Welcome to the Sarepta Therapeutics second quarter 2012 earnings call. My name is Leslie and I will be your operator for today. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session. Please note that this conference is being recorded. And I will turn the call over to Erin Cox. Ms. Cox you may begin.

Thank you, Leslie and thank you for joining today's call. Earlier today we released our financial results for the second quarter of 2012. The press release is available on our website at www.sareptatherapeutics.com and our 10-Q was filed earlier today. Joining me on the call today are Chris Garabedian, our President and Chief Executive Officer, Ed Kayne, our Chief Medical Officer, Diane [Veri] our Vice President of Global Health Policy and Government Affairs and Mike Jocobsen our Vice President of Finance. I would like to note that during this call we will make a number of statements that are forward-looking including statements about the development and clinical status of Sarepta's product candidates and the potential efficacy, clinical results, intellectual property position, revenues, expenses, potential funding from the government and other sources and collaboration and partnering opportunities. These forward-looking statements involve risks and uncertainties any of which are beyond Sarepta’s control. Any such risks could materially and adversely affect the business, results of operations and the trade practice of Sarepta’s common stock. For a detailed description of risks and uncertainties we face, you are encouraged to review the company's official corporate documents filed with the Securities and Exchange Commission. With that let me turn the call over to Chris Garabedian, Sarepta’s President and CEO. Chris?

Thank you, Erin. Good afternoon everyone and thank you for joining us. I'm pleased to provide you with an update and overview of our activities and accomplishments since our last earnings call along with our financial performance in the second quarter of 2012. We reached a very important milestone in our DMD program since our last earnings call. We announced on July 24 that our Phase IIb study of eteplirsen in Duchenne Muscular Dystrophy showed significant clinical benefits after 36 weeks of treatment on the primary clinical outcome to 6-minute walk test. As a reminder of the 36-week data that we shared two weeks ago in a conference call, which is available on our archive webcast through our website. We showed in our intent-to-treat population, using the predefined statistical analysis that was written in the statistical analysis plan for Study 201. The placebo-delayed treatment cohort declined an average of 78 meters from their baseline 6-minute walk test distance or a decline of approximately 20% from their baseline score of 395 meters, compared to a decline of 8.7 meters in the eteplirsen 50 mg per kg weekly cohort or a decline of approximately 2% from their baseline score of 396 meters. And this difference resulted in a statistically significant benefit with a p value of 0.019. Furthermore a statistically significantly benefit was also seen at the earlier time point of 32 weeks. Through 32 weeks, there was a 59.9 meter benefit with the eteplirsen based on an average decline in the placebo-delayed treatment cohort of 63 meters, while the eteplirsen 50 mg per kg cohort declined only 3 meters or an average of less than 1% from baseline. This resulted in a p value of 0.045. The magnitude of this benefit is unprecedented for a disease modifying drug in DMD and…

Thanks Chris and hello everyone. In the second quarter of 2012, we reported an operating loss of $5.6 million compared with an operating loss of $10.1 million in the second quarter of 2011. The decrease was primarily due to reduced research and development expenses along with some lower G&A costs. Revenue for the second quarter of 2012 was $11.2 million virtually the same as $11.6 million one year ago. During this quarter, we had an increase of $600,000 in our Ebola Marburg contract revenue primarily due just the timing of subcontracting activities. This increase was offset by a $900,000 decrease in revenues due to completion of the H1N1 flu contract in June of last year. With regards to R&D, our expenses were $13.8 million in the second quarter of 2012, a decrease of $3.9 million from the prior year quarter. The decrease was primarily due to a $2.1 million reduction in personnel related costs and proprietary research, a $1 million decrease in our DMD program costs based only on the timing of clinical and manufacturing activities and $800,000 decrease in cost associated with the completion again of the H1N1 US government contract last year. SG&A expenses in the second quarter of $2.9 million compared to $4 million in the second quarter of 2011. The $1.1 million decrease was primarily due to reduced employee related cost but that now let me look a little bit at the year-to-date comparisons. For the first six months of 2012, our operating loss was $12.4 million compared with an operating loss of $15.7 million in the first half of 2011. The $3.2 million decrease was a result of $6.7 million of reduced operating in cost partially offset by reduced revenues and completion of the H1N1 contract. Revenue for the first six months of 2012 was…

Okay, thank you Mike. Operator, we can open up the call for questions.

