Sarepta Therapeutics (SRPT)

Transcription

1 Americas/United States Equity Research Biotechnology Rating OUTPERFORM* [V] Price (22 Sep 14, US$) Target price (US$) 36.00¹ 52-week price range Market cap. (US$ m) Enterprise value (US$ m) *Stock ratings are relative to the coverage universe in each analyst's or each team's respective sector. ¹Target price is for 12 months. [V] = Stock considered volatile (see Disclosure Appendix). Research Analysts Jeremiah Shepard, PhD jeremiah.shepard@credit-suisse.com Jason Kantor, PhD jason.kantor@credit-suisse.com Ravi Mehrotra PhD ravi.mehrotra@credit-suisse.com Koon Ching PhD koon.ching@credit-suisse.com Anuj Shah anuj.shah@credit-suisse.com Sarepta Therapeutics (SRPT) SMALL & MID CAP RESEARCH Eteplirsen Likely Gains Accelerated Approval on Controversial Surrogate Endpt w/ New Data We believe SRPT will gain accelerated approval for its lead asset, eteplirsen, for Duchenne muscular dystrophy (DMD) within months following additional dystrophin data from: (1) fourth biopsy from the ongoing Phase IIb, and (2) confirmatory open-label study with eteplirsen. DMD is solely caused by a loss of dystrophin and we expect the FDA Advisory Committee will support utilization of dystrophin as a surrogate endpoint with supportive efficacy data. We recommend investors accumulate SRPT ahead of the expected spring FDA Advisory Committee meeting. Dystrophin as Surrogate Is Essential for Faster Approval: We think the FDA Advisory Committee will vote in favor of using dystrophin as a surrogate endpoint for accelerated approval. We believe a successful fourth-biopsy will be needed to convince the panel that dystrophin can be accurately quantified using SRPT's methodology. Without using dystrophin as a surrogate, SRPT will likely to have to rely on the final data from one or both confirmatory studies for approval, delaying an approval 24 months or longer. Catalysts: (1) NDA acceptance in Q1:15, (2) 168-week data from ongoing Phase IIb in Q1:15, (3) FDA panel meeting in spring 2015, and (4) potential approval in YE:15/H1:16. Updates on manufacturing, FDA meetings, and clinical plans for follow-on therapies could also be catalysts in Q4:14/2015. Valuation: Our $36 target price is composed of a $24/share DCF valuation of eteplirsen, $9/share for its pipeline, and $4/share in cash. We model a 2016 U.S. and EU launch, 70-80% penetration for eteplirsen into the addressable U.S./EU DMD market, and a 12% royalty to Prosensa for IP rights. Financial and valuation metrics Year 12/13A 12/14E 12/15E 12/16E EPS (CS adj.) (US$) Prev. EPS (US$) P/E (x) P/E rel. (%) Revenue (US$ m) EBITDA (US$ m) OCFPS (US$) P/OCF (x) EV/EBITDA (current) Net debt (US$ m) ROIC (%) 1, Number of shares (m) IC (current, US$ m) BV/share (Next Qtr., US$) 6.5 EV/IC (x) 4.6 Net debt (Next Qtr., US$ m) Dividend (current, US$) Net debt/tot eq (Next Qtr., %) Dividend yield (%) Source: Company data, Credit Suisse estimates DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES, ANALYST CERTIFICATIONS, AND THE STATUS OF NON-US ANALYSTS. US Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. CREDIT SUISSE SECURITIES RESEARCH & ANALYTICS BEYOND INFORMATION Client-Driven Solutions, Insights, and Access

2 Sarepta Therapeutics SRPT Price (22 Sep 14): US$20.79, Rating: OUTPERFORM [V], Target Price: US$36.00 Income statement (US$ m) 12/13A 12/14E 12/15E 12/16E Revenue (US$ m) EBITDA (79) (140) (153) (57) Depr. & amort. (1) (4) (4) (4) EBIT (US$) (90) (163) (182) (87) Net interest exp Associates Other adj, (22) (7) 0 0 PBT (US$) (112) (170) (182) (87) Income taxes Profit after tax (112) (170) (182) (87) Minorities Preferred dividends Associates & other Net profit (US$) (78) (140) (153) (57) Other NPAT adjustments (34) (30) (29) (30) Reported net income (112) (170) (182) (87) Cash flow (US$) 12/13A 12/14E 12/15E 12/16E EBIT (90) (163) (182) (87) Net interest Cash taxes paid Change in working capital 12 (5) (8) (4) Other cash & non-cash items Cash flow from operations (65) (140) (157) (57) CAPEX Free cash flow to the firm (65) (140) (157) (57) Acquisitions Divestments Other investment/(outflows) (12) (147) Cash flow from investments (12) (147) Net share issue/(repurchase) Dividends paid Issuance (retirement) of debt (0) (0) Other (0.14) 0.05 Cash flow from financing activities Effect of exchange rates Changes in Net Cash/Debt 69 (189) 51 (31) Net debt at start (186) (255) (67) (118) Change in net debt (69) 189 (51) 31 Net debt at end (255) (67) (118) (87) Balance sheet (US$ m) 12/13A 12/14E 12/15E 12/16E Assets Cash and cash equivalents Accounts receivable Inventory Other current assets Total current assets Total fixed assets Intangible assets and goodwill Investment securities Other assets Total assets Liabilities Accounts payable Short-term debt Other short term liabilities Total current liabilities Long-term debt Other liabilities Total liabilities Shareholders' equity Minority interest Total equity & liabilities Net debt (US$ m) (255) (67) (118) (87) Per share data 12/13A 12/14E 12/15E 12/16E No. of shares (wtd avg) CS adj. EPS (US$) (2.31) (3.54) (3.57) (1.27) Prev. EPS (US$) Dividend (US$) Dividend payout ratio Free cash flow per share (1.91) (3.56) (3.68) (1.27) (US$) Key ratios and 12/13A 12/14E 12/15E 12/16E valuation Growth(%) Sales (61.9) (39.0) (100.0) EBIT (52.1) Net profit (63.0) EPS (108.7) (53.7) (0.8) 64.6 Margins (%) EBITDA margin (556.7) (1,614.2) (45.8) EBIT margin (635.0) (1,878.6) (70.2) Pretax margin (787.6) (1,956.2) (70.0) Net margin (549.0) (1,610.5) (45.6) Valuation metrics (x) EV/sales EV/EBITDA (9.5) (5.4) (4.9) (13.2) EV/EBIT (6.6) (4.8) (4.0) (8.8) P/E (9.0) (5.9) (5.8) (16.4) P/B Asset turnover ROE analysis (%) ROE stated-return on (60.4) (74.9) (93.1) (55.5) equity ROIC 1,113.9 (117.3) (269.9) (210.0) Interest burden Tax rate Financial leverage Credit ratios (%) Net debt/equity (103.3) (32.4) (63.6) (67.7) Net debt/ebitda Interest coverage ratio , Quarterly data 12/13A 12/14E 12/15E 12/16E EPS for Q1 (0.41) (0.55) (0.92) (0.86) EPS for Q2 (0.46) (0.61) (0.89) 0.07 EPS for Q3 (0.63) (1.05) (0.87) (0.56) EPS for Q4 (0.77) (1.31) (0.89) 0.09 Source: Company data, Credit Suisse estimates. Daily Sep 23, Sep 22, 2014, 9/23/13 = US$ Sep-13 Dec-13 Mar-14 Jun-14 Price Indexed S&P 500 INDEX On 09/11/14 the S&P 500 INDEX closed at Sarepta Therapeutics (SRPT) 2

3 Sarepta (SRPT) Key Charts Exhibit 1: SRPT's Pipeline Product Indication Phase Target Developer/Collaborator Eteplirsen DMD Phase IIb Exon 51 skipping Proprietary SRP-4053 DMD Preclinical Exon 53 skipping Proprietary SRP-4045 DMD Preclinical Exon 45 skipping Proprietary SRP-4050 DMD Preclinical Exon 50 skipping Proprietary SRP-4044 DMD Preclinical Exon 44 skipping Proprietary SRP-4052 DMD Discovery Exon 52 skipping Proprietary SRP-4055 DMD Discovery Exon 55 skipping Proprietary SRP-4008 DMD Discovery Exon 8 skipping Proprietary Marburg Translation suppression; Proprietary/US Government AVI-7288 hemorrhagic fever Phase I Marburg virus nucleoprotein AVI-7100 H1N1 Influenza Phase I Translation suppression Proprietary/US Government AVI-7537 Ebola virus Phase I Translation suppression Proprietary/US Government Source: Company data. Exhibit 2: Summary of DCF DCF valuation NPV Per Share Eteplirsen 1,120 $24 Pipeline 434 $9 Est. Net Cash mid: $3 Shares in calculation 47.1 Total 1,690 $36 Source: Credit Suisse estimates. Exhibit 3: SRPT's Catalyst Calendar Expected Price Product Indication Catalyst Date Sensitivity Eteplirsen DMD World Muscle Society Meeting Oct 7-11 Low Eteplirsen DMD Begin open label study Q4:14 Low Eteplirsen DMD Begin safety studies Q4:14 Low Eteplirsen DMD NDA submission Q4:14 Medium Eteplirsen DMD NDA acceptance Q1:15 Medium Eteplirsen DMD Phase IIb 168 week data Q1:15 Medium Eteplirsen DMD FDA Advisory Committee Meeting Spring 2015 High Eteplirsen DMD FDA approval decision YE:15/H1:16 High SRP-4053 DMD Begin Phase II study in EU Q4:14 Low SRP-4045 / SRP-4053 DMD Begin combined Phase II placebocontrolled study Various DMD Sequence selections for exons 52, 55 and 8 Source: Company data, Credit Suisse estimates. Q1:15 Low H2:14 Low Exhibit 4: 6MWT Results for SRPT's Phase IIb Study Source: Company data. Exhibit 5: Comparison of Eteplirsen vs. Drisapersen Exhibit 6: Dystrophin Expression at 0, 24, and 48 Weeks Eteplirsen Exon 51 skipping therapy Delivery: IV (weekly) Data: Positive Phase II Safety: Vomiting, hypokalemia Oligo backbone: morpholino Drisapersen Exon 51 skipping therapy Delivery: Subcutaneous (weekly) Data: Failed Phase III but positive Phase II Safety: Proteinurea, injection site reactions Oligo backbone: phosphorothioate Source: Company data. Source: Company data. Sarepta Therapeutics (SRPT) 3

4 Table of Contents Sarepta Therapeutics SRPT 2 Sarepta (SRPT) Key Charts 3 Portfolio Manager Summary 5 Investment Positives 5 Investment Risks 6 Target Price: $36/Share 7 Favorable Public Comps 9 Trading History: Rocky Road from FDA Comments and Data Releases 10 Key Catalysts and Our Scenario Analysis 11 Potential Scenarios for SRPT 12 Significant Market Opportunity for SRPT's Eteplirsen 13 We Believe Dystrophin Is a Viable Surrogate for Several Reasons 15 Fourth Biopsy Likely Pivotal for Use of Dystrophin as Surrogate Endpoint 15 FDA Guidance for Eteplirsen Rely Heavily on Dystrophin as Surrogate 16 Concerning Excerpts from FDA Regarding Dystrophin 16 FDA Guidance Influenced SRPT's Clinical Strategy 17 Derivatives from FDA Guidance and Clinical Strategy 17 Expected Timeline for NDA Review and Potential Approval 18 Plans for European Filing 18 Outline for Open-Label Confirmatory Trial (Study 301) 18 Clinical Plans for Remainder of Pipeline 19 Eteplirsen Targets 13% of DMD 20 Competitive Landscape 20 Differences Between Eteplirsen and Drisapersen Likely Focus of FDA Advisory Committee 21 Dystrophin Also Likely a Key Topic at FDA AdCom 22 Hang-up on Using Dystrophin as Surrogate 22 Commentary in the FDA Draft Guidance Documents for DMD about Dystrophin as Surrogate 23 The FDA Eteplirsen Small Phase II Study Yields Promising Results 24 Efficacy Data Suggest Eteplirsen Delays Walking Decline 25 Debate over Phase IIb Data Analysis 26 Natural History Studies Support Efficacy Seen in Phase IIb 26 Individual Patient Data Support Efficacy Seen in Placebo Group 27 Pulmonary Data Suggest Eteplirsen Can Stabilize the Lung Function 29 Consistency in the Pulmonary Data Promising 29 Slowing of Pulmonary Decline Can Be Significant 30 Adverse Event Profile in Favor of Eteplirsen 31 Unanswered Commercial Questions 32 Manufacturing Likely to Limit Near-Term Market Penetration 32 Intellectual Property Situation Likely to Create Overhang 32 Eteplirsen COGS Likely to Be Significantly Higher than Drisapersen 33 How Eteplirsen Works 34 Animal Data Suggest Drisapersen Is Not as Active as Eteplirsen 35 Exon-Skipping Therapies Have Variable Activity 36 SRPT's Chemistry Outperforms RNA's Chemistry in DMD Mouse Model 37 Immunofluorescence Shows Modest Expression in Mdx Mouse Model for All Oligos 38 PMO Therapeutic Can Increase Dystrophin Expression in Dose Dependent Manner in DMD Mouse Model 39 The Dystrophin Expression Markedly Increased from 1X, 3X and 7X Injections 40 SRPT Management 42 HOLT 44 Financial Statements 46 Sarepta Therapeutics (SRPT) 4

