doesn't never read through there as far as we can see logically.

We'll move next to Mike Ulz at Morgan Stanley.

Maybe just a follow-up on ESSENCE in terms of time lines here. When could you potentially meet with the FDA? And when would you expect to roughly have a final decision on that -- on the PMO franchise?

Louise, do you want to take that?

Sure. So the meeting request will go in by the end of the year. So the meeting will take place sometime in the first quarter based on that request. And so then later in the spring, the final CSR will be submitted and then the outcome of the meeting with the agency will determine next steps. So we'll update when we have something new to share, but the meeting will happen in the first quarter of the year.

We'll go next to Brian Skorney at Baird.

I guess the study has been running for 10 years now and the original design was 6-minute walk. And I don't think it was changed to this 4-step Ascend velocity until under -- just under a year ago. And prior to that wasn't flagged as a key secondary endpoint. So I guess with switching the endpoint a mistake, what does the 6-minute walk data look like? And what was the rationale last year for changing the analysis?

Louise, do you want to take this?

Sure. Yes. So the -- we evaluated the endpoints following our ELEVIDYS EMBARK data. And so we did an analysis of endpoints and engaged external KOLs to help us do that moving to an endpoint that was perhaps more sensitive in this. And based on the data, we -- taking the 4-stair climb versus the 6-minute walk test was the right decision in terms of it was determined to be the most sensitive endpoint in our hierarchy. And I think the additional analyses we did from both a COVID perspective and a prognostic scoring method also showed that when you applied those thresholds, we see that the -- in terms of COVID, we see almost reached significance. And then when we did with prognostic scoring method, we did see that we reached significance. So it was certainly the right endpoint for the study.

We'll go next to Ritu Baral at TD Cowen.

I wanted to dig in a little further on the dynamics that will drive the down quarter next quarter. Can you elaborate on, I guess, the changes in shipments? I mean, is this sort of a lag on the delay that the disruption or the shipping disruption caused? Or is it something more fundamental? And sort of wrapped in all of this is how is safety monitoring around ALIs changing for the ambulatory patients? Are you finding that clinicians are sort of adopting these new monitoring suggestions that were detailed in World Muscle for ambulatory patients? And is that slowing things down?

Yes. I'm going to turn this over to Patrick. I mean let me say in the broadest of stroke, Ritu, it is the downstream pail that occurs when we have this massive disruption. I know people were a bit surprised that we were resistant to this temporary pause. But you can see the impact. We had a temporary pause for a very short period of time, but that really creates a significant downstream disruption. We've said many times, the process to go from start form to an infusion can be 4 to 6 months. So there's just a resonating impact when you have just a complete pause and then you have to restart everything. But Patrick, you can provide more nuance than I can on this.

Absolutely. And I'll add, in addition to what Doug just shared, we have really 3 dynamics this quarter. One, the medical conferences to where many of our HCPs are out of their offices for many days, weeks at a time. We've got also the major holidays that are going to impact infusions. And then the third is the inevitable illnesses that can pop up this time of the year. So all that comes together and it's what we've seen last year as well could impact this quarter's infusions. And so that's why we're projecting this quarter to be flat to possibly down in the fourth quarter.

We'll go next to David Hoang at Deutsche Bank.

So I guess maybe following up on some of the ELEVIDYS dynamics that were already asked about. Are you at a place where you can kind of provide a little bit of color on when you think ELEVIDYS demand would be normalized and we might see an inflection in revenues? And then as you think about some of the other competitor gene therapy products out there, one of which I think is seeking accelerated approval sometime next year, does that factor into kind of how you think about how ELEVIDYS demand may play out?

I'm not going to comment on nor editorialize on other people's claims with their drugs. But as it relates to commercial performance, Patrick, perhaps you want to provide some commentary on that?

Yes. And the early view is that based on our commercial execution and the trends that we're seeing, it does support that floor that we talked about. As we get further into this quarter, we'll also see additional demands and additional enrollment forms come in, and we'll be able to give an update at a later time, more likely the JPMorgan time frame.

Next, we'll go to Mitchell Kapoor at H.C. Wainwright.

This is [ Jade ] on for Mitchell. So you stated today that the majority of previous ELEVIDYS cancellations were reordered, but can you provide the actual hard numbers on the infusion postponements versus the number of cancellations you've gotten? And do you have like an actual number of start forms that have been filed for this third quarter?

Yes. We're going to use revenue as our metric. So we're not going to provide that level of detail. Do you have anything to say, Patrick, about the canceled doses, you can certainly touch on that.

Yes. So during the pause, we had 14 cancellations, and we have seen 11 of those patients rescheduled and were redosed within the August time frame, and the remainder are still working through the system.

Next, we'll go to Biren Amin at Piper Sandler.

I had a question on ESSENCE. Patients missed doses due to COVID, then you should expect dystrophin production on western blot and percentage of dystrophin-positive fibers to also be impacted between COVID and non-COVID patients. However, there was an analysis that I think the company presented interim data on at the World Muscle Meeting in October 2022 at week 48, that analysis showed no impact for 43 patients that were randomized to either AMONDYS or placebo on exon skipping dystrophin production, dystrophin-positive fibers, dystrophin intensity. Each of these endpoints were evalue static. So I just want to kind of understand how do you correlate that interim AMONDYS data on these biomarkers to the final functional data where you did see a COVID impact?

Louise, do you want to comment on that?

Yes. A couple of points on that. So we'll -- once we have all of the final data, we can certainly do a sensitivity analysis to look at this. I think one thing to remember is that the patients didn't have -- there's not a single patient that had biopsies at each time point. So it's difficult to track. So all patients had baseline biopsies and then a subset had them at 48 and another at 96. And so once we have all the data, we can go back and look for sensitivity to see if there was an impact on dystrophin expression. But it is complicated by the fact that not every -- that the patients didn't have sequential biopsies in the study in terms of 48 and 96 weeks, there were separate patients.

