united states district court for the district of...

Case 1:14-cv-10201-IT Document 39 Filed 07/21/14 of 89

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS

MARK A. CORBAN, Individually and on Behalf of All Others Similarly Situated, CIVIL ACTION NO. 14-CV-10201-IT

Plaintiff,

v. JURY TRIAL DEMANDED

SAREPTA THERAPEUTICS, INC., CHRIS GARABEDIAN, SANDY MAHATME, and ED KAYE,

Defendants.


TABLE OF CONTENTS

I. NATURE OF THE ACTION ............................................................................................. 1

II. JURISDICTION AND VENUE ......................................................................................... 2

III. PARTIES ............................................................................................................................ 2

IV. BACKGROUND ................................................................................................................ 4

A. The FDA Approval Process .................................................................................... 7

B. The FDA's Position on Data and Intent-to-Treat ................................................. 13

C. Sarepta's Eteplirsen Trials .................................................................................... 15

V. PLAINTIFFS' INVESTIGATION ................................................................................... 18

A. A Medical Expert Familiar with the FDA Approval Process Identified Significant Problems with the Clinical Trials for Eteplirsen ................................................... 18

B. Information From Former Sarepta Employees ..................................................... 20

VI. MATERIALLY FALSE AND MISLEADING STATEMENTS ISSUED DURING THE CLASS PERIOD ............................................................................................................... 23

VII. THE TRUTH IS REVEALED .......................................................................................... 52

VIII. ADDITIONAL ALLEGATIONS OF SCIENTER ........................................................... 70

A. Defendants Knew, or Should Have Known in the Absence of Recklessness, that Their Class Period Statements Were Materially False or Misleading .................. 70

B. Motive ................................................................................................................... 77

X. PLAINTIFFS' CLASS ACTION ALLEGATIONS ......................................................... 79

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CONSOLIDATED CLASS ACTION COMPLAINT

Plaintiffs Mark A. Corban and Steve Fleischmann, individually and on behalf of all other

persons similarly situated, by their undersigned attorneys, for their complaint against Defendants,

allege the following based upon personal knowledge as to themselves and their own acts, and

information and belief as to all other matters, based upon, inter al/a, the investigation conducted

by and through their attorneys, which included, among other things, a review of the Defendants'

public documents, conference calls and announcements made by Defendants, United States

Securities and Exchange Commission ("SEC") filings, wire and press releases published by and

regarding Sarepta Therapeutics Inc., analysts' reports and advisories about the Company,

interviews with confidential witnesses (former employees of Sarepta Therapeutics, Inc.),

consultation with experts and information readily obtainable on the Internet. Plaintiffs believe that

substantial evidentiary support will exist for the allegations set forth herein after a reasonable

opportunity for discovery.

I. NATURE OF THE ACTION

1. This is a federal securities class action on behalf of a class consisting of all persons

other than Defendants who purchased Sarepta Therapeutics Inc. ("Sarepta," "SRPT" or the

"Company") securities during the period beginning July 10, 2013 through and including November

11, 2013 (the "Class Period"), seeking to recover damages caused by Defendants' violations of the

federal securities laws and to pursue remedies under § § 10(b) and 20(a) of the Securities Exchange

Act of 1934 (the "Exchange Act") and Securities Exchange Commission ("SEC") Rule lOb-5

promulgated thereunder against the Company and certain of its officers and directors

("Defendants").

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II. JURISDICTION AND VENUE

2. The claims asserted herein arise under and pursuant to Sections 10(b) and 20(a) of

the Exchange Act (15 U.S.C. §78j(b) and 78t(a)) and SEC Rule lOb-S (17 C.F.R. §240.10b-5).

3. This Court has jurisdiction over the subject matter of this action pursuant to § 27 of

the Exchange Act (15 U.S.C. §78aa) and 28 U.S.C. § 1331.

4. Venue is proper in this District pursuant to § 27 of the Exchange Act, 15 U.S.C. §

78aa and 28 U. S. C. § 1391(b), as Sarepta's principal place of business is located within this District

and certain of the Individual Defendants reside within this District.

5. In connection with the acts, conduct and other wrongs alleged in this Complaint,

Defendants, directly or indirectly, used the means and instrumentalities of interstate commerce,

including but not limited to, the United States mail, interstate telephone communications and the

facilities of the national securities exchange, NasdaqOS.