5 Portfolio Manager Summary SRPT is developing novel exon-skipping therapies to treat Duchenne muscular dystrophy (DMD). The company wholly owns its pipeline, which comprises eight therapies. Its lead drug, eteplirsen, targets about 13% of DMD patients, while the remaining seven preclinical therapies address another ~35% of DMD patients. SRPT has established proof of efficacy in DMD with a small Phase IIb study. The regulatory environment for DMD-focused therapies has improved significantly over the last six months. Sarepta and its closest competitor Prosensa plan to submit NDAs by YE:14 for accelerated approval. The FDA has outlined two potential paths for accelerated approval and signaled its willingness to accept additional data during the review process. We expect the SRPT application to be supplemented with additional data from planned clinical trials, and we anticipate that the application will be approved by YE:15 or the first half of SRPT's Pipeline SRPT's current pipeline includes eight exon-skipping therapies for distinct subsets of DMD patients and three infectious disease programs. SRPT's eight DMD therapies could address ~50% of the DMD population, which would equate to about 7,300 patients in the U.S. alone. All eight exon-skipping therapies utilize the same technology and leverage the clinical, regulatory, and scientific efforts of its lead drug eteplirsen. SRPT also has three different infectious disease programs, which include an early-stage Ebola program that has recently garnered significant attention. We do not expect the infectious disease program to be a meaningful value driver in the near term. Exhibit 7: SRPT Pipeline Product Indication Phase Target Developer/Collaborator Eteplirsen DMD Phase IIb Exon 51 skipping Proprietary SRP-4053 DMD Preclinical Exon 53 skipping Proprietary SRP-4045 DMD Preclinical Exon 45 skipping Proprietary SRP-4050 DMD Preclinical Exon 50 skipping Proprietary SRP-4044 DMD Preclinical Exon 44 skipping Proprietary SRP-4052 DMD Discovery Exon 52 skipping Proprietary SRP-4055 DMD Discovery Exon 55 skipping Proprietary SRP-4008 DMD Discovery Exon 8 skipping Proprietary AVI-7288 Marburg hemorrhagic fever Phase I Translation suppression; Marburg virus nucleoprotein Proprietary/US Government AVI-7100 H1N1 Influenza Phase I Translation suppression Proprietary/US Government AVI-7537 Ebola virus Phase I Translation suppression Proprietary/US Government SRPT's exon-skipping therapies currently in development could treat up to 50% of DMD patients, and the same technology could be used to generate therapies that could treat another 30% of DMD patients. Source: Company data. Investment Positives Clinical and Preclinical Indicate that Eteplirsen Is Active: We believe the clinical and preclinical data suggest that eteplirsen can increase dystrophin production and provide a therapeutic benefit to DMD patients amenable to exon 51 skipping therapy. Additionally, current data suggest that eteplirsen is more active than its lead competitor drisapersen. Proprietary Chemistry Could Confer Superior Safety: The chemistry used to generate eteplirsen and SRPT's other exon-skipping therapies has demonstrated a superior safety profile relative to the chemistry used by SRPT's competitor Prosensa. This could become a major driver of future market penetration, as this therapy is Sarepta Therapeutics (SRPT) 5

6 intended for chronic use in boys. This same chemistry is used to make the other therapies for additional DMD patient subsets, and this safety profile could have the same impact on market adoption. Although the DMD patient exposure with eteplirsen has been limited (only 12 patients), another 26 patients have been safely dosed with the therapy. Receptive Regulatory Environment for DMD Therapies: The regulatory environment for DMD therapies has improved dramatically over the last six months. This is largely driven by patient-advocacy groups that have heavily lobbied the FDA to allow access to experimental therapies for the debilitating disease. The FDA now appears to have softened its requirements for approving DMD drugs. SRPT and its competitor RNA plan to file an NDA by YE:14. Success in Eteplirsen Would De-risk the Entire Pipeline: SRPT is developing eight exon-skipping therapies, including eteplirsen, that use the same chemistry and mechanism of action. Clinical success in the eteplirsen confirmatory studies and regulatory acceptance of dystrophin as a surrogate endpoint would read well on SRPT's entire pipeline and significantly increase the possibility that other pipeline programs could be approved solely based on dystrophin analyses. Wholly Owned Pipeline: SRPT retains worldwide rights to its pipeline agents for DMD, including eteplirsen. We believe that SRPT can successfully commercialize its DMD drugs, given the highly targeted specialty market for DMD, and potentially find partners for non-core geographies (ex-u.s./ex-eu). Maintaining the rights to its pipeline also makes SRPT an attractive takeout candidate. Orphan Drug Focus: SRPT's focus on DMD therapies has the following benefits: (1) highly organized patient advocacy groups, (2) potentially faster regulatory paths to market, (3) expected favorable reimbursement economics, and (4) DMD is a genetically defined disease that is easily identified. Investment Risks Limited Size of the Clinical Data Set: The regulatory authorities will likely be concerned with the lack of definitive efficacy data and limited safety database from the small Phase IIb study. Another risk with a small clinical dataset from the Phase IIb trial is that the efficacy observed may not be replicated in larger clinical studies. FDA May Rely on Efficacy Data Inclusive of Two Non-ambulatory Patients: The FDA will likely include the two non-ambulatory patients in its primary analysis in the Phase IIb study. However, we look to see how the FDA treats these patients in subsequent post-hoc analyses, as these two patients became non-ambulatory early in the study when eteplirsen is likely to have no significant impact. Timing Risk Associated with NDA Filing: SRPT has an aggressive regulatory and commercial timeline. The FDA is unlikely to approve the eteplirsen on accelerated approval based solely on the current data set and could delay the decision until new clinical data are available. Furthermore, the manufacturing section of the NDA could be deemed insufficient and could also lead to a delay in the Agency's decision. Commercial Scale Manufacturing Not Established: SRPT has not validated large-scale manufacturing for eteplirsen and may not be ready for a full launch in by YE:15/H1:16. Given the anticipated rapid uptake of an approved therapy in this orphan disease, there is risk that a limited manufacturing supply could dampen the launch projections. Sarepta's competitor, Prosensa, is expected to have sufficient supply of drisapersen for a potential launch, and if it is approved on a similar timeline, it could capture the segment of the market unable to receive eteplirsen. Sarepta Therapeutics (SRPT) 6

7 Risks Associated with Clinical Endpoints: While there is significant precedence for using six-minute walk test (6MWT) for drug approvals in other indications, this is a new regulatory endpoint in DMD. It is also an endpoint with significant baseline variability and potential variability in the natural history of the disease. Dystrophin has never been used for approval in DMD either, and the methods for its measurement have not been standardized. There is a risk that the FDA and EMA decline approving eteplirsen due to the unvalidated endpoints. Unclear Intellectual Property Situation for Eteplirsen: There are ongoing proceedings to settle disputes for the IP rights between SRPT and RNA in the U.S. and EU. Until these proceedings are complete, we believe it is likely that it will create an overhang on the stock. Risks Around Label/Reimbursement: The Phase IIb trial enrolled patients 7-13 years old who could walk within specified parameters. These restrictions were designed to optimize the ability to measure the 6MWT and are not based on safety concerns or mechanism of action. If successful, patients of all ages and walking ability (both ambulatory and non-ambulatory) would likely want to take eteplirsen. The breadth of the FDA/EMA-approved label and the view of payors will be important in determining the market opportunity for the drug, and there is a risk that the initial indicated patient population is more limited than expected. Financing Risk: SRPT will likely need to raise additional funds to reach profitability. Financing could be delayed/not necessary if SRPT signs a commercial partnership(s). We model a financing in Q2:15 and assume a partnership outside of the U.S. and EU. Target Price: $36/Share Our valuation is supported by a DCF model using probability-weighted sales estimates for eteplirsen in DMD (70%) in the U.S. through 2028 (Exhibit 8). We use a 35% tax rate and a 12% discount rate, and we arrive at a $36 valuation based on current share count and an equity raise in 2015 (we assume a 4M equity raise in Q2:15). We assume that SRPT will have COGS of approximately 25% at launch, trending down to 12.5% after manufacturing improvements. We also conservatively estimate that Sarepta will pay Prosensa a 12% royalty on future sales as part of a settlement for the U.S. and EU IP. At current share levels, our $36/share target price for SRPT implies an approximately $1.5B market cap for an orphan drug company with an approved drug. This would be a significant discount to its public market comps with ultra-orphan therapies, including ALXN, VRTX, ISIS, and AEGR (Exhibit 11). This valuation assumes a 70% probability of success, which implies a higher valuation if approved. We believe that, if SRPT has success with its top three pipeline candidates (assigning a 100% probability of success for eteplirsen, SRP-4045, and SRP-4053), its market cap could become $2.9B (based on $70/share valuation). We believe that SRPT could reach this level within a two-year timeframe if it receives accelerated approval for eteplirsen and the two confirmatory studies are successful. Assume 70% probability of success for eteplirsen in DMD in U.S. and 60% probability of success in EU Sarepta Therapeutics (SRPT) 7

8 Penetration Penetration 23 September 2014 Exhibit 8: Summary of DCF Valuation DCF valuation NPV Per Share Eteplirsen 1,120 $24 Pipeline 434 $9 Est. Net Cash mid: $3 Shares in Calculation 47.1 Total 1,690 $36 Source: Credit Suisse estimates. The largest levers in our valuations are: (1) Probability of Success for Eteplirsen and Pipeline: We use a 70% probability of success for eteplirsen in the U.S. and a 65% probability of success for eteplirsen in the EU. We would expect the probability to go higher on a positive FDA AdCom and potential approval. Positive developments for eteplirsen will likely lead to a higher probability of success for SRPT's pipeline. (2) Pricing of Eteplirsen: We assume a gross price of $300,000 per year in the United States and $250,000 in Europe. The pricing is in-line with other orphan drugs but may depend on the potential pricing for ataluren in the EU. For comparison, Kalydeco for cystic fibrosis launched with a $294,000 price point in the United States. (3) Eligible Patient Population: We assume the FDA and EMA labels include both ambulatory and non-ambulatory patients. The potential U.S. and EU label could be more restrictive/inclusive than what we estimate. The non-ambulatory segment of the DMD patient population represents approximately one-half of the patient pool (CINRG Natural History Study), and exclusion of these patients from the label could significantly hurt sales projections. Ambulatory (blue) vs. nonambulatory (red) distribution (4) Timing of U.S. and EU approvals: We assume U.S. and EU launches in Q2:16 and YE:16, respectively. A delay for either region could significantly affect our valuation work. (5) Market Share with Drisapersen: We predict that the current safety profile will limit broader market adoption for drisapersen, and we project that the eteplirsen captures the large majority of the market opportunity based on its better safety profile. Source: CINRG Natural History Study We did a variance analysis for three of our assumptions on our $395M U.S. peak sales estimate. We conducted these analyses by varying eteplirsen market share relative to eligible patient population (Exhibit 9) and price point at launch relative to the eligible patient population (Exhibit 10). Exhibit 9: Impact on U.S. Peak Sales from Market Share and Peak Penetration Eteplirsen market share $ % 50% 60% 70% 80% 90% 100% 100% $247 $308 $370 $432 $493 $555 $616 90% $222 $277 $333 $388 $444 $499 $555 80% $197 $247 $296 $345 $395 $444 $493 70% $173 $216 $259 $302 $345 $388 $432 60% $148 $185 $222 $259 $296 $333 $370 50% $123 $154 $185 $216 $247 $277 $308 40% $99 $123 $148 $173 $197 $222 $247 Source: Credit Suisse estimates. Exhibit 10: Impact on Peak Sales from Price Point at Launch and Peak Penetration Price point at launch $ % $329 $411 $493 $575 $658 $740 $822 90% $296 $370 $444 $518 $592 $666 $740 80% $263 $329 $395 $460 $526 $592 $658 70% $230 $288 $345 $403 $460 $518 $575 60% $197 $247 $296 $345 $395 $444 $493 50% $164 $205 $247 $288 $329 $370 $411 40% $132 $164 $197 $230 $263 $296 $329 Source: Credit Suisse estimates. Sarepta Therapeutics (SRPT) 8