Thank you. (Operator Instructions) First question is from Ed Tenthoff. Please go ahead.

It seems like Sarepta is a good new name for the company and you guys are really excelling since the change. So following up a little bit more on the data we have seen in Duchenne Muscular Dystrophy; I appreciate the update on kind of the clarity with respect to accelerated approval based on the 48 week data when we get that. Is there any specification in terms of what kind of patient number might be required for accelerated review?

Yeah, so Ted, I don’t think there is a hard and fast rule as it relates to that. I look at this as there are a couple things that the FDA is going to be looking at and you can break that into having proven efficacy and again under accelerated approval it’s that you have a marker that would reasonably predict a clinical benefit. And I think from an efficacy standpoint, the FDA has seemingly not been as concerned with the number of patients to show an effect and you can look to Alexion's drug Soliris was approved for a second indication on 13 evaluable patients. You can look at a drug like Afinitor that was approved Tuberous Sclerosis on nine patients out of 28 patient open-label study that showed response of brain lesion reduction. There are many other examples that have been highlighted in terms of proof of efficacy. I think the question is, what is the safety data base that is going to be required for an accelerated approval. And again, we are encouraged by our safety profile and we believe that that should give the FDA more comfort, we have other studies in which we have had eteplirsen exposed to patients, our dose-ranging study with 19 patients we did a IM study with eteplirsen prior to that. And of course we would commit to a confirmatory study and they would know that we would be evaluating a larger dataset moving forward. So you know we are not in position to make any declarations at this point. We want to wait for the 48 week data. We want to see what it’s telling us and we want to prepare a briefing document to discuss with the FDA, the feasibility of accelerated approval. But until we have that 48 week dataset and really until we have that conversation with the FDA, it’s hard for us to make clear assessments of the probability of that.

And one another quick question if I may, with respect to OUS partner, have you had any conversations with EMEA yet in terms of what’s their view of the dataset is and kind of their expectations might be for a path to approval?

You know we have not, but we watched the EMA closely in terms of their decisions on other rare disease drugs and we are very encouraged that in some cases they seem very amenable to take Phase II dataset and consider that for -- they have a different term than accelerated approvals for extraordinary circumstances. And so we will be preparing a briefing document that we think just as we would discuss with the FDA, we think that would easily be prepared for an EMA discussion as well.

And our next question comes from Charles Duncan [JMP Securities]. Please go ahead.

My first question is regarding The World Muscle Biology Conference in October you mentioned, Chris I am wondering when the abstracts are due. I think you mentioned that you would be filing a late breaking abstract and if so if there would be a PR around that and if it would include any data?

Yeah, so the abstract dead line is in late August and we; this is a single track muscle disease meeting, so unlike society meetings that are multi-track and there's a lot more competition for abstract, we believe that this definitely will be of interest for presentation and so we will be submitting an abstract for a 48 week data presentation by the end of August. However, we will not have data to put into that abstract, so we will put the 36 week data into that abstract with a understanding that we will have 48 week data ready for presentation at the meeting, but we do not expect to have a press release with any additional data at the time we submit that abstract.

Second one is with regard to the time and cost of Phase III. I understand the prospects for the upside for an accelerated approach, but could you help us understand what could be the rate limiting steps to starting a Phase III at the end of ’13. Is it safety and how much safety do you have to show before that or are there some other rate limiting steps before the start of Phase III?

We will be putting as much preparation in place to think about that, but we really aren’t going to aggressively pursue a strategy until we talk to the FDA, which I mentioned we expect to have a meeting by the end of year or January. And from that discussion, I think that will hopefully give us the right type of feedback that will guide our decision on the right pivotal study. With respect to rate limiting steps to start that or the financial requirements to do that, there is not much expense that’s required in planning all of that and it really, once you really start with enrollment and securing the sites and working with CROs to prepare for that, then you start to incur cost, but as you know, the bulk of the costs are once you started rolling and you start dosing the patients etcetera, we would also need to ramp-up the drug supply in anticipation of the study. So I envision that in 2013, that there would be costs required to produce drug supply and until we know what that sample size is going to be, I think it’s hard to guide exactly what that’s going to cost. But I will tell you, generally what I have been saying is that we think a pivotal study the size of about 60 patients may be that’s 40 treated versus 20 placebo or something in that range, we believe would be sufficient to power for clinical outcome and to satisfy the safety requirement of the FDA. So hopefully that gives you the guides that are you looking for in terms of preparing for that pivotal.

