Profiles in Long-Termism: Sarepta Therapeutics CEO Chris Garabedian
Biotech is a long-term business, in a world that places more value on short-term thinking. Pharma companies often cut long-term R&D budgets, or do disastrous mega-mergers, mainly to juice their profits for a quarter or two.
But sometimes people come along who are willing and able to buck the trends. They have a strategy for the long term. Not only that, they have the guts, the monomaniacal intensity it takes to carry out their plan, and the resilience to achieve something of lasting significance.
These are people I’d like to write about in this space occasionally under the banner I just made up, of “profiles in long-termism.” Chris Garabedian, the CEO of Cambridge, MA-based Sarepta Therapeutics, is one of these long-termers. He hasn’t really accomplished anything of truly lasting significance yet, but if you’ve followed what he’s done the past two years, it’s remarkable, and he’s taken a company that was going nowhere fast and turned it into one of the most intriguing biotech drug developers you’ll find.
Sarepta (NASDAQ: SRPT) exploded on the scene in the past year. One year ago, its stock was worth 69 cents. Today, it will open trading at more than $37. Many smart people now believe that Sarepta has come up with the first effective drug for treating Duchenne Muscular Dystrophy, a disabling and deadly neuromuscular disease. The product is a molecular-targeted drug that is designed to help boys with the disease who can’t make enough dystrophin for proper muscle function because they have an abnormality in part of the dystrophin gene called exon 51. About 13 percent of Duchenne Muscular Dystrophy patients have a form of the disease caused by this genetic variation. The company is competing in this field with GlaxoSmithKline and its partner Prosensa, but most observers see Sarepta as the leader.
How in the world did this turnaround happen?
I’ve been privileged to see this story unfold up close, as I did the first in-depth interview with Garabedian in the spring of 2011, when he was still settling in as CEO at what was then known as AVI Biopharma. I wrote a lengthy feature story in June 2011, with the following headline:
In that story, he audaciously invoked a comparison to Cheshire, CT-based Alexion Pharmaceuticals (NASDAQ: ALXN), an $8 billion company at the time. Garabedian declared, “We could make this a breakout biotech. It will take some time. It’s not going to happen in a year. But I think this could be a company valued in the multi-billions in the next several years.”
Given the history of AVI, readers would have been excused for chuckling at what looked like pure hubris. Garabedian had been a dealmaker at Celgene (NASDAQ: CELG) and Gilead Sciences (NASDAQ: GILD), but he was young (44 at the time), and a first-time CEO.
Worse, AVI Biopharma looked like a complete mess. The company had been around since 1980, and it was built on a technology, RNA-based antisense drugs, that few people in the industry believed in at the time. The company’s track record was awful. It had spent 30 years on R&D, and burned through more than $250 million of investor cash, with no FDA-approved drug to show for it. Nothing was even within hailing distance of a Phase III clinical trial. The company had about $33 million in the bank at the end of 2010, about enough to operate for another year. Shareholders pushed out the previous two management teams, frustrated at the lack of progress.
Garabedian joined AVI’s board in June 2010. He says he considered it a diamond in the rough. As a young executive, he learned a lot at Gilead and Celgene about what it takes to be successful as an independent biotech, and he vowed that if he ever got a shot to be a CEO, he wanted to build an enduring company that did something really important for patients.
When the board asked him to consider joining as CEO, Garabedian said in a recent interview at his office, he had three conditions. First, the company needed to retain whole ownership of its Duchenne Muscular Dystrophy candidate, and not sell off most of the commercial rights to a partner. Second, he needed the freedom to bring in his own management team. Third, he needed the board’s blessing to raise more money (therefore diluting the value of their existing shares).
“I said to the board, ‘This is a program that every company in the industry would love to have, why would we partner it? Why don’t we bring it forward ourselves and create value?’” Garabedian recalled.
He got the job. Before he officially started on Jan. 1, 2011, Garabedian was already putting his stamp on things. Right away, he killed the lead clinical trial AVI had been running for its Duchenne Muscular Dystrophy drug. This trial was designed to ask whether the drug worked differently in a large single shot, or in an intravenous infusion, at a low 50 milligram per kilogram of body weight dose, and then see over 12 weeks whether it could help the boys produce more dystrophin—the key protein that patients would need to produce in order to keep their muscles functioning. If that didn’t work, the study was designed to double the dose, and see what happened next.
Garabedian looked at the study and thought it was a waste of the company’s precious resources. He had spent time talking to about a dozen “thought leaders” in Duchenne Muscular Dystrophy. One researcher, Francesco Muntoni of University College London, convinced Garabedian that the duration of dosing, rather than the size or manner of the dose, was more important to get patients to start producing dystrophin again.
But this wasn’t an obvious call to make.
“I talked to a dozen experts who live and breathe DMD, and guess what, 12 experts all have 12 different opinions,” Garabedian says. “But what happens when you talk to all 12 experts, and have all their wisdom and experience? You start to understand the trade-offs. They’re not all right, they’re not all wrong. You have to come up with the best strategy based on talking to the true experts in the field.”