9 Favorable Public Comps Companies developing drugs for orphan diseases typically trade at a premium to their biotech peers. Orphan disease companies with an approved product(s) are on the high end of the valuation range, which include several multibillion-dollar companies (VRTX, ALXN, ISIS, and BMRN). We believe there could be a significant increase in the valuation assigned to SRPT upon a potential positive FDA AdCom and U.S. approval, and it could elevate it into a similar range as the companies with approved product(s). We note that the closest comparator for SRPT from a therapeutic perspective would be VRTX, as both have therapies targeting a genetically defined disease that requires chronic therapy (albeit with smaller patient numbers). Both companies utilize a proprietary technology that can be used to make other therapies treat other subsets of the orphan disease population. We think the closest comparator for SRPT from a therapeutic perspective is VRTX Exhibit 11: Public Market Comps for Orphan Drug Companies Price Lead Market Enterprise Company Ticker 9/22/2014 Product Stage Cap. (MM) Value (MM) Alexion Pharmaceuticals ALXN-US $ Soliris M arketed 31, ,056.4 Vertex Pharmaceuticals VRTX-US $ Kalydeco M arketed 24, ,248.4 Biomarin Pharmaceuticals BM RN-US $69.08 Naglazyme, etc M arketed 10, ,977.1 Alnylam Pharmaceuticals ALNY-US $77.40 ALN-TTR02 Phase III 5, ,255.1 Isis Pharmaceuticals ISIS-US $40.71 Kynamro M arketed 4, ,379.4 Synageva Biopharma GEVA-US $62.76 Sebelipase alfa Phase III 2, ,547.0 PTC Therapeutics PTCT-US $41.10 Translarna M arketed (EU) 1, ,009.0 Aegerion Pharmaceuticals AEGR-US $32.87 Lomitapide M arketed Sarepta Therapeutics SRPT-US $20.79 Eteplirsen Phase II Raptor Pharmaceuticals RPTP-US $10.40 Procysbi M arketed Amicus Therapeutics FOLD-US $6.26 M igalastat HCl Phase III Prosensa RNA-US $8.29 Drisapersen Phase III Corcept Therapeutics CORT-US $2.75 Korlym M arketed Average 6, ,114.5 Median 1, ,009.0 Source: Company data, ThomsonOne. Sarepta Therapeutics (SRPT) 9

10 Trading History: Rocky Road from FDA Comments and Data Releases Exhibit 12: Recent Stock Chart for SRPT 1) 96-week data release holds-up 2) FDA pulls permission to file for accelerated approval 3) 120-week data release still strong 4) FDA puts accelerated approval back on table 5) 144-week data release causes some concerns Source: Company data, ThomsonOne. SRPT has traded between a $12 and $55 range over the last 52 weeks. This wild ride has primarily been driven by two different catalysts: (1) FDA feedback about the route to registration, and (2) data releases from SRPT's ongoing Phase IIb study. 1) The 96-week data release for the ongoing Phase IIb study indicated that the patients in the treated group maintained their walking ability, while the patients in the "placebo/delayed treatment" group had a measured decrease in walking ability. 2) At a meeting with FDA, the Agency indicated that it wanted a more traditional path for approval versus the accelerated path it previously laid out for SRPT. This was largely precipitated by the negative Prosensa Phase III data release. 3) The 120-week data release for the ongoing Phase IIb study showed that the treated group and the "placebo/delayed treatment" group maintained their walking ability relative to the 96-week data release. 4) To the surprise of many, the FDA put the accelerated approval pathway back on the table for SRPT, signaling its intent to accept an NDA based on the Phase IIb study and preliminary data from other open-label studies. We think this was largely done in response to heavy lobbying of DMD advocacy groups. 5) The 144-week data release was concerning for some since the treated group had the largest decline in walking ability from baseline observed to date (32m drop versus 18m, the largest prior drop). Sarepta Therapeutics (SRPT) 10

11 Key Catalysts and Our Scenario Analysis Exhibit 13: SRPT Newsflow Expected Price Product Indication Catalyst Date Sensitivity Eteplirsen DMD World Muscle Society Meeting Oct 7-11 Low Eteplirsen DMD Begin open label study Q4:14 Low Eteplirsen DMD Begin safety studies Q4:14 Low Eteplirsen DMD NDA submission Q4:14 Medium Eteplirsen DMD NDA acceptance Q1:15 Medium Eteplirsen DMD Phase IIb 168 week data Q1:15 Medium Eteplirsen DMD FDA Advisory Committee Meeting Spring 2015 High Eteplirsen DMD FDA approval decision YE:15/H1:16 High SRP-4053 DMD Begin Phase II study in EU Q4:14 Low SRP-4045 / SRP-4053 DMD Begin combined Phase II placebocontrolled study Various DMD Sequence selections for exons 52, 55 and 8 Source: Company data, Credit Suisse estimates. Q1:15 Low H2:14 Low Key catalysts include: 1) NDA Acceptance: Assuming SRPT submits an NDA in December 2014, we believe there is a high probability that the FDA will accept the NDA filing in the middle of Q1:15 (~60 days after filing). 2) 168-Week Data Release in Q1:15: This data release is significant because the 144-week data demonstrated a small decline in walking ability relative to the prior 120-week data set. We would expect some decline relative to 144-week data, but an acceleration in the decline could be concerning to investors. 3) FDA Advisory Meeting: We expect that the FDA will call for an advisory meeting in H1:15 (likely the spring of 2015) and that the committee will discuss the Sarepta and Prosensa NDAs together. This discussion could meaningfully affect the FDA's thought process for the NDA review and could foreshadow the Agency's decision. We believe the most significant near-term catalyst is the FDA advisory meeting likely next spring 4) FDA's Decision on NDA: We believe that the FDA will want to see as much data from the planned open-label study with eteplirsen before potentially approving the therapy, and we do not expect that significant data will be available until Q3:15. While an earlier look might be sufficient, we are cautious on approval before YE:15 and believe it represents an upside scenario. The FDA could extend the PDUFA dates after supplemental data have been submitted to the Agency. Sarepta Therapeutics (SRPT) 11

12 Potential Scenarios for SRPT Exhibit 14: Scenario Analysis for SRPT in the Next 12 Months 60 Scenario 50 $51 - Upside $36 - Base 20 $22 - Down side 10 0 Current price $3 Target - Cash value Source: Credit Suisse estimates. We highlight the key assumptions for each scenario in the following exhibits: Exhibit 15: Best-Case Scenario: Eteplirsen gains accelerated approval in U.S. and EU, with no accelerated approval for drisapersen and all DMD patients (ambulatory and non-ambulatory patients) Upside - Accelerated approval in US and EU / no immediate approval for drisapersen in US Program NPV per share No difference in launch date Eteplirsen $1,620 $34 85% Probability of success in US Pipeline $651 $14 80% Probability of success in EU following US approval Cash $136 $3 Capture all US market share for first 2 yrs 80% Market penetration - Ambulatory and non-ambulatory patients Total $2,407 $51 +50% Change in pipeline value 300K price point in US/250K in EU Source: Credit Suisse estimates. Exhibit 16: Base-Case Scenario: Eteplirsen and drisapersen gain accelerated approval in U.S. and EU for all DMD patients Base Program NPV per share No difference in launch date Eteplirsen $1,120 $24 70% Probability of success in US Pipeline $434 $9 60% Probability of success in EU based on current assumptions Cash $136 $3 80% Market penetration - Ambulatory and non-ambulatory patients 0% Change in pipeline probability of success Total $1,690 $36 300K price point in US/250K in EU Source: Credit Suisse estimates. Exhibit 17: Bear-Case Scenario: No accelerated approval in U.S./EU for eteplirsen or drisapersen only for ambulatory patients Downside - No accelerated approval in US and EU / Only ambulatory patients Program NPV per share 1 year delay in US and 1 year delay in EU launch Eteplirsen $618 $13 65% Probability of success in US based on full approval Pipeline $304 $6 60% Probability of success in EU following US delay Cash $136 $3 50% Market penetration - Ambulatory patients only -30% Change in pipeline value Total $1,058 $22 350K price point in US/300K in EU Source: Credit Suisse estimates. Sarepta Therapeutics (SRPT) 12

13 Significant Market Opportunity for SRPT's Eteplirsen Globally, we estimate that approximately 5,750 DMD (13% of DMD patients) may be appropriate for an exon 51 skipping therapy based on their specific genetic mutations, with 2050 in the U.S., 2730 in the EU, and 950 for the ROW. We assume a high penetration rate among eligible patients and assume an annual gross price of $300,000 in the U.S. and $250,000 in the EU. The likely next two exon-skipping therapies from SRPT address another 7,000 patients (16% of DMD patients). We project that eteplirsen reaches peak sales in the U.S. and EU three years after launch, with $395M and $329M in sales, respectively, and that sales from that point forward will grow through price increases and population growth. Modeling Assumptions for Eteplirsen Sales Build We assume relatively high penetration rates into the eligible patient population of 80% in the United States, 70% in the EU, and 65% for ROW. The remainder will go to RNA's drisapersen. We estimate that 85% are eligible for treatment in the United States, based on the assumption that eteplirsen's label does not limit its use by age or walking ability in the U.S., but a slightly more restrictive label in the EU and ROW (75% in the EU and 60% in ROW). We use a gross price of $300,000 per year in the United States and $250,000 per year in the EU, with a gross to net adjustment of 12% in the United States, the EU, and the ROW (Exhibit 18). We estimate that U.S. and EU eteplirsen sales will be $395M and $329M, respectively, three years after launch and will grow further from population growth and price increases The high penetration rates into the eligible patient population (80% in the United States, 70% in the EU, and 65% for ROW) is our most significant assumption. It is largely based on our view that the eteplirsen safety profile will drive better market adoption. We assume a rapid penetration into the addressable market, with peak market share within the first 24 months. We also completed a valuation analysis of Prosensa's lead follow-on therapies (Exhibit 19)and the key assumptions are below. Modeling Assumptions for Pipeline Projections We estimate peak sales for DMD therapeutics in 2020 (assuming all patients are treated at comparable price points to eteplirsen in the U.S.). We then estimate that all pipeline therapies targeting a defined percentage of the DMD patient population capture an equivalent percentage of the 2020 DMD market. We assume that the top four therapies reach the market first, which include SRP-4053, SRP-4045, SRP-4050, and SRP We assign a probability of success to each program, and we estimate that the SRP-4053 and SRP-4045 programs have a 40% probability of success and that the SRP-4050 and the SRP-4044 programs have a 20% probability of success. We think that SRPT will be able to utilize dystrophin as an efficacy endpoint, which will likely speed up a potential approval. We estimate that SRP-4053 and SRP-4045 reach the market in three years and SRP-4050 and SRP-4044 reach the market in five years. Sarepta Therapeutics (SRPT) 13