And then one last strategy question, it sounds like you are getting some good response out of perspective partners. But I wasn’t clear if you are saying that you would do just an OUS partner or that’s your target and then keep the drug for US and perhaps mount to commercial -- establish a commercial effort in the States; I am not sure if what your strategy is there?

So let me clarify that Charles, so its interesting, my answer on that question might have been different a few weeks ago, and I think even on the last earnings call post 24 week data, we suggested that all options are on the table. I think our preference if we decided to pursue a partnership is to retain the US market and the reason is this, we have done a lot of the heavylifting we believe to prepare for an FDA approval. We think that commercially we have expertise to know how to prepare for that and it would not require a huge amount of resources to sell the drug. And we think that that’s achievable and we can manage our bottomline more effectively, we can build a revenue generating and cash flow positive business on a US commercial launch. When you look at companies like Alexion or others and the multiple you get from developing your own commercial infrastructure and generating that revenue and income that's very appealing. However, to do that globally right, is a different effort. It requires more resources and while we could achieve that we think that with a partner we could accelerate the development of the other Exons. We think they could bring their resources to bear to get the broader DMD program to the market and that includes beyond eteplirsen, the other Exon-skipping drugs and ultimately a class approval and we believe that would be a win, win for Sarepta, for a partner and for the DMD community to get drugs to market more quickly and that would be our preference. And again the amount of interest we are getting in this program now that we have this clinical benefit that we've shown in 36 weeks, reason to believe that we would be able to orchestrate an ex-US partnership. Of course, we need to look at the economics versus going alone. We need to weigh that and what’s in the best interest of the program for shareholders of Sarepta and we haven’t made a decision either way, but we are definitely exploring the prospect of a partnership and would lean more heavily toward an ex-US deal.

And I guess I assume that could be signed before the commencement of a pivotal study if one needs to be pursued?

Yeah, most definitely it could be commenced before then. I think because we’re getting close to the 48-week data, it's unclear if we could get a deal done. I mean I think some times these can happen very quickly. And so I think what we're focusing on now is preparing these companies with diligence, with the meetings to understand what type of structures in terms would be acceptable and you know, potentially we would be ready to move quickly if the right deal structure and economics came to bear. But it's really hard to guide on timing on that. But think it's fair to say, if we pursue the partnership, that would likely commence prior to a pivotal study.

(Operator Instructions) We will take the next question from Chris Murray.

Looking at other DMD candidates, I was just wondering beyond Exon 45 and Exon 50, you noted your partnership could trigger further development of other candidates into the clinic. How far long are any of those candidates or how long do you think or do you estimate it would take to bring those candidates in to the clinic and initial study?

Yeah. So Chris, the two collaborations we have ongoing on Exon 45 and Exon 50, we have guided that the pre-clinical program we believe could be ready to submit an IND by the end of next year. That’s our goal and again we're preparing and planning a program for those two drug candidates that would allow us to prepare an IND and presumably be ready for clinical studies in 2014. What's required for an additional Exon skipping drug, that’s a discussion we also want to have with the FDA. We think that this is part of a three-step process to gain a class approval. And we want to discuss this strategy with the FDA. We know that we need to prove safety and efficacy with our lead program eteplirsen, so first things first. We want to get to the 48-week dataset. We want to understand what a confirmatory study needs to look like in the FDA side to get a traditional approval. We also want to understand what is the burden of safety in efficacy on additional Exon skipping drugs in the clinic to get approval for those and we know that in a rare genetic disease like this where it's feasible to do clinical study on the first you know most prevalent Exon skipping drugs we treat the most prevalent mutations. But beyond that there is a long tail and it becomes prohibitive to do traditional safety and efficacy studies once you get beyond the first a handful of Exon skipping drugs. So the second step, we believe is approving similar safety pharmacokinetics with a standard dose with additional Exon skipping drugs. That might be Exon 45 and Exon 50, may be adding Exon 53 or something else into a companion clinical program and then beyond that, we want…

And if I could really quickly to the DoD and perhaps maybe could you give us some color on maybe why they chose the Ebola versus the Marburg program in terms of which one they wanted to do a stop work order on obviously you got two there, are you further along on Marburg, is that a more interest of them?

Yeah, I have Diane Barry here who heads up our global health policy in government affairs and Diane will answer that.

