In a move that Sarepta Therapeutics Inc.’s president and CEO, Doug Ingram, called “transformational” for the company and “the largest licensing transaction in cell or gene therapy history,” Sarepta granted Roche Holding AG exclusive commercial rights outside the U.S. for SRP-9001, its gene therapy for Duchenne muscular dystrophy (DMD).

In exchange for rights to SRP-9001 (AAVrh74.MHCK7.micro-dystrophin), Sarepta, of Cambridge, Mass., receives $1.15 billion up front and as an equity investment, plus up to $1.7 billion in regulatory and sales milestones and royalties on net sales, which are expected to be in the midteens. The two companies will equally share the global development expenses, while Sarepta retains all of SRP-9001’s rights in the U.S.

“Indeed, it will be of lasting strategic importance to Sarepta, and it will work to accelerate our mission,” Ingram said on Monday’s conference call to investors, adding that the company will have as much as $2.5 billion in cash after the deal closes in the first quarter of 2020. That mission is to become, Ingram added, the global leader in rare genetic medicine, continuing its RNA commercial aspirations that are built on hybrid manufacturing.

Writing in an analyst note Monday, Evercore ISI’s Josh Schimmer called the deal a “validator” of Sarepta’s “manufacturing plans and capacity” and noted the company now has a $2.5 billion “war chest for continued progress on all programs, faster access to a significant ex-US opportunity (e.g., ~60,000 prevalent DMD [patients] in China alone) and Roche’s global pricing and market access expertise.”

Sarepta remains responsible for the global development plan and manufacturing build-out for SRP-9001. As for manufacturing, Ingram said Sarepta’s plans and capacity won’t change in the next 18 to 24 months, but as the deal matures, there will be the need for additional capacity.

“But as we kind of get past 2021, we're going to have to do some thinking and then scale beyond what we already have, if we can – if, for instance, we can begin to access regions, I guess, just one example, China, that have a breathtaking opportunity,” he said.

Doug Ingram, president and CEO, Sarepta Therapeutics

Ingram said the deal’s scope from the very beginning was only for ex-U.S. rights. “We were very clear on that,” he said.

China, Ingram said, was likely a clear target for Roche, of Basel, Switzerland, noting there are 60,000 DMD patients in China and that “outside the U.S., every hour of every day, a child is dying of DMD.”

In November, RBC Capital Markets' Brian Abrahams estimated SRP-9001 could eventually generate as much as $4 billion-plus worldwide.

Sarepta also granted Roche an option to acquire ex-U.S. rights to certain future DMD-specific programs, in exchange for separate milestone and royalty considerations, and cost sharing.

Sarepta’s stock (NASDAQ:SRPT) closed 7.46% higher on Monday, ending the day at $135.58.

The Sarepta deal comes within a week of Roche’s completion of a $4.8 billion acquisition of Spark Therapeutics Inc. In the merger, all Spark shares not owned by Spark, Roche or Roche’s wholly owned subsidiaries, are converted into the right to receive the same cash consideration per share, less any applicable withholding taxes, as was paid in the tender offer. The final steps were made as Roche and Spark said the FTC and the U.K. Competition and Markets Authority closed their investigations and granted unconditional clearance and termination of the waiting period, which expired Dec. 16. Once the merger is complete, Spark will become a wholly owned subsidiary of Roche.

H.C. Wainwright & Co.’s Debjit Chattopadhyay wrote Monday that SRP-9001 provides “the perfect complement to Roche’s neurology/neuromuscular franchise, which now reflects a disease-modifying treatment, risdiplam, for spinal muscular atrophy and RG-6042, for Huntington’s disease, in our view.”

In August, the FDA was skeptical about Sarepta’s injectable Vyondys 53 (golodirsen), but that changed swiftly Dec. 13 with the agency’s accelerated approval for the DMD follow-on therapy, the first treatment specifically for DMD patients with a confirmed dystrophin gene mutation that is amenable to exon 53 skipping will affect about 8% of DMD patients. That is a group not reached by Sarepta’s first commercial product, Exondys 51 (eteplirsen). But the price tag is the same. The company said it would be priced at parity with Sarepta’s Exondys 51, which is $892,000 annually. Vyondys 53 also received orphan drug designation and a rare pediatric disease priority review voucher. The company plans an immediate commercial launch.

In February, Wainwright’s Chattopadhyay compared Solid Biosciences Inc.’s SGT-001, its microdystrophin gene transfer for DMD, with Sarepta's SRP-9001 and New York-based Pfizer Inc.'s PF-06939926. "Key differences within constructs could translate into safety and protein expression advantages," he said in a report. "Unlike small-molecule drugs where packaging is often more expensive than the active pharmaceutical ingredient, gene therapy cost of goods sold are expected to be substantial." Another factor is that "the DMD patient community is a closely knit ecosphere with parents driven to choose the best option for a rapidly progressive and fatal disease." Variations between the three DMD programs "could translate into meaningful differences in microdystrophin expression and safety, in our view," he wrote.

Solid's chief technology officer, Joel Schneider, said the company is "not going to leave any stone unturned" as investigators begin to explore the severe adverse event that led to the FDA's clinical hold on the phase I/II study with SGT-001 in DMD in mid-November. Preclinical, clinical and manufacturing data will be sorted.

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