14 Exhibit 18: DMD Sales Build for Eteplirsen (Peak Years in Light Brown) 2014E 2015E Q1:16E Q2:16E Q3:16E Q4:2016E 2016E 2017E 2018E 2019E 2020E DMD patients (US) 15,000 15,764 15,961 16,161 16,363 16,567 16,567 17,396 18,265 19,179 20,138 Patients treatable with exon 51 skipping 1,950 2,049 2,075 2,101 2,127 2,154 2,154 2,261 2,375 2,493 2,618 % Patients treatable with exon 51 skipping 13% 13% 13% 13% 13% 13% 13% 13% 13% 13% 13% Penetration ,470 1,900 1,995 2,094 % Penetration 0% 10% 25% 45% 65% 80% 80% 80% % Eterlipsen market share 0% 60% 65% 70% 75% 80% 80% 80% % Drisapersen market share 0% 40% 35% 30% 25% 20% 20% 20% Total Eteplirsen patients ,150 1,748 1,102 1,520 1,596 1,675 Gross Price $300,000 $300,000 $300,000 $300,000 $300,000 $300,000 $309,000 $309,000 $318,270 $327,818 $337,653 $347,782 Annual price increases 0.0% 0.0% 0.0% 0.0% 0.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% Gross to net adjustment 12% 12% 12% 12% 12% 12% 12% 12% 12% 12% 12% Net price $264,000 $264,000 $66,000 $66,000 $66,000 $67,980 $271,920 $280,078 $288,480 $297,134 $306,048 Compliance 90% 90.0% 90.0% 90.0% 90.0% 90.0% 90.0% 90.0% 90.0% 90.0% 90.0% 90.0% Annual sales ($M) $0 $0 $0 $7 $28 $70 $106 $278 $395 $427 $461 DMD patients (EU) 20,000 21,019 21,282 21,548 21,817 22,090 22,090 23,194 24,354 25,572 26,850 Patients treatable with exon 51 skipping 2,600 2,732 2,767 2,801 2,836 2,872 2,872 3,015 3,166 3,324 3,491 % Patients treatable with exon 51 skipping 13% 13% 13% 13% 13% 13% 13% 13% 13% 13% 13% Penetration ,508 2,216 2,327 2,443 % Penetration 0% 0% 0% 10% 50% 70% 70% 70% % Eterlipsen market share 0% 0% 0% 60% 75% 75% 75% 75% % Drisapersen market share 0% 0% 0% 40% 25% 25% 25% 25% Total Eteplirsen patients ,131 1,662 1,745 1,833 Gross Price $250,000 $250,000 $250,000 $250,000 $250,000 $250,000 $250,000 $250,000 $250,000 $250,000 $245,000 $240,100 Annual price increases 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% -2.0% -2.0% Gross to net adjustment 12% 12% 12% 12% 12% 12% 12% 12% 12% 12% 12% Net price $220,000 $220,000 $55,000 $55,000 $55,000 $55,000 $220,000 $220,000 $220,000 $215,600 $211,288 Compliance 90% 90% 90% 90% 90% 90% 90% 90% 90% 90% 90% 90% Annual sales ($M) $0 $0 $0 $0 $0 $9 $9 $224 $329 $339 $348 DMD patients (ROW) 7,000 7,357 7,449 7,542 7,636 7,731 7,731 8,118 8,524 8,950 9,398 Patients treatable with exon 51 skipping ,005 1,005 1,055 1,108 1,164 1,222 % Patients treatable with exon 51 skipping 13% 13% 13% 13% 13% 13% 13% 13% 13% 13% 13% Penetration % Penetration 0% 0% 0% 0% 20% 40% 65% 65% % Eterlipsen market share 0.0% 0.0% 0.0% 0.0% 70.0% 70% 70% 70% % Drisapersen market share 0.0% 30.0% 30.0% 30.0% 30.0% Total Eteplirsen patients Gross Price $225,000 $225,000 $225,000 $225,000 $225,000 $225,000 $225,000 $225,000 $225,000 $225,000 $225,000 $225,000 Annual price increases 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Gross to net adjustment 12% 12% 12% 12% 12% 12% 12% 12% 12% 12% 12% Net price $198,000 $198,000 $198,000 $198,000 $198,000 $198,000 $198,000 $198,000 $198,000 $198,000 $198,000 Compliance 90% 90% 90% 90% 90% 90% 90% 90% 90% 90% 90% 90% Annual sales ($M) $0 $0 $0 $0 $0 $0 $0 $26 $55 $94 $99 ROW Royalties 20% $0 $0 $0 $0 $0 $0 $0 $5 $11 $19 $20 Source: Credit Suisse estimates. Exhibit 19: Valuation of SRPT Pipeline % of DMD WW sales Adjusted Years to Product Target Population estimate Probabiilty Market SRP-4053 Exon 53 Skipping 8% $380 40% 3 SRP-4045 Exon 45 Skipping 8% $380 40% 3 SRP-4050 Exon 50 Skipping 5% $301 20% 5 SRP-4044 Exon 44 Skipping 6% $285 20% 5 Source: Company data, Credit Suisse estimates. Sarepta Therapeutics (SRPT) 14

15 We Believe Dystrophin Is a Viable Surrogate for Several Reasons We believe that dystrophin can be used as a surrogate marker for approving eteplirsen under accelerated approval for the following reasons: 1. Mutations in the dystrophin gene are the sole cause of Duchenne muscular dystrophy, and increasing the production of dystrophin in these patients should help ameliorate the disease pathology. Also, there are inherent challenges in conducting a well-controlled motor-function test in a DMD study, limiting the options for meaningful efficacy endpoints. 2. Eteplirsen directly targets dystrophin pre-mrna and should increase the amount of functional dystrophin transcript, which could lead to increased expression. A meaningful increase in this expression is likely to provide a therapeutic benefit. 3. Preclinical experiments suggest that therapies using the same technology (PMO technology) as eteplirsen are efficient at increasing the dystrophin expression by exon 51 skipping. Work by Heemskerk et al. suggests the PMO-based therapy can induce exon 51 skipping efficiently in a mouse model at the transcript level as observed by RT-PCT and the protein level by Western blot and immunofluorescence. In addition, this work demonstrated that the PMO-based therapy can induce more exon 51 skipping than a drisapersen-like therapy (Journal of Gene Medicine 2009; 11: ). We believe that this supports the observation that eteplirsen can drive high dystrophin expression in clinical trials (and likely higher than drisapersen). 4. A positive result is harder to explain away than a negative result. While there is debate about the methodology used for dystrophin analysis, the positive dystrophin results reported by SRPT are significantly harder to discount than a negative dystrophin results reported by RNA. The SRPT collection protocol was well controlled, eliminating some of the issues in collecting the muscle samples reported by other companies. In addition, SRPT's analyses were done on a blinded basis. Although one can argue about the intensity of the positive signal, it is challenging to completely discount a positive signal relative to a negative result. FDA definition of surrogate endpoint: "A surrogate endpoint used for accelerated approval is a marker - a laboratory measurement, radiographic image, physical sign or other measure that is thought to predict clinical benefit, but is not itself a measure of clinical benefit." Fourth Biopsy Likely Pivotal for Use of Dystrophin as Surrogate Endpoint We believe that the proposed fourth biopsy will be critical in convincing the FDA that dystrophin is a useful surrogate marker. We believe the reproducibility of the prior dystrophin findings with an independent third party would give the reviewers comfort in the prior dystrophin analyses in the Phase IIb study. SRPT announced a collaboration with Flagship Biosciences last August, and this group will conduct the dystrophin analysis on the fourth biopsies. We do not think that the FDA will be looking so much at the longitudinal expression levels but instead focus on the reproducibility of the results from the fourth biopsies versus the prior biopsy for the respective patient. A negative outcome, such as no dystrophin expression or significantly less robust dystrophin expression, would significantly dampen the probability for accelerated approval for eteplirsen. Success with fourth biopsy is critical for FDA to use dystrophin as surrogate endpoint Sarepta Therapeutics (SRPT) 15

16 FDA Guidance for Eteplirsen Rely Heavily on Dystrophin as Surrogate We believe that the FDA guidance for an eteplirsen filing indicates that the Agency is open to approving the therapy with a relatively limited dataset, and it could come sometime in the next months. The FDA has provided similar guidance to both SRPT and RNA regarding potential paths for accelerated approval. A Potential Path to Approval Includes Significant Optionality It appears the FDA is providing itself meaningful flexibility for a potential approval based on its communications with SRPT. We highlight the key points from this communication. There are two endpoints that might be used to support potential accelerated approval: (1) Dystrophin as a surrogate endpoint, and (2) 6MWT as an intermediate efficacy endpoint. FDA's suggestion for a fourth biopsy demonstrates its interest in dystrophin expression and suggests to us that the Agency will actively consider dystrophin as a surrogate. This procedure is a significant burden on these children and we do not think the FDA would suggest it unless it was interested in this endpoint. There are two confirmatory studies that could support full approval: (1) an open-label study that is historically controlled, and (2) a placebo-controlled efficacy study with another exon-skipping therapy. The Agency stated both should be ongoing at the time of a potential accelerated approval. This guidance is similar to what the FDA provided to Prosensa. The required endpoint or time point for the primary efficacy readout for the confirmatory open-label eteplirsen study was not listed, but the FDA indicated that it "might be acceptable to confirm clinical benefit following accelerated approval", suggesting that it would need to be some validated measure of clinical benefit (i.e., 6MWT or other). The placebo-controlled study would need to include 6MWT or another key efficacy measure to demonstrate a link between dystrophin expression and a clinical benefit. This guidance is similar to what the FDA provided to RNA. Concerning Excerpts from FDA Regarding Dystrophin SRPT did include some of the comments from the FDA regarding dystrophin, and we note that some of the comments do reveal hesitancy to consider dystrophin as a surrogate endpoint with the current data set. (1) " [We] remain skeptical about the persuasiveness of the (dystrophin) data AND, uncertain whether the existing dystrophin biomarker data will be persuasive enough to serve as a surrogate endpoint that is reasonably likely to predict clinical benefit" Again, we believe the fourth biopsy will be crucial for convincing the FDA that the dystrophin expression previously observed is significant. We also think that the FDA will want to see the 24-week dystrophin analyses from the open-label as well before making a final decision about using it as a surrogate. (2) [FDA proposed] a collaborative effort in which we will work to better understand the methods and analyses used for the existing biomarker data, AND also work together on methods for the collection of additional data that could be more reliable." [If the FDA] "were to find the biomarker data to be adequate upon detailed review, however, they would have the potential to support accelerated approval." Two possible endpoints for accelerated approval are: (1) dystrophin as a surrogate, and (2) 6MWT. We believe the dystrophin endpoint represents the fastest route to registration. The FDA's comments regarding dystrophin highlight the risk associated with a potential approval using dystrophin as a surrogate Sarepta Therapeutics (SRPT) 16

17 This suggests to us that the FDA has concerns about the methodology used in the dystrophin analyses, and this is what likely led to the collaboration with Flagship Biosciences. We think that if a third, independent party were to demonstrate that the dystrophin levels were consistent with what was done previously, the FDA would likely accept the results from the prior dystrophin analyses and would be inclined to use dystrophin as a surrogate endpoint. FDA Guidance Influenced SRPT's Clinical Strategy The FDA has requested that SRPT conduct several studies to support a potential approval of eteplirsen, and the studies requested are as follows: Eteplirsen Open-Label Study: This will be an open-label study with 80 eteplirsen-addressable patients, and it is set to begin in Q4:14. This study will be compared with an 80-patient natural history study that SRPT plans to start in Q4:14/Q1:15. This study will require that all patients to undergo a biopsy at entry. To reduce the biopsy burden on patients and still get a time course of dystrophin expression, the first 20 patients will have a second biopsy at 24 weeks, the next 20 patients will have the second biopsy at 48 weeks, and the remaining 40 will have the second biopsy during the extension phase. Safety Study in Young Patients: An open-label study with 20 patients that are four to six years old. This trial is meant to be a safety study and not an efficacy study, and it is anticipated to start in Q4:14. No biopsies will be collected. Dystrophin analyses from 24-week biopsies (and possibly 48-week biopsies) could support accelerated approval if dystrophin is deemed a valid surrogate endpoint Safety Study in Non-ambulatory Patients: An open-label study in 20 patients that are not able to walk a minimum distance or are wheelchair dependent. This study will look at pulmonary function in these patients, and it is expected to start in Q4:14. No biopsies will be collected. Placebo-Controlled Study with Follow on Therapies: A placebo-controlled study with patients that are amenable to exon 45 or exon 53 skipping. This trial will begin in Q1:15 and will be conducted in North America and Europe. Success in this study would be sufficient for approval of eteplirsen. Derivatives from FDA Guidance and Clinical Strategy We made several derivative observations from the comments from the FDA to SRPT for its NDA filing/guidance for next clinical trials. We highlight the derivatives as follows. The Open-Label Study Design Is Useful for Analyzing Dystrophin Expression and Adding to Safety Database: The staggered biopsies of 20 patients at 24 weeks and 48 weeks suggests to us that the FDA has requested the patient numbers in an effort to confirm the dystrophin expression in the eteplirsen-treated patients. In addition, the 80 patients to be dosed with eteplirsen will dramatically increase the number of patients exposed to the therapy. We think the FDA will wait for the 24-week and/or 48-week dystrophin data before possibly approving eteplirsen under accelerated approval. FDA's Consideration of Two Endpoints for Accelerated Approval Suggests that It Wants to Maintain Flexibility to Approve Eteplirsen: Furthermore, the Agency's openness to different endpoints for the confirmatory study indicates that the FDA is willing to consider different endpoints for full approval. It is unusual for the Agency to allow for such flexibility in the endpoints for accelerated approval and/or for full approval. Positive SRP-4045 and SRP-4053 Confirmatory Study Could Allow for Approval: We believe that a positive study for SRP-4045 and SRP-4053 could support approval of these two agents without another clinical study. This would open up another 16% of the DMD patient population. Sarepta Therapeutics (SRPT) 17