III. PARTIES

6. Plaintiff, Mark A. Corban, purchased Sarepta securities during the Class Period at

artificially inflated prices and has been damaged thereby. The Investor Certification of Mark A.

Corban, with a detailed listing of his transactions in Sarepta common stock during the Class Period,

was filed with the Court on March 28, 2014 (Dkt. No. 21-1).

7. Plaintiff, Steve Fleischmann, purchased Sarepta securities during the Class Period

at artificially inflated prices and has been damaged thereby. The Investor Certification of Steve

Fleischmann, with a detailed listing of his transactions in Sarepta common stock during the Class

Period, was filed with the Court on March 28, 2014 (Dkt. No. 2 1-1).

8. Defendant Sarepta is an Oregon corporation with its principal executive offices

located in Cambridge, Massachusetts. Sarepta describes itself as a biopharmaceutical company

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focused on the discovery and development of unique RNA-based therapeutics for the treatment of

rare and infectious diseases.

9. Defendant Chris Garabedian ("Garabedian") was at all relevant times President,

Chief Executive Officer and a director of Sarepta. Garabedian has been a member of the board of

directors since June 2010 and President and Chief Executive Officer since January 2011. Prior to

joining Sarepta Garabedian served as Vice President of Corporate Strategy for Celgene

Corporation, a publicly-traded integrated global biopharmaceutical company, from July 2007 to

December 2010, where he was responsible for assessing all potential business development

transactions. From November 2005 to June 2007, Garabedian served as an independent consultant

to early-stage biopharmaceutical companies. From 1997 to 1998 and from 1999 to November

2005, Garabedian worked at Gilead Sciences, Inc., a publicly-traded biopharmaceutical company,

where he served in a number of global leadership roles, including as Vice President of Corporate

Development, Vice President of Marketing, and Vice President of Medical Affairs. While at

Gilead Sciences, Garabedian's responsibilities included managing corporate development

initiatives, including portfolio review and planning, mergers and acquisitions and in-licensing

activities, and leading four global product launches. Garabedian also held various commercial

roles at COR Therapeutics, Inc. from 1998 to 1999 and at Abbott Laboratories from 1994 to 1997.

He started his biopharmaceutical career as a consultant with Migliara/Kaplan Associates from

1991 to 1994.

10. Defendant Sandy Mahatme ("Mahatme") was at all relevant times Senior Vice

President and Chief Financial Officer of Sarepta. Mahatme has served as Senior Vice President,

Chief Financial Officer since November 2012. From January 2006 to November 2012, Mahatme

worked at Celgene Corporation, a publicly-traded biopharmaceutical company, where he served

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in various roles, including Senior Vice President of Corporate Development, Senior Vice President

of Finance, Corporate Treasurer and Head of Tax. While at Celgene, Mahatme established the

Corporate Development Department, focused on strategic, targeted initiatives including

commercial development in emerging markets, acquisitions and licensing and global

manufacturing expansion. Prior to working at Celgene, Mahatme worked for Pfizer Inc., a

pharmaceutical company, for eight and a half years in senior roles in Business Development and

Corporate Tax.

11. Defendant Ed Kaye ("Kaye") was at all relevant times Senior Vice President and

Chief Medical Officer of Sarepta. Kaye joined Sarepta in June 2011. Previously he served as Group

Vice President for Clinical Development and Therapeutic Head for Lysosomal Storage Disorders

and Neurodegenerative Diseases at Genzyme since 2007. Kaye held additional leadership roles in

Clinical Development and Medical Affairs over 10 years at Genzyme and developed specific

experience with pediatric neuromuscular conditions. He played a leadership role in gaining

Myozyme's approval for Pompe Disease and oversaw collaborations in this field, including the

development of ataluren for Duchenne Muscular Dystrophy (DMD). He received his medical

education and pediatric training at Loyola University Stritch School of Medicine and University

Hospital, child neurology training at Boston City Hospital, Boston University, and completed his

training as a neurochemical research fellow at Bedford VA Hospital, Boston University.

IV. BACKGROUND

12. Sarepta describes itself in its SEC filings as a biopharmaceutical company focused

on the discovery and development of unique RNA-based therapeutics for the treatment of rare and

infectious diseases. According to the Company, applying its proprietary, highly-differentiated and

innovative platform technologies, it is able to target a broad range of diseases and disorders through

distinct RNA-based mechanisms of action.