So, we had no indication that they are prioritizing Marburg over Ebola or Ebola over Marburg. I think it clearly the fact that with our Marburg program, currently we are the farthest along in development. We don’t have a competitor that’s also funded by TMT and the reality of the situation is that DoD is under some tight fiscal constraints and the Ebola program that they are funding two competing candidates that are relatively at the same stage of development. So they have to make some tough decisions there, but I have been saying that both people are hardworkers still till a priority for both DoD and for the civilian community and their share requirement is a huge gap and our medical countermeasure stockpile. I will leave it at that.

Chris, I will just add. I mean the two programs that are being funded by TMT for Ebola were both issued to stop work order and you know, again as I mentioned in my script, I believe they need to support in Ebola drug development program and we think that the Ebola program that we have provides a lot of leverage in that when you combine the Ebola program that we have with our Marburg program. It really supports a platform approach of our technology. We have the same PMO plus backbone that we're using in both programs. They’re both single agents. The only difference is the sequence and we believe that the value of maintaining both of these programs to not only the DoD but to other government agencies who are looking for a platform technology that could be applied to other viral targets and other pathogens is important. So again, it’s unfortunate the fiscal constraints that the government and the DOD is under to have to make these decisions, but we are still hopeful that they will see the value in maintaining the Ebola program. Again, we will know by September 1st, if they will cancel the Ebola program, if they will cancel the stop work order and allow us to continue or if they will delay that decision with a extension of the stop work order.

And then just real quick, the competitor doesn’t have another sort of similar platform program with another DOD candidate; do they?

Not that I am aware of.

We have a follow-up question from Charles Duncan [JMP Securities]. Please go ahead.

I had kind of a follow-up for I guess Mike related to that stop work order. I am wondering if you could clarify, you gave new guidance on both revenue and expenses, I am assuming they are both going down if there is stop work through the rest of the year? And then also if you could help us understand the percentage of overhead or so that was taken care by the Ebola part of that contract?

With regards to the guidance, our previous revenue guidance was in the $40 million to $50 million range and now we are at $37 million to $43 million based on the assumptions that the Ebola work will be significantly curtailed just from the financial conservative point of view of that. With regard to operating loss, our old guidance was $30 million to $35 million. Since we initially gave that guidance and as we have looked and made adjustments to our operating burn rates and that kind of stuff, we were able to bring that down. I think as Chris has talked on earlier calls, our margins and etcetera on the government contracts isn’t huge; it is a way that helps us develop and move our technology forward, it’s a way that helps cover certain operating costs, but the margins aren’t huge. And I don’t think that’s something we have previously disclosed with regards to the margins and so.

Well, so what we have guided it depends on how you assess huge or not, but we’ve guided about 8% cash flow, these are cost plus arrangements and so the cash flow is not significant to offset burn on the proprietary programs. The margins with overhead and G&A kickers, we have guided that we believe they are in excess of 20%, but just to answer your question Charles, we have not really provided guidance historically on expenses, okay. The expenses on the government programs are very proportional right; the margin that I mentioned is on top of it in terms of revenues, but they are very proportional to the revenues that we book on those programs. So imagine 75% to 80% of the revenues we book there is expenses attached to that that supports government programs. In order to figure out expenses on the proprietary basis, well then that’s our operating loss; it’s a proxy for that, plus some of the margins were offset that we would have from the government programs could be applied. So I hope that answers the question you were looking for.

Yeah, it does sounds like not a big deal. Just one additional clarification on that if there is a stop work that remains in existence, you would be free to use all the information and work and go beyond them if you had another government contract?

You know, some of this -- like we own the product and data from the program, but we would want to discuss with our government collaborators, because they are still our collaborators on Marburg and they potentially could be collaborators on future programs and we also know that the agencies talk to each other and they are aware of the various programs that are being funded. And so it’s been our best interest to keep good relations and to make sure we understand what their expectations are and you know what our plans are. And as long as we keep that good dialogue and communication you know TMT and DOD has been great partner in trying to navigate any types of issues like this. So I don’t want to make any strong declarations, but we would talk with our collaborators and we would figure out the best things for Sarepta and for the government going forward.

Makes sense again congrats on the DMD data; looking for that 48 week data and appreciate the added color.

Operator, I think that concludes the time we have today. I just want to say, we are we are very excited about the recent developments on both the Duchenne and some of the Marburg data more recently and thank all the listeners for continued support of Sarepta until the next call. Thank you.