18 Safety Studies in Younger and Older Patients Could Help Expand the Potential Label for Eteplirsen in the U.S. If Approved: This is significant because most of the clinical work completed by SRPT and RNA has been largely limited to patients aged seven and older. Eteplirsen Safety Database, Although Limited, Not Likely to Prevent Approval SRPT has only dosed 38 patients with eteplirsen from its healthy volunteer studies, intramuscular study, and Phase IIb study. The FDA has not indicated that there is a set amount of safety data needed for the application, suggesting that it will be amenable to a limited safety database for the eteplirsen filing. We believe that the benign data observed for patients through 144 weeks and limited issues observed with the morpholino backbone will play in SRPT's favor. Furthermore, the infectious disease program uses a similar chemistry as SRPT's DMD therapies, and the safety profile for these programs have been benign as well. At the time of potential accelerated approval, SRPT could possibly double the size of its safety database with patients exposed to eteplirsen for at least 24 weeks of exposure to the drug. Expected Timeline for NDA Review and Potential Approval SRPT plans to submit its NDA to the FDA by YE:14 and the Agency has 60 days to accept the filing. After accepting an NDA, the Agency will convey if an Advisory Committee is expected and assigns a PDUFA date. The FDA has already told SRPT that a panel is highly likely, and we expect that the AdCom would be called in spring The PDUFA date will depend on what type of review is assigned to the application (six-month for priority review or ten-month for standard review). If SRPT were to file by YE:14, we would expect either an August or December PDUFA date. That said, it is unclear how the Agency will handle data supplements during its review. Typically, a supplemental data submission will trigger a 90-day extension of the review process, which would push out the PDUFA date. Plans for European Filing SRPT will seek scientific advice from the EMA in H2:14 about a path forward. If the EU regulatory authorities are open to filing with the current dataset, SRPT plans to file an MAA under the exceptional circumstance conditional approval guidelines. We believe that the MAA filing would be at least three to six months behind the U.S. filing. The FDA appears intent on having Prosensa and Sarepta examine younger ambulatory patients and non-ambulatory patients, suggesting that the Agency is interested in including these patients in a label We expect the FDA will schedule an Advisory Committee to discuss eteplirsen the NDA (along with the drisapersen NDA) in spring 2015 Outline for Open-Label Confirmatory Trial (Study 301) SRPT's trial design for its open-label eteplirsen study is similar to its Phase IIb study, which could be useful to enhance the probability for a successful outcome in the confirmatory study. Highlights of the Differences Between the Trials Wider Range for Entry: Age 7-16 now versus a prior age of 7-13 in the Phase IIb study. Higher Minimum Baseline Walking Ability: Now >300m at baseline (with the primary analysis on m patients) versus the previous m requirement (±10%). New open-label study for eteplirsen significantly draws on the Phase IIb study parameters Sarepta Therapeutics (SRPT) 18

19 Limited Number of Sites Conducting 6MWT: This reduces the inherent variability of conducting the study at multiple sites. SRPT plans to use two different sites that will complete the 6MWT. Longer Treatment Phase: The duration of the treatment phase will be 48 weeks instead of the prior 24 weeks, increasing the likelihood that SRPT could observe an efficacy benefit. Single Dosage: The 30mg/kg will be the only dosage examined versus the prior Phase IIb that had the 30 mg/kg and 50 mg/kg. Exhibit 20: Eteplirsen Confirmatory Study Very Similar to Prior Phase IIb Study (Key Differences in Red) Phase Study 201 (Phase IIb) Study 301 # of patients eteplirsen arm & 80 natural history arm Design Randomized, double-blind, placebo controlled Open-label, natural history controlled Dose(s) in mg/kg IV 50mg/kg for 12wks (4pts), IV 30mg/kg for 24wks (4pt), placebo (4pts) IV 30mg/kg for 48 weeks Primary endpoint Dystrophin positive fibers 6MWT Key secondary endpoints 6MWT, respiratory function Dystrophin positive fibers and respiratory function (MEP and MIP % predicted) Duration 24 weeks 48 weeks Age Baseline 6MWT meters (±10%) >300 m (primary analysis on those with m on 6MWT) Sites One site ~35 sites On steroids Yes (at least 24 weeks) Yes (at least 24 weeks) Pulmonary function FVC 50% of predicted FVC 50% of predicted Cardiac function LVEF >40% LVEF >50% Study # NCT NA Source: Company data. Clinical Plans for Remainder of Pipeline Separately Planned Study with SRP-4053 SRPT plans to conduct a study with SRP-4053 at four European sites. This study will be conducted in London, New Castle, Paris, and Rome. It is partially funded by a collaboration with the European Union SKIP-NMD. SRPT plans to start dosing in the October or November 2014 timeframe for this study, slightly ahead of the placebo-controlled study with SRP Follow on Therapies Likely Could Be Approved with a Dystrophin Endpoint and/or Grouped into Larger Clinical Trial It would be very challenging to power studies with rare exon deletions using an efficacy endpoint. If dystrophin is accepted by the FDA as a valid surrogate endpoint for efficacy and the correlation is confirmed with the placebo-controlled study, it is likely to approve future therapies with a surrogate endpoint. In addition, it may be possible combine the different groups for an efficacy analysis and possibly look at individual groups at a later date. Accepting dystrophin as a valid surrogate endpoint would help pave path forward for remainder of pipeline Sarepta Therapeutics (SRPT) 19

20 Eteplirsen Targets 13% of DMD DMD is a genetic disease caused by a mutation in the dystrophin gene, a key structural protein found in muscles. Lack of dystrophin or the production of nonfunctional dystrophin leads to progressive muscle weakening that eventually proves fatal. DMD is an X-linked genetic disease found only in boys, and the frequency of the disease is approximately 1 in 3,500 male births. Boys with the disease lose muscle strength and typically become wheelchair bound by the age of years. Muscle weakness ultimately leads to respiratory problems and death, with the typical DMD patient living to the age of Steroids are the only therapeutic administered to DMD patients, which have significant side effects (growth inhibition, weight gain, behavioral issues, increased chance for diabetes, etc) and do not address the fundamental underlying cause of the disease (FDA Draft Guidance Documents for DMD). A goal of the therapy is to increase the dystrophin expression such that a patient develops a milder form of muscular dystrophy like Becker's muscular dystrophy. It is estimated that an average DMD patient has 3% of the dystrophin expression of a healthy patient and a Becker's patient has >20% (FDA Draft Guidance Documents for DMD). This suggests that there is a threshold that is beneficial to a patient. Competitive Landscape Several new agents are in development and all have the same treatment goal: increase the production of dystrophin by targeting the specific genetic mutation at the root cause of the disease (Exhibit 21). Because there are a myriad of possible mutations that can lead to DMD, each approach is usually applicable only to a distinct, non-overlapping subset of patients. Eteplirsen targets 13% of DMD patients that are amenable to exon 51 skipping therapy. There is another therapy (drisapersen) in late-stage development that targets that same 13% using the same exon 51 skipping technology. Another agent, ataluren, targets another 13% of the DMD population distinct from the subset targeted by eteplirsen/drisapersen. This form of DMD is caused by a nonsense mutation (nmdmd), and patients are not overlapping with patients addressable with exon 51 skipping therapies with nmdmd. There are other exon-skipping therapies in development that utilize a similar mechanism of action to drisapersen or eteplirsen. However, these therapies target genetically different patient populations that are a fraction of the size of patients treatable with exon 51 skipping therapies. Sole cause of DMD is loss of functional dystrophin due to a genetic mutation Source: PTCT corporate presentation Sarepta Therapeutics (SRPT) 20

21 Exhibit 21: DMD Drugs in Development Company Drug Target %DMD population Phase Largest Trial Prosensa drisapersen Exon 51 skipping 13% Phase III 180 Sarepta eteplirsen Exon 51 skipping 13% Phase IIb 12 PTC Therapeutics ataluren Nonsense mutation 13% Phase III in US; Approved in EU 174 Other exon skipping therapies Prosensa PRO-044 Exon 44 skipping 6% Phase I/II 18 Prosensa PRO-045 Exon 45 skipping 8% Phase I/II 45 Sarepta SRP-4045 Exon 45 skipping 8% Phase I/II ready NA Prosensa PRO-053 Exon 53 skipping 8% Phase I/II NA Sarepta SRP-4053 Exon 53 skipping 8% Phase I/II ready NA Sarepta SRP-4050 Exon 50 skipping 5% Preclinical NA Prosensa PRO-052 Exon 52 skipping 4% Preclinical NA Prosensa PRO-055 Exon 55 skipping 2% Preclinical NA Source: Company data, ClinicalTrials.gov. Differences Between Eteplirsen and Drisapersen Likely Focus of FDA Advisory Committee Eteplirsen and drisapersen both have the same exon 51 skipping mechanism of action (Exhibit 22), but there are several notable differences between the therapies. While drisapersen has the advantage of a significantly larger data set and a statistically significant Phase II study, its confirmatory Phase III failed. Eteplirsen has shown very good efficacy, but this has only been observed in a very small trial, and it has an extremely small total patient exposure for safety analysis. We believe the FDA and the AdCom will be most focused on the following issues: The key eteplirsen issues are: (1) limited number of patients in the eteplirsen data set, (2) dystrophin quantification methodology and its use as a potential surrogate endpoint, and (3) removal of the two non-ambulatory patients in the 6MWT analyses. We believe that the limited data set using an endpoint focused on a clinical outcome (6MWT) will make approval using dystrophin as surrogate endpoint more significant, as running one or both confirmatory studies to completion will take at least 24 months. The key drisapersen issues are (1) the failed drisapersen Phase III study; and (2) adverse events for drisapersen across all trials, notably proteinuria, injection site reactions, and thrombocytopenia. We believe that the modest efficacy and meaningful adverse events for a therapy in young boys could play into any consideration around the risk/benefit profile for the therapy. Key eteplirsen issues: (1) Limited number of patients in the data set, (2) Dystrophin quantification methodology and its use as a potential surrogate endpoint, and (3) Removal of the two nonambulatory patients in the 6MWT analyses Exhibit 22: Key Differences Between Eteplirsen and Drisapersen Eteplirsen Exon 51 skipping therapy Delivery: IV (weekly) Data: Positive Phase II Safety: Vomiting, hypokalemia Oligo backbone: morpholino Drisapersen Exon 51 skipping therapy Delivery: Subcutaneous (weekly) Data: Failed Phase III but positive Phase II Safety: Proteinurea, injection site reactions Oligo backbone: phosphorothioate Source: Company data. Sarepta Therapeutics (SRPT) 21