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13. To date, the Company has not generated any material revenue from any product

sales.

14. During the Class Period and presently the Company's primary focus was and is on

rapidly advancing the development of its potentially disease-modifying Duchenne muscular

dystrophy drug candidates, including its lead product candidate, eteplirsen. Duchenne muscular

dystrophy, or DMD, is a rare genetic muscle-wasting disease caused by the absence of dystrophin,

a protein necessary for muscle function.

15. DMD is an insidious and severely debilitating childhood neuromuscular disease

that affects approximately 1 in 3,500 boys wordwide. This rare disease is caused by mutations (i.e.

deletions, duplications, point mutations) in the dystrophin gene, ultimately resulting in the absence

or defective versions of the critical dystrophin protein. Clinically, patients suffer from progressive

loss of muscle strength, often rendering them wheelchair-bound before the age of 12. Respiratory

and cardiac muscle can also be affected by the disease, and most patients ultimately die in early

adulthood due to respiratory and cardiac failure. However, less severe forms of muscular

dystrophy, including mild Becker muscular dystrophy result in semi-functional dystrophin (e.g.,

truncated or slightly altered dystrophin) and less severe muscle loss. These patients generally have

longer life expectancies and lose ambulation later in life. And it is based on production of this

truncated dystrophin that Sarepta's technology is focused.

16. Eteplirsen is Sarepta's lead therapeutic candidate for DMD. Currently, there are no

approved disease-modifying therapies for DMD.

17. The research, testing, manufacturing, labeling, approval, commercialization,

marketing, selling and distribution of drug products are subject to regulation by state authorities

and the United States Food and Drug Administration ("FDA") in the United States and other

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regulatory authorities in other countries, with regulations differing from country to country.

Marketing of Sarepta's product candidates, including eteplirsen, in the United States or foreign

countries is not permitted until the required approvals are obtained from the FDA or other

applicable foreign regulatory authorities.

18. In 2012, Sarepta completed a U.S.-based placebo controlled trial for eteplirsen that

was initiated in August 2011. Following completion of this study in early 2012, the Company

initiated an open label extension study' that it expected to complete in late 2013 with the same

participants from the original placebo controlled trial. These studies were conducted as part of

Sarepta's Phase JIb clinical trial.

19. Sarepa's primary efficacy trials, study 201 and its extension study 202, enrolled 12

patients. Eteplirsen was given in 30 mg/kg and 50 mg/kg doses, and compared with a placebo

arm. After 24 weeks, the placebo arm was randomized and patients (2 each) were either given 30

mg/kg or 50 mg/kg. Therefore, after 24 weeks all patients were/are receiving eteplirsen, although

at 2 different doses.

20. According to the Company's Form 10-K annual report for the year ended 2012,

Sarepta anticipated initiating a Phase 3 trial for eteplirsen by the end of 2013 and commencing

dosing in this trial in early 2014.

21. During the Class Period, Defendants made materially false or misleading

statements concerning, among other things: (1) the prospects of the FDA's acceptance for

1 "Open-label" is a term used to describe the situation when both the researcher and the participant in a research study know the treatment the participant is receiving. Open-label is the opposite of double-blind when neither the researcher nor the participant knows what treatment the participant is receiving.

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consideration of a New Drug Application ("NDA") for eteplirsen based on its Phase JIb study data

set; and (2) the significance of that data set.

A. The FDA Approval Process

22. In the United States, pharmaceutical development and marketing is regulated by

the FDA, an agency of the U.S. Department of Health and Human Services. The modem regulatory

regime was enacted in 1962, after Thalidomide, a sleeping pill, caused birth defects in thousands

of babies. In reaction to this tragedy, Congress passed the Kefauver-Harris Amendments to the

Food, Drug and Cosmetic Act (the "FDCA") requiring that any company that wanted to market a

pharmaceutical product in the United States (in industry parlance, a "sponsor") had to obtain prior

approval from the FDA, and that the approval had to be based upon substantial scientific evidence

demonstrating that the product was safe and effective for its intended use in humans. 2

23. The FDCA, as amended, requires the Commissioner of the FDA to refuse any drug

application if

(a) "he has insufficient information to determine whether such drug is safe for use under such conditions;" or

(b) "there is a lack of substantial evidence that the drug will have the effect it purports or is represented to have under the conditions of use prescribed, recommended, or suggested in the proposed labeling thereof"