Garabedian found Muntoni’s argument compelling, and went with it. Based on that input, he advocated for an unusual design that tested a 50 milligram/kilogram of body weight dose over 12 weeks, and a lower dose—30 milligrams/kilogram— over 24 weeks.
Sounds like a simple test, but in the real world, it wasn’t. The company needed to manufacture more of the drug to carry out this test. Resources, at a small company, were limited. Here’s how Garabedian recalls the situation:
“I called up my head of manufacturing, and said, ‘how much drug do we have?’
“We don’t have much.”
“How much is not much?” Garabedian replied.
“We have enough to treat eight patients for about 24 weeks.”
“How long will it take to get more drug?
“Nine months to a year.”
This put Garabedian in a squeeze. He was adamant that he wanted to run a study that asked not just a scientific question, but one that spoke to the scientific community, the medical community, and the financial folks. That would be the only way to build value, and get the resources needed to take the drug to a higher level. He needed to get really valuable data on a small budget.
So he pushed for a study that would enroll eight patients on the new drug, and gambled by adding four more patients to a placebo group, to provide a valid comparison that medical and financial analysts would want to see. The main goal would be to show Duchenne boys were producing more dystrophin proteins that could be seen in muscle biopsies at 24 weeks, but the boys would also be evaluated with a standardized clinical test that measured how far they could walk in six minutes. If the company could somehow show that dystrophin levels were increasing for boys in inexorable decline, then it would at least have a good chance to raise the money it needed to carry out the next steps to prove it had an important drug. If it showed improvement in 6-minute walk distance, that would be a home run.
There were still a couple big barriers in the way. The company hadn’t yet finished its long-term toxicity studies in animals, which are normally required by the FDA before companies are allowed to do long-term dosing on humans. The company pleaded with the FDA to do long-term dosing in its clinical trial, even beyond 24 weeks, while it finished up the long-term animal tox studies in parallel. The FDA said yes. And Sarepta followed through on its promise.
“That could also have killed this program if we weren’t able to continue dosing beyond 24 weeks,” Garabedian says.
Knowing that it would be important for the company to show a benefit at 24 weeks, Sarepta also knew it would even more compelling to sustain the benefit all the way out to 48 weeks. That meant the company needed to start manufacturing the drug to anticipate needs of longer-term dosing. That took some money, and Garabedian needed to cut from some other internal drug-development programs to do it.
All this time, Garabedian was courting shareholders with his long-term vision, including many blue-chip funds. They listened, but mostly didn’t bite. He was able to raise $30 million in April 2011, but it didn’t allow for much margin for error, at the company’s cash burn rate. Still, it was an exciting time for Garabedian, putting his stamp on the company, as he placed a stake in the ground that he hoped people would remember for years later.
“For the first time, we were telling a story about how we could create value, as opposed to just doing a deal with a heavy share discount and lots of warrants, just to get money in the door,” Garabedian says.
Data from the trial came a year later, and the numbers weren’t good enough to meet expectations.
The study randomly assigned 12 boys to a couple different doses of the drug or a placebo, showing boys on the drug produced about 22.5 percent of normal dystrophin levels after 24 weeks on the therapy, while there was no increase on the placebo. No serious adverse events were reported in patients on the experimental treatment, and no patients dropped out of the study. The study’s lead investigator hailed it as a “major advance” for Duchenne Muscular Dystrophy.
The big problem? Boys on the drug didn’t do any better than placebo on the 6-minute walk test at 24 weeks.
Investors ran for the exits, smelling another failure. Sarepta shares fell below $1. Garabedian pleaded for patience, noting that Sarepta had another thorough follow-up analysis built in at 48 weeks, which might show a scientific and medical benefit from the drug. Garabedian was scrambling. A few days after that negative reaction, he told me he was even re-considering his prior vow to go it alone in drug development. He figured he might need to lean on a partner for help, just to get money.
“I couldn’t even get investors interested in giving us $15 million,” Garabedian recalls. “This was back in May 2012, to give us a bridge to the 48-week data. Those were some of the darker days.”
The company’s only real hope was to hold on, white knuckles and all, for a glimpse at the 36-week follow-up report scheduled for July, and the all-important 48-week analysis in October. The stock was below $1, and the company was facing the threat of a Nasdaq de-listing. Like many desperate executives would have done, Garabedian went to the board and asked for clearance to do a reverse stock split to prop up the stock price above $1—always a very unpopular move with shareholders who end up getting less. Some members of the management team Garabedian had recruited walked out the door.
Garabedian also asked the board to allow him to change the name of the company to Sarepta Therapeutics, to foster the new identity he was trying to build, and shed some of the old baggage that went with the old name. While he didn’t announce it publicly at the time, Garabedian was also looking to move the company from its headquarters in Bothell, WA to the Boston area, where he saw a deeper talent pool for people with experience in developing drugs for patients with rare diseases.