22 Dystrophin Also Likely a Key Topic at FDA AdCom One issue with dystrophin analysis is the lack of robust dystrophin data presented by PTCT and RNA for their DMD studies. While SRPT was careful to collect baseline biopsies in all patients and did follow-up biopsies in all the patients, the other two companies did not have as consistent of a collection procedure, which makes their analyses challenging. The following points highlight the thoroughness behind SRPT's dystrophin analyses: SRPT did its dystrophin analysis in a blinded manner and subtracted out the averages to correct for baseline dystrophin expression; SRPT did its analysis of dystrophin for two different muscle groups (biceps at week 12 or week 24 and deltoid at week 48), while RNA did it on one (tibialis anterior); and Dystrophin expression is very modest for drisapersen (<5%) SRPT observed expression of 30-60% in the patients in its Phase IIb, while RNA reported dystrophin levels of <5% in another study. The FDA has recently met with a facility that conducted the dystrophin analysis for SRPT in the Phase IIb study (Nationwide Children's Hospital in Columbus, Ohio) to discuss how it collected and analyzed the dystrophin data. The Agency appears to be doing its diligence on the procedures involved in the dystrophin analysis and is likely preparing for the NDA analysis/adcom briefing documents. Source: RNA corporate presentation Exhibit 23: Dystrophin Increases from Baseline Through the Last Biopsy at 48 Weeks in the Phase II Study Source: Company data. Hang-up on Using Dystrophin as Surrogate The FDA defines a surrogate endpoint as: "A surrogate endpoint used for accelerated approval is a marker - a laboratory measurement, radiographic image, physical sign or other measure that is thought to predict clinical benefit, but is not itself a measure of clinical benefit." Sarepta Therapeutics (SRPT) 22

23 As DMD is solely caused by a loss of dystrophin and it is the target of treatment, we believe that dystrophin is a valid biomarker that should predict a clinical benefit. We note there is a lack of statistically significant correlation between dystrophin expression and 6MWT or another validated efficacy endpoint. Sarepta previously suggested that a signal in 15-20% of fibers seems to be correlated with a clinical outcome, and all patients had 30-60% positive fibers after 48 weeks. It may be possible to determine a correlation with the dystrophin expression noted for eteplirsen and a clinical benefit, but it would likely take large placebo-controlled trial to confirm this. Commentary in the FDA Draft Guidance Documents for DMD about Dystrophin as Surrogate Another outcome from the heavy lobbying by the advocacy groups for was the FDA allowing the advocacy groups to participate in composing the draft of the first guidance documents for DMD. This document was prepared by industry, sponsors, academia and the advocacy groups. On page 39 of the FDA Draft Guidance the use of dystrophin as a surrogate is addressed. We included the excerpt below and we highlighted the sentences we feel are significant. "Use of dystrophin quantification or relative quantification as a biochemical outcome measure The amount of dystrophin restoration necessary to achieve clinical benefit is unclear at present, and may depend upon the disease stage at treatment initiation and state/health/fragility of the muscle. It has been established that dystrophin levels correlate with the prognosis seen in female DMD carriers (normal dystrophin), and in male Becker muscular dystrophy (abnormal but at least partially functional dystrophin). While the amount of dystrophin restoration that can be achieved therapeutically is yet to be seen, the broad consensus is that similar levels of dystrophin restoration would be likely to result in some clinically meaningful benefit. However, the correlation is unlikely to be perfect between what may be seen as a result of therapeutic de novo dystrophin introduced in DMD patients later in life and what has been reported in female carriers and patients BMD, where some dystrophin is present from birth. The therapeutic benefits of dystrophin restoration may depend upon the age at treatment initiation, the health of the muscle in the patient receiving treatment and/or other factors. Nonetheless, in a medically addressable population, some degree of dystrophin restoration is reasonably likely to result in some clinical benefit, although the effect size and timing of clinical response are unclear at the time this guidance is being written." Issue with using dystrophin as a surrogate is that it has not been correlated with a validated clinical endpoint We feel the most important comment in the excerpt is: " the broad consensus is that similar levels of dystrophin restoration would be likely to result in some clinically meaningful benefit". We believe this position on dystrophin is consistent with our view that it could serve as a surrogate for possible approval of eteplirsen. This excerpt suggests to us that the groups preparing the draft guidance believe that dystrophin production will provide a therapeutic benefit and that it will likely be challenging to demonstrate a correlation with current efficacy tests. This draft guidance document is not binding but it does suggest that there is already consensus among the groups outside of the FDA that increased dystrophin production should correlate with a therapeutic benefit (albeit the threshold levels are unclear). However, it is estimated that an average DMD patient has 3% of the dystrophin expression of a healthy patient and a Becker's patient has >20% of a healthy patient (FDA Draft Guidance Documents for DMD page 10). This suggests that there is a threshold that is beneficial to a patient and this might be a target for using dystrophin as a surrogate. Sarepta Therapeutics (SRPT) 23

24 The FDA Eteplirsen Small Phase II Study Yields Promising Results SRPT conducted a randomized, double-blind, placebo-controlled Phase II study (Study 201) that enrolled 12 boys at a single center. Patients were randomized to three arms: (1) placebo group, (2) 30 mg/kg dose, and (3) 50 mg/kg dose. There were four boys in each arm, and the trial was blinded. Following the 24-week treatment period, patients in the placebo arm could cross over to active treatment. All 12 patients continued on in Study 202, which was an open-label, long-term safety and efficacy study. This extension study is still ongoing, and the most recent announced data are from the week 144 time point (2.8 years). The goal of the two trials was to collect efficacy and safety data for eteplirsen. The efficacy data are primarily measured by the 6MWT, but other muscle function tests have been assessed during the trial. There were two patients in the 30 mg/kg treated cohort that became non-ambulatory by week 24, and they were removed from future efficacy analyses. Pulmonary function has been followed to determine if there is a therapeutic benefit for patients once they become non-ambulatory. Safety has been collected for both the 201 and 202 studies. All the patients underwent a biopsy at baseline, while the placebo and 50mg/kg/week group had a biopsy at 12 weeks, and then the 30 mg/kg and placebo groups had biopsy at 24 weeks. All patients had a follow up biopsy after 24 weeks in the extension study. Biopsies were conducted on two different muscle groups (biceps and deltoid) in the patients, and the dystrophin expression was analyzed using immunofluorescence. Exhibit 24: Phase IIb Study Design Allows for Short-Term Placebo Group Before Entering Treatment Phase Source: Sarepta Therapeutics corporate presentation. Sarepta Therapeutics (SRPT) 24

25 Efficacy Data Suggest Eteplirsen Delays Walking Decline The eteplirsen Phase IIb clinical data presented are promising and suggest to us that eteplirsen is providing a possible disease-modifying benefit to DMD patients. SRPT has presented the 6MWT data for the ongoing Phase IIb study for week 12, 24, 36, 48, 62, 74, 84, 96, 120, and 144. We anticipate that the company will release 168-week data at the beginning of 2015 (which will be used to augment the data in the NDA). At the start of the trial, there were 12 patients enrolled, but two patients became non-ambulatory shortly after starting the study. The presentation for the 6MWT through 120 weeks is in Exhibit 25, and we included these data with the 144-week 6MWT data announced July 10, Exhibit 25: Six-Minute Walk Test Data from Baseline to Week 120 Includes Several Intervening Time Points Source: Sarepta Therapeutics corporate presentation. Exhibit 26: Six-Minute Walk Test Through Week 144 on a 24-Week Interval p p p= p= Eteplirsen group Placebo/delayed Source: Company data, Credit Suisse estimates; *This time point was taken at 74 weeks and instead of 72 weeks. Sarepta Therapeutics (SRPT) 25

26 Debate over Phase IIb Data Analysis The removal of two treated patients from the data analysis is likely to prevent potential approval with the current dataset, in our opinion. The controversy with the data analysis lies with the exclusion of two non-ambulatory patients. There was a set of twins that were enrolled into the 30 mg/kg group that became non-ambulatory and could not perform the 6MWT after 24 weeks. Both twins were below 250 meters after 4 weeks of being enrolled in the trial and Mazzone et al. indicate that patients below 250 meters were at the highest risk of losing ambulation over a one-to-two year period. SRPT reported that dystrophin was expressed in the muscles analyzed of the non-ambulatory patients, but an MRI scan showed that the patients had fibrotic and fatty muscles. There are other non-ambulatory tests that indicate there is stabilization in these patients, which includes upper arm tests, nine-hole peg tests, and others (i.e., pulmonary function tests). Natural History Studies Support Efficacy Seen in Phase IIb We believe that the efficacy of eteplirsen is most evident in the placebo/treated group, as these patients have an altered 6MWT score after 48 weeks and appear to break from the typical pattern of decline in the 6MWT (Exhibit 27). DMD patients typically have highly variable changes in 6MWT, which is largely dependent on age and baseline walking ability. Four long-term natural history studies in patients conducted (Mazzone, McDonald, and Goemans) in patients older than seven indicate that they typically lose 40-60m per year in a 6MWT. The studies followed boys older than seven years old for one year or two years. We plot the Mazzone and Goemans two-year on the same graph as the Phase IIb efficacy results. These separate studies found that boys declined 122 meters and 125 meters, respectively, at 104 weeks. We did not include the Mazzone 2011 study that demonstrated a 42-meter decline after 48 weeks and the McDonald 2013 study that showed a 59-meter decline after 52 weeks, although both of these observations were consistent with the two-year studies. We recognize that the natural history studies did not have such strict entry criteria as the Phase IIb study, and if they enrolled more advanced patients, these studies are likely to demonstrate faster declines. The placebo/delayed boys track well with the same negative trajectory as the boys in the natural studies through 48 weeks. After receiving eteplirsen starting at 24 weeks, the boys likely start producing dystrophin 12 to 24 weeks later. However, the impact is likely not felt until after the 48-week mark of the study, and this is when the boys start to diverge from the track observed for the natural history studies. We do not believe the FDA will approve eteplirsen based on the current dataset and will request additional data from the eteplirsen open-label study Natural history studies suggest that placebo/delayed treatment groups should have declined significantly more in the Phase IIb Sarepta Therapeutics (SRPT) 26

27 Exhibit 27: Placebo/Treated Patients Break from Natural History Pattern Eteplirsen group (N=6) Placebo/delayed (N=4) Mazzone 2013 (N=113) Goemans 2013 (N=14) Source: Company data, Credit Suisse estimates. Individual Patient Data Support Efficacy Seen in Placebo Group The individual patient data indicate that all four patients in the placebo/treated group demonstrated a break in their negative trajectory in the 6MWT after receiving eteplirsen for 24 weeks (Exhibit 28). For the placebo/delayed group, there were four placebo patients that had a baseline 6MWT >350 meters that eventually dipped below 350 meters by 36 weeks. This was a >15% decline for all patients from baseline by 36 weeks (range was 15.4% to 18.9%). After receiving eteplirsen, the placebo/delayed patients had a marked slowing in the 6 MWT decline over the next 84 weeks, in which three had a <10% decline and one had a 10-15% decline between week 36 to week 120. This is compelling because DMD patients typically decline very quickly once they start to lose ambulation, as noted in the PTCT DMD Phase III study placebo group with 57 patients (Exhibit 29). The placebo/delayed patients have received eteplirsen for nearly two years in the extension phase and have demonstrated notable stability in their 6MWT through 144 weeks. For the treated group, the results were also consistent across all of the ambulatory patients. There was only one patient that recorded a decline of greater than 10% between week 36 and week 120. However, there was notable drop in the 6MWT for the 144-week data, suggesting that one or more patients likely had a significant drop in the 6MWT. Furthermore, the patient-level 6MWT data for the ten ambulatory patients indicate that there is promising efficacy observed in the two different groups and that the results are not driven by one or more super-responders. Individual patient data support the premise that placebo/treated patients deviate from negative trajectory observed in natural history studies Sarepta Therapeutics (SRPT) 27

28 Exhibit 28: Individual Patient Efficacy Results Supportive of Efficacy Observed Source: Sarepta Therapeutics corporate presentation. Exhibit 29: Placebo Group from PTCT DMD Phase III Shows Rapid Loss in Ambulation Once Patients Start to Have a Declining 6MWT Source: PTC Therapeutics corporate presentation. Sarepta Therapeutics (SRPT) 28