21 U.S.C. § 355(d)(4)-(5).

24. The FDA is only permitted to consider clinical evidence to be "substantial," and

thus satisfy the FDCA, if it:

consist[s] of adequate and well-controlled investigations, including clinical investigations, by experts qualified by scientific training and experience to evaluate the effectiveness of the drug involved, on the basis of which it could fairly and responsibly be concluded by such experts that the drug will have the effect it

2 See Expert Report of Dr. Richard A. Guarino, attached as Exhibit 1, for a synopsis of the FDA approval process.

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purports or is represented to have under the conditions of use prescribed, recommended, or suggested in the labeling or proposed labeling thereof.

21 U.S.C. § 355(d). Well-controlled clinical investigations measure the subject drug against a

control group, which is provided either a placebo or another recognized drug for comparison.

Moreover, well-controlled clinical investigations are almost always conducted in a

"doubleblinded" manner, meaning that the tests are designed so that the study participants and the

investigators (as well as the sponsor and associated research organizations) do not know whether

each participant has been provided the candidate drug or is a member of the control group. Double-

blinding is intended to minimize test bias and error that can arise when the participant and/or

investigator have knowledge of the assigned treatment.

25. The sponsor, not the FDA, is responsible for determining the design of clinical trials

and the protocols for each trial, if a sponsor wants the FDA to agree to the sufficiency of a

particular protocol, the sponsor may request a Special Protocol Assessment pursuant to 21 U.S.C.

§ 355(b)(5)(C). Under this provision, the FDA and sponsor meet to discuss the sponsor's proposed

protocols, and reduce any agreements to writings that become part of the administrative record.

Such agreements may not be changed except by mutual consent or under exceptional medical or

scientific circumstances. Id. Sarepta did not apply for, and did not receive, any Special Protocol

Assessments in connection with its clinical testing of eteplirsen.

26. For each clinical trial, the sponsor also develops a statistical analysis plan ("SAP").

The SAP specifies the statistical techniques that will be used to analyze the data gathered in the

study. The SAP is often included in the study protocol; at other times it is a separate document.

However, to avoid bias and "data dredging," the SAP should always be finalized for all well-

controlled trials before the study data is unblinded.


27. The success or failure of a clinical trial is measured by whether the trial meets pre-

specified endpoints (target outcomes), and by the statistical significance of its results.

28. In clinical studies, null hypotheses are formulated, which are then rejected or

retained with the help of statistical tests. The null hypothesis assumes that any kind of difference

or significance seen in a set of data is due to chance. It is presumed to be true until statistical

evidence nullifies it for an alternative hypothesis.

29. The null hypothesis is formulated in advance and is tested with the help of a

significance test. The p-value is a probability, which is the result of such a statistical test. A small

p-value signifies that the probability is small that the difference can purely be assigned to chance. 3

The FDA traditionally considers a clinical trial to be statistically significant if the a "p-value," is

lower than 0.05 in each of two or more corroborating well-controlled clinical trials, lower than

0.01 in a single well-controlled clinical trial supported by other corroborating evidence, or lower

than 0.00 1 in a single well-controlled clinical trial alone.

30. A sponsor generally conducts clinical trials in three phases. These phases, which

are codified in FDA regulations, are as follows:

(a) Phase I. Phase I studies "are designed to determine the metabolism and pharmacologic actions of the drug in humans, the side effects associated with increasing doses, and, if possible, to gain early evidence on effectiveness."

(b) Phase II. Phase II studies are "typically well controlled" studies "conducted to evaluate the effectiveness of the drug for a particular indication or indications in

For instance, if it is to be shown that a new antihypertensive drug is better than an old one, the first step is to show that the two drugs are not equivalent. Thus, the null hypothesis (Ho) to be rejected is then formulated as follows: "There is no difference between the two treatments with respect to their effect." The alternative hypothesis (Hi) then states that there is a difference between the two treatments. In this example, the observed difference in mean systolic blood pressure might not be due to a real difference in the hypotensive activity of the two anti-hypertensives, but might be due to chance. However, if the p-value is <0.05, the chance that this is the case is less than 5%.

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patients with the disease or condition under study and to determine the common short-term side effects and risks associated with the drug."