In July, the Garabedian and the Sarepta team caught a big break. Four boys who got a high dose of Sarepta’s drug, eteplirsen, saw their walking ability decline by just 8.7 meters on a standard 6-minute walk test after 36 weeks of treatment. That was a statistically significant improvement compared with boys on the placebo, who lost 78 meters of walking ability over the same period of time. No drug-related adverse events were reported, and no patients dropped out of the study because of side effects.
Shares went from $3.46 to $8.52 that day.
Still, there was reason to reserve judgment on the Sarepta drug. Sarepta hadn’t taken a muscle biopsy from patients at 36 weeks—that’s invasive for patients—and there was no biopsy data that could confirm the walking improvement was connected to increased dystrophin production. For that extra layer of convincing data, everyone would have to wait until the 48-week analysis in October.
With more follow-up time, the data kept looking better and better. Boys on the Sarepta drug were able to walk an average of 89 meters further than those on a placebo after 48 weeks, when both groups took the 6-minute walk test. Much of that difference was explained by the rapid decline of patients on the placebo, but the boys who got the drug actually improved, and were able to walk an average of 21 meters further after 48 weeks than they could at the start of the study. The results were better than anything anyone had seen for this patient population. And critically, dystrophin levels continued to increase over time. The boys weren’t yet producing 100 percent of normal dystrophin levels, but they were getting enough to improve muscle function, and it provided a sound scientific explanation for the clinical benefit researchers were seeing.
By this time, parents and the patients in the study were seeing notable improvements, and some compelling stories started getting told by local television. Patient advocacy groups who had supported the program were suddenly invigorated with possibilities of getting the first treatment that could turn their lives around.
The Sarepta bandwagon was now full. Shares went from $14.99 before the 48-week data presentation to $44.93 after. By December, Garabedian took advantage of his sky-high stock price to raise $125 million for the company, from many of the same folks he had been briefing on his vision a year or two earlier.
Now the Sarepta story is all about what happens next with the FDA. Hearing from so many passionate patient advocates and parents, Garabedian has sought to at least inquire with the FDA about the possibility of getting an “accelerated approval” to start selling the drug on the basis of his intriguing, but tiny, data set of just 12 patients.
Sarepta is crafting plans for a larger, traditional Phase III clinical trial to confirm the results, but everything that comes next depends on whether the FDA goes out on a limb to approve a drug that has such promise for a group of children who have no other good options. Patient advocates have been banging on the FDA’s door, much like AIDS activists did two decades ago, demanding that regulators allow them to have access to a potentially transformative therapy.
Meanwhile, this run of success has given Garabedian a whole slew of options he didn’t have before. He could have sold some of his newly valuable shares, which he didn’t. He could have struck a partnership on one of Sarepta’s other internal drug programs, although he has chosen not to, believing that he needs the company’s energy focused on getting eteplirsen approved.
Once that happens, he said Sarepta will be on a mission to apply the lessons of eteplirsen to boys with genetic abnormalities in exons other than exon 51. Essentially, the company wants to get to the point where it has a portfolio of exon-specific drugs that serve as what you could call personalized medicines for most Duchenne patients.
Brad Loncar, an individual biotech investor based in Lenexa, KS, said he bought Sarepta shares once he saw the 36-week data release last July. He said he intends to hold onto the stock for a long time.
“Chris is not in this for a short-term fast buck,” Loncar says. “Eteplirsen is their first product. It’s very important they get it absolutely right. Everything will flow from that. As a long-term investor, that appeals to me.”
On my visit to Garabedian’s office in April, he made clear that while there are lots of directions things can go in the short-term, the long-term plan is still intact. He’s a student of biotech history, and has seen how sticking with a long-term plan can pay off.
“In most cases, the breakout biotechs were built largely on one drug that got approval for an unmet medical need,” Garabedian said. “You can see a few companies currently, like Aegerion and Ariad, that are on the cusp of delivering a real commercial product. It can catalyze a company. Once you do that, it becomes a more strategic endeavor on how you continue to add, build up the pipeline, acquire other companies or technologies.
“Truthfully, there have been six breakout large cap biotechs—Genzyme, Genentech, Gilead, Celgene, Biogen and Amgen. Everybody aspires to be that next one. Alexion has an opportunity. Vertex too. Regeneron has a nice business model working. All of that hinges on that one product that’s approved that drives real demand. We think we have that and we think we have what it takes to build one of the great biotechs for the future.”
Sarepta will need to execute on its strategy for many years to even hope to get in the same sentence with those companies. It’s still audacious—and more than a little conceited—for Garabedian to talk like this. His company still only has about 100 employees and not a single FDA-approved drug. But I do hope Sarepta can deliver on this plan and do something important for Duchenne patients. Its stock may dip if it doesn’t get the cherished “accelerated approval” from the FDA right away, and some of its good luck could easily turn bad. But it wouldn’t even be close to this position without having a long-term vision, and sticking with it, even when times got tough.
With that, I’m off on my own personal long-term journey of sorts, climbing with a couple old friends on Denali (Mt. McKinley), the highest peak in North America. That means I won’t be online to read and respond to any comments until July 1. I plan to post a few photos when I get back. See you all here at BioBeat next month.