29 Pulmonary Data Suggest Eteplirsen Can Stabilize the Lung Function We believe that the eteplirsen lung function data suggest that eteplirsen can improve the expected survival of DMD patients because the decline in pulmonary function is the leading cause of death. This is also important because a significant subset of DMD patients are non-ambulatory but may still realize benefit while on eteplirsen. The company has presented pulmonary function tests through 144 weeks, which includes maximum inspiratory pressure, maximum expiratory pressure, and forced vital capacity, as well as predicted analyses to help adjust the data for certain developmental factors. Natural history data suggest that FVC pre-predicted and min and max percent-predicted started to decline during the ambulatory state, and the early signs of respiration problems start. We high the following endpoints examined in the study: Improvements in the pulmonary function might lead to increases in the survival of the eteplirsen patients. This would be significant because DMD patients typically pass before age 30. Maximum Inspiratory Pressure (MIP): This is an indicator of diaphragm muscle strength and is thought to be a leading indicator for pulmonary function decline. Forced Vital Capacity (FVC): The total air volume expelled during forced expiration and this is a global measure of lung capacity and lung function. Maximum Expiratory Pressure (MEP): This is indicative of the rectus abdominus and oblique muscles. MEP will typically decline before MIP and FVC. These tests help track the progression of the disease and DMD patients typically have some decline in their MIP and MEP during the late ambulatory stage (ages 7-13). Respiratory illness and related deaths are common in late-stage DMD patients, and this is thought to be from muscle weakness that causes a patient to have an ineffective cough and poor airway clearance. Consistency in the Pulmonary Data Promising The data presented to date indicate that the pulmonary function has been stable and/or slightly improved for the patients in the study, and these data are consistent for all the time points presented. The MEP and MIP analysis in Exhibit 30 is for ITT (includes the two nonambulatory patients). McDonald et al. suggested that the decrease in the max static lung pressures were the first changes noted in the DMD patients five to ten years old. We believe that the pulmonary data will be interpreted in a positive light by the FDA when it reviews the eteplirsen NDA. Natural history data suggest that patients should have experienced notable drops in the lung function at the ages in the study. That said, there is a lack of a decline in the two tests during the early phase of the study, suggesting that the placebo/treated group had little impact on the results early in the study. Sarepta Therapeutics (SRPT) 29

30 Exhibit 30: Consistent MEP and MIP Data from Baseline Through Week 120 Is Positive Source: Sarepta Therapeutics corporate presentation. Exhibit 31: Pulmonary Function Results at 120 Weeks and 144 Weeks Pulmonary Function Test (PFT) Mean Baseline PFT Value Mean Week 120 Value % Change from Baseline at 120 wks Mean Week 144 Value % Change from Baseline at 144 wks Maximum Inspiratory 63.1 cm H 2 O 72.3 cm H 2 O 14.6% 72.4 cm H 2 O 14.7% Pressure Maximum Expiratory 68.1 cm H 2 O 78.3 cm H 2 O 15.0% 76.8 cm H 2 O 12.8% Pressure Forced Vital Capacity 1.73 liters 1.88 liters 8.7% 1.92 liters 11.0% Forced Vital Capacity 101.3% 93.2% -8.0% 90.9% % Predicted Maximum Inspiratory 91.7% 95.2% 5.5% 93.9% 2.4% Pressure % Predicted Maximum Expiratory Pressure % Predicted 79.3% 79.6% 0.4% 75.7% -4.5% Source: Company data. Slowing of Pulmonary Decline Can Be Significant We believe the stabilization of the pulmonary function is significant and could translate into an overall improvement in the quality of life for patients, potentially prolonging survival. We believe the most analogous therapeutic intervention is treatment of CF. The annual decline in the predicted FEV1 in CF patients is 2-4% (Que et al., Thorax, 2006; vol 61 (2): pp ). Although this slow decline does not necessarily deleterious at first glance, the accumulated lung function loss eventually leads to death. Slowing this decline can be significant, as it can translate into many years of improved quality of life and extend survival. Sarepta Therapeutics (SRPT) 30

31 Adverse Event Profile in Favor of Eteplirsen We believe that the adverse event profile reported for eteplirsen will be the primary driver of broader market adoption of the therapy over drisapersen. This is important because eteplirsen will be used to treat young boys chronically. There have been no significant adverse events for eteplirsen through week 144, and there is no laboratory evidence of toxicity. There were no reports of changes in laboratory parameters for kidney function, liver function, platelet counts, or coagulation profiles. That said, there has been a marked increase in the proteinuria reported for patients on eteplirsen from week 96 to week 120. SRPT reports that this is transient urine protein elevation that resolved without any intervention, and there were no additional kidney marker changes. We believe the adverse event profile will be better characterized in the FDA briefing documents expected just prior to the panel. This will likely be more important to RNA, as it has had a more involved side-effect profile that is believed to be due to its oligo backbone chemistry and significantly more patients treated with drisapersen. Although it has been only used in a small number of patients, eteplirsen has a benign safety profile. The same chemistry used to make eteplirsen was used to make other therapies that have a benign safety profile as well. Exhibit 32: Adverse Event Profile for Eteplirsen Only Group and Placebo/Delayed Treatment Group Eteplirsen group Placebo/delayed treatment group Eteplirsen Eteplirsen Eteplirsen Eteplirsen Eteplirsen Eteplirsen Placebo 120 wks 96 wks 72 wks 96 wks 72 wks 50 only 24 wks only N=8 (%) N=8 (%) N=8 (%) N=4 (%) N=4 (%) N=4 (%) N=4 (%) Procedural pain 6 (75) 6 (75) 5 (62) Procedural pain 1 (25) 1 (25) 1 (25) 3 (75) Vomiting 4 (50) 4 (50) 4 (50) Vomiting 2 (50) 2 (50) 1 (25) 0 Hypokalaemia 4 (50) 4 (50) 4 (50) Hypokalemia (50) Cough 4 (50) 3 (38) 3 (38) Cough 1 (25) 1 (25) 1 (25) 2 (50) Back pain 4 (50) 4 (50) 4 (50) Back pain (50) Fall 2 (25) 2 (25) 2 (25) Fall (25) 1 (25) Headache 3 (38) 3 (38) 2 (25) Headache 4 (100) 4 (100) 4 (100) 2 (50) Balance disorder 3 (38) 3 (38) 3 (38) Balance disorder Diarrhoea 2 (25) 2 (25) 2 (25) Diarrhoea 1 (25) 1 (25) 1 (25) 1 (25) Dermatitis Contact 3 (38) 3 (38) 3 (38) Dermatitis Contact Pyrexia 2 (25) 2 (25) 2 (25) Pyrexia (50) Haematoma 2 (25) 2 (25) 2 (25) Haematoma (25) Abdominal pain Abdominal pain 2 (50) 1 (25) 1 (25 2 (50) Nausea 1 (12) 1 (12) 1 (12) Nausea 2 (50) 2 (50) 1 (25) 1 (25) Rhinitis 1 (12) 1 (12) 1 (12) Rhinitis (25) Polyuria 1 (12) 1 (12) 1 (12) Polyuria Muscle Spasms 1 (12) 1 (12) 1 (12) Muscle Spasms 2 (50) 2 (50) 1 (25) 0 Musculoskeletal Pain 1 (12) 1 (12) 1 (12) Musculoskeletal Pain Proteinuria 5 (62) 2 (25) 1 (12) Proteinuria (25) Injection Site Pain 1 (12) 1 (12) 1 (12) Injection Site Pain Source: Company data. Sarepta Therapeutics (SRPT) 31

32 Unanswered Commercial Questions Manufacturing Likely to Limit Near-Term Market Penetration The likely limiting factor for Sarepta's near-term commercial success is a lack of an established source of large-scale manufacturing of eteplirsen. Although SRPT has validated eight mid-scale batches (reported on the Q2:14 call) and has recently acquired a new manufacturing facility, we believe that there will be an upper limit of patients that can be treated with eteplirsen in the U.S. at the time of launch. SRPT has submitted comparability and stability data on the mid-scale batches to the FDA, and the company expects to have pre-nda meeting to go over CMC. SRPT may release the feedback from the CMC meeting to help provide insight on how the manufacturing is progressing. The company will be completing a large-scale validation batch in H1:15, ahead of a potential mid:15 approval. There has been a notable lag in the ramp-up of eteplirsen. Although we are encouraged by the ramp-up from small-scale to mid-scale, there may be unknown issues with the manufacturing that may appear in the large-scale manufacturing. Furthermore, the validation of a new manufacturing facility/new size lot is likely to take longer than anticipated. Intellectual Property Situation Likely to Create Overhang We believe that it is likely that SRPT settles the ongoing IP disputes with RNA for both the EU and U.S. rights and that SRPT pays a 10-15% royalty to RNA. The disputes are likely to create an overhang on SRPT ahead of an approval and could limit the near-term upside to the stock. RNA has publicly stated that it will not block access to eteplirsen if it is not approved, suggesting to us that it would be open to a royalty-based settlement if eteplirsen is approved. EU Decision Looms SRPT did not prevail in the opposition challenge in the EU for exon 51 and exon 46. SRPT might be able to receive clarity on the EU IP situation by (1) accelerating the ruling in the EU for IP outcome or (2) negotiating a license for the EU and UK. Interference for Key U.S. IP Declared by USPTO in July The USPTO declared two different interference contests in July 2014 for the IP related to (1) eteplirsen and (2) SRP-4053 (exon 53 skipping therapy). An interference serves as a method to determine the priority of filing. During the interference, SRPT's patent will remain valid until the interference, and RNA's patent will not issue until it is completed. The main issue at debate is the priority date and the claims referenced in RNA's patent. RNA has an earlier priority date in both cases. The PTO has assigned RNA as the "senior party" and SRPT as the "junior party", and the burden of proof is assigned to the junior party. The key to determining the proper priority date is the (1) date of invention and (2) date it was reduced to practice. This process can take many years to complete and will likely involve an appeal following the initial decision. In the following exhibits, we highlight the priority date for the sets of patents at issue. Lack of a validated large-scale source of eteplirsen is the most significant hurdle for a successful launch Sarepta Therapeutics (SRPT) 32

33 Exhibit 33: Eteplirsen vs. Drisapersen (Interference Case 106,008) Eteplirsen Drisapersen Patent / app number 7,807,816 7,960,541 13/550,210 Priority date June 28, 2004 June 28, 2004 March 21, 2003 Issue date October 5, 2010 June 14, 2011 Allowable, but not issued Source: Company data, USPTO. Exhibit 34: Exon 53 Skipping Therapies (Interference Case 106,007) SRPT-4053 PRO-053 Patent / app number 8,455,636 11/233,495 Priority date June 28, 2004 March 21, 2003 Issue date Allowable, but not issued Source: Company data, USPTO. First Round of Proceedings Likely to Take 18 Months Minimum The Patent Trial and Appeal Board (PTAB) of USPTO will examine the case and make a binding decision about the priority date for the two patents. As the case was initiated in July 2014, we believe that a decision from the PTAB is not expected before YE:15, in the best case (Exhibit 35). We believe it is likely that the case will take longer than 18 months due to standard delays within the PTO. In addition, we expect that the losing party will file an appeal, which would cause the final decision to be delayed even longer. Exhibit 35: Interference Trial Timeline per USPTO Source: USPTO.gov ( Eteplirsen COGS Likely to Be Significantly Higher than Drisapersen SRPT has publicly stated that, at a price range of $300, ,000, the COGS would likely be in the 15-25% range. The COGS would likely be improved with manufacturing improvements. This suggests eteplirsen could cost between $60,000 to $100,000 per year to make per patient. The average weight of the patient in the Phase IIb trial at baseline was 31.5kg, and using a 30 mg/kg dose as SRPT suggests that it might, this suggests that the therapy could cost approximately $1,200 to $2,000 per gram. We note that this is comparable to the costs to manufacture monoclonal antibodies ($300-5,000 per gram). SRPT could lower its COGS with additional manufacturing improvements. The drisapersen COGS would likely to be meaningfully lower, as the patients will likely receive 5 times less drug and the phosphorothioate backbone chemistry is well characterized and used to make other oligo therapeutics. Sarepta Therapeutics (SRPT) 33