(c) Phase III. Phase III studies are expanded studies "performed after preliminary evidence suggesting effectiveness of the drug has been obtained, and are intended to gather the additional information about effectiveness and safety that is needed to evaluate the overall benefit-risk relationship of the drug and to provide an adequate basis for physician labeling. Phase 3 studies usually include from several hundred to several thousand subjects."

21 C.F.R. § 312.21.

31. According to the FDA's website, a Phase 1 study is intended to establish the drug's

safety and the proper dosage for the drug. The FDA's website explains that a Phase 1 study

typically involves "20 to 100 healthy volunteers" and lasts "several months." According to the

FDA, 70% of drugs pass the Phase 1 study and move to the next phase.

32. The FDA's website explains that a Phase 2 study is designed to determine the

drug's efficacy and any possible side effects. According to the FDA, a Phase 2 study typically

involves "a few hundred patients" with the disease or condition and lasts "several months to 2

years." The FDA explains that only 33% of drugs pass the Phase 2 study and move to the next

phase.

33. According to the FDA's website, a Phase 3 study is designed to further test the

drug's efficacy and to monitor adverse reactions. A Phase 3 study uses data collected from the

Phase 2 study to "refine research questions, develop research methods, and design new Phase 3

research protocols." According to the FDA, a Phase 3 study typically involves "300 to 3,000

volunteers who have the disease or condition" and lasts "1 to 4 years." The FDA explains that

only 25% to 30% of drugs pass the Phase 3 study and are eligible to be reviewed by the FDA.

34. When a sponsor believes it has conducted sufficient well-controlled clinical trials,

and believes that those trials demonstrate substantial evidence of efficacy and safety consistent

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with the FDCA, the sponsor may prepare and submit an NDA 4 with the FDA, seeking approval to

the market the subject drug in a specific dose for the treatment of a specific condition or

"indication."

35. According to the FDA, an NDA "tells the full story of a drug." To be considered,

"[a] drug developer must include everything about a drug - from preclinical data to Phase 3 trial

data - in an NDA." Further, "[d]evelopers must include reports on all studies, data, and analyses."

The NDA must also specify how the drug will be manufactured, packaged and labeled. The FDA

can only grant approval when presented with scientific evidence meeting the requisite statutory

criteria.

36. In rare instances, a sponsor can seek accelerated approval for a drug. Accelerated

approval allows a drug that could fill an unmet need to be approved by the FDA based on a

surrogate or an intermediate clinical endpoint. Therefore, a sponsor seeking accelerated approval

may submit an NDA before clinical trials are complete. 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.

37. Within sixty (60) days of receiving an NDA, the FDA will accept the NDA for

filing if it believes the NDA is sufficiently complete to permit a substantive review of the

information contained within the NDA. The acceptance of an NDA for filing is not a determination

of the substantive merits of the NDA, but rather a threshold determination of whether there is

enough data to conduct a substantive examination. If the FDA determines that there is a problem

preventing a meaningful substantive examination - for example, if the NDA is missing paperwork,

Or, in the case of a biologic molecule or tissue, a Biologics Licensing Application ("BLA"). This case involves eteplirsen, a pharmaceutical drug candidate. Accordingly, it does not involve a BLA.

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includes facially insufficient data, fails to include data in the proper format, or suffers from other

errors that impede a substantive review - the FDA may refuse to file an NDA.

38. The filing of an NDA triggers review deadlines specified in the Prescription Drug

User Fee Act ("PDUFA"). Under the PDUFA, the FDA is generally required to respond to the

NDA within six months. The date by which the FDA must issue its response is frequently referred

to as a drug's "PDUFA date."

39. An NDA accepted for filing is reviewed for substance by the FDA's Center for

Drug Evaluation & Research ("CDER"). Prior to the PDUFA date, CDER may (or may not)

convene an advisory committee to provide it with technical advice, enhance its decision-making

process, and provide a forum for public discussion of controversial issues.

40. Where an advisory committee is convened, the sponsor and the FDA staff will each

provide the advisory committee briefing documents and make presentations to the advisory

committee. After receiving the submissions of both the sponsor and the FDA, and hearing their

respective presentations, the advisory committee will discuss the safety and efficacy of the drug

candidate and provide the FDA with a nonbinding vote on specific questions regarding safety and

efficacy, and whether approval is warranted based upon the evidence of safety and efficacy

provided by the sponsor.