We'll go next to Gavin Clark-Gartner at Evercore.

I just wanted to follow up on the ELEVIDYS trajectory question. So acknowledging there can be a 4- to 6-month lag, as you noted, have you seen a pickup in start forms over the last 1 to 2 months that gives you confidence there will be a notable revenue pickup in 2026?

Patrick?

We're starting to see sites identify patients and send in their enrollment form. Every patient has a very distinct journey that they have to go through. So it's the antibody screening and the testing and their prescreening before they even start the authorization process. And so the early trends are supporting the positive outlook. And as we get more data, we'll share at a later time.

Our next question comes from Yigal Nochomovitz at Citi.

This is [ Shivan Kim ] on for Yigal. Maybe just 2 quick ones from us. Regarding ELEVIDYS, can you speak on whether you're currently seeing prescribers use sirolimus prophylactically for ambulatory patients? And for non-amb patients, can you remind us on the latest thinking around balancing the potential higher risk of infection from using sirolimus and if there was any discussion amongst KOLs or FDA did not utilize sirolimus prophylactically in all non-amb patients given this risk?

All right. With respect to the latter question on the non-ambulatory, that will be the outcome of our study. We feel pretty confident going into it that the risk benefit is going to justify the prophylactic use of sirolimus, but we'll only know that when the study read out and we look at those issues versus potential issues associated with risk of infection. I will say that to your first question, we only -- we don't have a systematic look at what physicians might be using prophylactic sirolimus there. We definitely have anecdotal evidence that a significant number, particularly more sophisticated physicians have used it. And what we're hearing at least anecdotally is that they're not having a lot of problems with the use of sirolimus prophylactically. So what we've at least heard anecdotally is that there some are using it and they are finding it very manageable and I think trying the benefit from it. But this all has to be confirmed. And we have a study that we're going to start when we get to go ahead with the FDA, which hopefully, again, will be very soon. And then we'll be off and then we'll get the data back and we'll get to review it if we are confident that it's significantly changed the risk benefit. We certainly have a lot of conviction that it could, and we're going to talk to the FDA and start testing non-ambulatory patients again.

We'll go next to Sami Corwin at William Blair.

Given the turnover at FDA, I understand that you had written guidance previously from the head of Neuro. But I guess what was the last time you interacted with the division regarding the ESSENCE trial? And then just curious on the percent of patients that missed consecutive doses in the ESSENCE trial that were in the non-COVID group.

As it related to that second issue on the consecutive doses, I think it more than doubled or around doubled in the COVID period versus the COVID-free period. We haven't had any specific discussions other than administrative-related discussions with the agency regarding ESSENCE over the last bit of time, certainly not in the last 6 months, I don't believe, unless Louise corrects me. But again, I think we're working with the -- I know you've seen without editorial [indiscernible] you see all this sort of turmoil at the FDA leadership level recently over the last few days. But I think at the division level, that's where this decision is going to be made. And I'm confident that the professionals in the division are going to take a careful look at this. And I think we are going to be in good shape with respect to marketing authorization. And I'm hopeful that we'll actually be in good shape when we talk to them about transitioning from accelerated approval to traditional approval.

Next, we'll go to Kristen Kluska at Cantor Fitzgerald.

This is Rick Miller on for Kristen. Just one here. To follow up on the MISSION trial, you said good readout next year for EXONDYS. Do you have any insight on how the FDA might look at any of these dose-ranging data you could generate there? Would you plan to meet with the agency after that trial? And just any insight you can give on what that conversation might look like?

Yes. I think it's going to look at the totality of the evidence from that study and just ask the question, is there a benefit to these patients by increasing the dose perhaps to 100 mg per kg versus the 30 mg per kg, and it's going to be a totality of that evidence about whether that occurs or not is on the one hand, there might be a benefit. We might see some benefit either functionally or in expression. On the other hand, it has to be -- has to rise to a certain bar because we are seeing a benefit from EXONDYS at 30 mg per kg, and that already takes nearly an hour a week. And if you start increasing the dose to 100, certainly 200 is probably not actually viable for these patients. The amount of time that you're infusing these kids is enormous and the imposition is extraordinary. So that's the whole thing we have to look at and then together decide if -- I mean, the good news is we're going to be completely aligned in our view of the agency and us. If 100 mg per kg was superior to 30 mg per kg for these kids and the risk benefit and the administrative issues justified it, we'd be fine doing that, but we need to look at that data very carefully. So again, the MISSION is not a confirmatory study. The result of MISSION will either be we're going to be continuing to distribute EXONDYS at 30 mg per kg or we're going to be distributing EXONDYS at some dose higher than 30 mg per kg. And if it was higher, it will very likely be 100 mg per kg.

And next, we'll go to Andy Chen at Wolfe Research.

This is Brandon on for Andy. Regarding your floor assumptions on ELEVIDYS sales, to what degree are you factoring competitive pressures from emerging therapies?

We've considered emerging therapies. And again, this is just a stress test. It's not our guidance. It's just -- this is a number that we would be very comfortable. We'd be in fine financial shape. We'd be able to maintain our revolver and pay our debts and advance all of our programs. So we're feeling very comfortable about that as a floor.

And that concludes our Q&A session. I will now turn the conference back over to Doug for closing remarks.

Well, thank you all very much for spending some time with us this evening. We all look forward to continuing to update you as we get through the rest of this year, and we'll have some additional milestones. And as we look forward into next year, we'll provide updated guidance next year, of course. And then we're really excited early next year to provide you an update on the actual clinical data from our siRNA programs. That's enormously important to us. So with that, have a lovely evening.