34 How Eteplirsen Works Eteplirsen works by inducing the skipping of exon 51 to provide a therapeutic benefit to patients that have an exon-deletion mutation. Up to 13% of DMD patients have this type of mutation and are amenable to eteplirsen therapy. The primary goal of this therapy is to induce enough dystrophin protein expression, albeit at a reduced level compared with normal patients, to help rescue patients with muscle damage caused by a lack of dystrophin protein. A milder form of muscular dystrophy relative to DMD is known as Becker's muscular dystrophy. Becker's muscular dystrophy has a more moderate disease course, as some can live a relatively normal life, never needing a wheelchair. If treatment can start early enough, a DMD patient's disease course might be altered to look more like that observed for Becker's patients. Exhibit 36: Diagram for Eteplirsen Mechanism of Action Source: Sarepta Therapeutics presentation. Sarepta Therapeutics (SRPT) 34

35 Animal Data Suggest Drisapersen Is Not as Active as Eteplirsen Animal experiments indicate that drisapersen has activity, although it appears to have less robust activity relative to eteplirsen. A group in the Netherlands that did some of the seminal work on drisapersen collaborated with Prosensa to compare and contrast the in-vivo activity in two different animal models. This work was completed with three different oligos denoted as: 1. Drisapersen-like oligo (2OMePS short): 20-mer with same chemistry and sequence as drisapersen; 2. Extended drisapersen-like oligo (2OMePS long): 25-mer with same chemistry as drisapersen and its sequence has five extra bases added to drisapersen; and 3. Truncated eteplirsen-like oligo (PMO): 25-mer with the same chemistry as eteplirsen but uses only 22 of the 30 bases as eteplirsen. This experiment examined the exon-skipping ability in a mouse model with the human dystrophin gene knocked into the mouse to control for any variability inherent in targeting the mouse gene splicing with the oligos designed for the human dystrophin gene (hdmd). Truncated Eteplirsen-Like Oligo Outperforms Drisapersen-Like Oligo in Exon 51 Skipping The PMO oligo with a shorter sequence used for eteplirsen is the best performing oligo, as the reported altered splicing was evenly spread between 2% and 16%. While the 2OMePS oligo had a range of 2% to 14%, it was significantly more weighted to the lower end of the range ~3%. Importantly, the drisapersen-like oligo had a range of only 1-7%. This suggests to us that drisapersen will be less active in humans and could provide less therapeutic benefit. Exhibit 37: Truncated Eteplirsen-Like Oligo Induces Most Exon-51 Skipping in Vivo Similar experiment conducted by Sarepta, which demonstrated that a full-length eteplirsen is ~10X better at exon skipping than drisapersen. Source: Heemskerk et al, Journal of Gene Medicine 2009; 11: ; 2OMePS short = drisapersen-like oligo, 2OMePS long = drisapersen-like extended oligo, and PMO = Truncated eteplirsen-like oligo. Source: SRPT corporate presentation. We speculate that the full-length eteplirsen oligo could be even more efficacious than the one used because (1) the 25-mer 2OMePS oligo performed better in almost every experiment than the 20-mer 2OMePS oligo, and the eteplirsen 30-mer could be better than a 25-mer; (2) the eteplirsen sequence targets a key binding site utilized in the formation of the RNA splicing complex (U1-snRNP binding site necessary for spliceosome formation); and (3) the safety of the PMO chemistry could allow for higher dosing than drisapersen. Sarepta Therapeutics (SRPT) 35

36 Exon-Skipping Therapies Have Variable Activity There is significant variability in the splicing modulation for the dystrophin gene in the experiments conducted in animal models. We believe that the variability could negatively affect the ability to observe a clinical benefit in the DMD patients with other exon-skipping therapies. Heemskerk et al. reported on experiments that examined the efficacy of exon skipping for oligos, targeting exon 44, 45 and 46, in addition to exon 51 (Error! Reference source not found.). We note that the animal model used in this experiment was the hdmd mice model, which are wild-type animals with the fully functional human dystrophin gene knocked in. The uptake of the oligos could be less pronounced in a normal muscle fiber of an animal with normal muscle tissue than in a compromised muscle fiber in a DMD patient with compromised (leaky) muscle tissue. For each targeted exon, the experiments were completed with intramuscular delivery of three different oligos, similar to what was done for the exon 51 skipping experiment: 1. Short 2OMePS: 20-mer with same chemistry as drisapersen 2. Long 2OMePS: 25-mer with same chemistry as drisapersen 3. PMO: 25-mer with the same chemistry as eteplirsen We made the following observations from the experiments. There is significant variability in the skipping efficiency between different exons. This suggests to us that the pipeline candidates for Prosensa and Sarepta may not be as efficient at skipping the different exons as exon 51. There is similar variability between the three types of oligos utilizing a different sequence as was observed for the exon 51 experiment, suggesting that PMO performs better than both 2OMePS oligos. Exhibit 38: Variability Between Exon Skipping for Different Dystrophin Exons Source: Heemskerk et al, Journal of Gene Medicine 2009; 11: ; 2OMePS short = 20-mer using same chemistry as drisapersen oligo, 2OMePS long = 25-mer using same chemistry as drisapersen oligo, and PMO = 25-mer using same chemistry as eteplirsen oligo. Sarepta Therapeutics (SRPT) 36

37 Derivative Comments from This Experiment Relative to Prosensa's Pipeline Not all exons may be amenable to efficient exon-skipping therapy, suggesting that only a subset of exons can be effectively targeted using this technology. The planned confirmatory trial targeting exon 44 for RNA could produce lower corrected dystrophin than drisapersen and eteplirsen. We view this as a serious possibility since the oligos with RNA's chemistry do not perform as well in vivo as SRPT's PMO technology. SRPT is better positioned to deal with this issue, as it has next-generation oligos versus RNA that has only the technology that it can make for all of its oligo therapies. These experiments likely contributed to RNA's decision to elect to run trials with its exon 44 skipping therapy (PRO-044) next after drisapersen. A paper by Pane et al indicated that there are underlying differences in the 6MWT scores in the patients addressable with exon 44, exon 51, exon 45 and exon 53 skipping. This could impact the future clinical work done in patients with these genotypes, as these patients may progress faster or slower than expected. The patients amenable to exon 44 skipping had slower than expected 6MWT declines while the patients addressable with exon 51, exon 45, and exon 53 declined faster than expected 6MWT declines. Exhibit 39: Variability in the 6MWT for DMD genotypes Source: Pane et at, PLoS (2014) vol. 9 (1) SRPT's Chemistry Outperforms RNA's Chemistry in DMD Mouse Model Heemskerk et al. also looked at the ability of oligos designed to promote exon-skipping of in the DMD mouse model (mdx mouse). They used similarly designed oligos (2OMePS short, 2OMePS long and PMO) targeting exon 23. These mice were administered the oligos by intravenous infusion, which allowed for more efficient delivery than the subcutaneous delivery previously used in the hdmd mice. Following the administration of oligos every other day for three weeks, the animals were sacrificed and the different muscle tissues were harvested and analyzed for exon 23 skipping by RT PCR and dystrophin expression by western blot/immunofluorescence. The experiments by RT PCR and by western blot demonstrated that the PMO oligos are markedly better at inducing exon 23 skipping (30-60% for the PMO oligo and 5-20% for 2OMePS short and long oligos) and promoting dystrophin protein expression (10-30% for PMO oligos and 1-4% for 2OMePS short and long oligos) (Figure 40 and Figure 41). Sarepta Therapeutics (SRPT) 37

38 There is very modest exon 23 skipping and dystrophin expression in the heart at the dosage examined for the PMO and 2OMePS oligos. This experiment suggests that, even with a mouse model with a similar muscle phenotype as DMD patients (i.e., "leaky" muscle fibers), the PMO oligo performs better than the 2OMePS oligos across five different muscle groups. This also supports the premise that eteplirsen could induce higher dystrophin expression in the muscle fibers than drisapersen and that it is plausible that it could be quantifiable with current methodologies. Figure 40: PMO Oligo Performs Better Across Multiple Muscle Groups at Inducing Exon 23 Skipping Source: Heemskerk et al., Journal of Gene Medicine 2009; 11: ; 2OMePS short = 20-mer using same chemistry as drisapersen oligo, 2OMePS long = 25-mer using same chemistry as drisapersen oligo, and PMO = 25-mer using same chemistry as eteplirsen oligo. Figure 41: Dystrophin Expression Robust in Animal Model Treated with PMO Oligo Source: Heemskerk et al, Journal of Gene Medicine 2009; 11: ; short = 20-mer using same chemistry as drisapersen oligo, long = 25-mer using same chemistry as drisapersen oligo, and PMO = 25- mer using same chemistry as eteplirsen oligo. Immunofluorescence Shows Modest Expression in Mdx Mouse Model for All Oligos Heemskerk et al. also examined the dystrophin expression in the mdx mice that were administered the oligos intravenously by immunofluorescence. The results demonstrated that there is a weak correlation between the exon skipping observed by RT-PCR and the dystrophin expression seen with western blots (Figure 42). This observation is significant because it could hurt both RNA and SRPT when it comes time for FDA to consider using dystrophin as a surrogate endpoint. It is also noteworthy that the best dystrophin staining was in the tibialis anterior, which is the same muscle group that Prosensa targeted for its dystrophin analysis in the clinical studies. This suggests that PMO-based oligo can induce the dystrophin expression significantly better than a 2-OMePS oligo. Sarepta Therapeutics (SRPT) 38

39 Figure 42: Immunofluorescence Modest for All Oligos Examined Source: Heemskerk et al., Journal of Gene Medicine 2009; 11: PMO Therapeutic Can Increase Dystrophin Expression in Dose Dependent Manner in DMD Mouse Model Preclinical work by Wu et al. indicates that a PMO-based therapeutic can increase dystrophin expression in a dose-dependent manner in the mdx mouse model. The PMO therapeutic was administered to these mice via a single intravenous infusion at g/kg, 0.03 g/kg, 0.15 g/kg, 0.3 g/kg, 0.6 g/kg, 1.5 g/kg, and 3.0 g/kg. The authors analyzed the dystrophin staining in the tibialis anterior, intercostal, diaphragm, heart, and biceps. The tibialis anterior, biceps, and intercostal muscle groups demonstrated limited staining at the 0.03 g/kg (same dose that eteplirsen will be dosed at in the open-label study) and subsequently increased at higher doses. The diaphragm begins to show expression at the 0.15 g/kg dose and increased through 3 g/kg. The increase in the expression in the diaphragm is consistent with SRPTs proposal that the stabilization in the respiratory function might be due to eteplirsen-driven increases in the dystrophin expression in the muscles important for lung function. This also suggests that an exon 51 skipping therapy could be beneficial to non-ambulatory patients. The heart does not show meaningful dystrophin expression until the 1.5 g/kg dose, which is consistent with other reports that indicate that dystrophin expression is lowest after dosing with a PMO therapeutic. Additionally, this experiment demonstrated that there is a dose-dependent relationship in the dystrophin expression with the PMO-based therapeutic. Sarepta Therapeutics (SRPT) 39

40 Exhibit 43: Dose-Dependent Increases in Dystrophin Expression in DMD Mouse Model Source: Wu et al., Gene Therapy (2010) 17, ; TA = tibialis anterior. The Dystrophin Expression Markedly Increased from 1X, 3X and 7X Injections Alter et al. demonstrated that systemic delivery of the oligos with weekly injections of 2mg of a PMO therapeutic induces higher expression with repeated dosing. While the dystrophin expression increased in almost every muscle group analyzed (abdomen, diaphragm, biceps, quadriceps, tibialis interior, gastrocnemius, and intercostal), the expression in the heart did not increase significantly over this time period. The increase in the dystrophin expression in the diaphragm is consistent with SRPTs proposal that the stabilization in the respiratory function might be due to eteplirsen-driven increases in the dystrophin expression in the muscles important for lung function. This experiment also suggests that the dystrophin expression could increase with repeated dosing of a PMO oligo, including eteplirsen or another SRPT pipeline candidate. Sarepta Therapeutics (SRPT) 40

41 Exhibit 44: Dystrophin expression increases with repeated dosing in mice Source: Alter et al., Nature Medicine (2006) 12(2) ; TA = tibialis anterior. Sarepta Therapeutics (SRPT) 41