41. Critically, an advisory committee is the only forum in which the public can legally

be advised by the FDA of the FDA's position and the FDA's interactions with the sponsor

regarding the drug candidate. Except in advisory committee briefing documents and during the

advisory committee hearing, FDA secrecy regulations strictly prohibit the agency from disclosing

information regarding pending NDAs and INDs. As a result, without an advisory committee, the

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FDA may not publicly refute a sponsor's misrepresentations regarding clinical trials, protocols,

or the sponsor's interactions with the FDA. See 21 C.F.R. §§ 312.130, 314.430.

42. The FDA can only grant approval when presented with scientific evidence meeting

the requisite statutory criteria. If the FDA approves the drug candidate, it will issue an approval

letter in writing to the sponsor. If the FDA finds that the NDA fails to provide the substantial

evidence of efficacy and safety required by statute, or has other material shortcomings which

prevent approval, the FDA will send the sponsor a Complete Response Letter ("CRL") identifying

the reasons why the application was not approved. A CRL may, but need not always, request that

the sponsor conduct additional clinical trials. CRLs are never made public by the FDA when

issued, and are never released thereafter as long as the sponsor is continuing to pursue the subject

drug application. 5 Accordingly, investors must rely on sponsor companies to provide accurate

information regarding CRLs and other interactions of the sponsor with the FDA.

B. The FDA's Position on Data and Intent-to-Treat

43. FDA law and regulations require the collection and maintenance of complete

clinical study data. This includes information on subjects who withdraw from a clinical

investigation, whether the subject decides to discontinue participation in the clinical trial (21 CFR

50.25(a)(8)) or is discontinued by the investigator because the subject no longer qualifies under

the protocol (for example, due to a significant adverse event or due to failure to cooperate with

study requirements). FDA recognizes that a subject may withdraw from a study; however, the

withdrawal does not extend to the data already obtained during the time the subject was enrolled.

The FDA sometimes releases CRLs in redacted form years later, after the drug candidate is approved or officially abandoned.

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FDA's longstanding policy has been that all data collected up to the point of withdrawal must be

maintained in the database and included in subsequent analyses, as appropriate.

44. As explained by the FDA in its Guidance for Sponsors, Clinical Investigators, and

IRBs: Data Retention When Subjects Withdraw from FDA-Regulated Clinical Trials ("Guidance

for Sponsors"):

FDA previously addressed the topic of data withdrawal in the preamble to the 1996 final rule providing an exception from informed consent requirements for emergency research, 21 CFR 50.24. In response to a comment that a subject's legally authorized representative should be allowed to prevent the review of the subject's data, FDA stated: "FDA regulations (see, for example, Sec. 312.62 and Sec. 812.140(a)(3)) require investigators to prepare and maintain adequate case histories recording all observations and other data pertinent to the investigation on each individual treated with the drug or exposed to the device. The agency needs all such data in order to be able to determine the safety and effectiveness of the drug or device. The fact of having been in an investigation cannot be taken back. Also, if a subject were able to control the use (inclusion and exclusion) of his or her data, and particularly if the clinical investigation were not blinded, the bias potential would be immense. Thus, the agency rejects this comment because it could prevent FDA from learning of an important effect of the product and significantly bias the results of the investigation" (see comment 95,61 Federal Register 51498, 51519, October 2, 1996). It should be appreciated that FDA's response applies to the most potentially difficult situation, that is, studies involving an exception from the informed consent requirements in which subjects, due to a life threatening medical condition, are unable to provide informed consent to participate in the study. Subjects may subsequently withdraw from such studies, but the data collected up to withdrawal may not be removed

(emphasis added).

45. In its Guidance for Sponsors, the FDA explained its position by stating that "FDA

law and regulations recognize that a complete and accurate risk/benefit profile of an investigational

product depends upon the data from every subject's experience in the clinical trial." The FDA

further explained that:

The validity of a clinical study would also be compromised by the exclusion of data collected during the study. There is long-standing concern with the removal of data, particularly when removal is non-random, a situation called

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"informative censoring." FDA has long advised "intent-to-treat" analyses (analyzing data related to all subjects the investigator intended to treat), and a variety of approaches for interpretation and imputation of missing data have been developed to maintain study validity. Complete removal of data, possibly in a non-random or informative way, raises great concerns about the validity of the study.

There is particular concern with a study's reliability when subjects withdraw their data in a non-random way because they are unhappy with their experience, either because they failed to obtain a desired effect or suffered an adverse event. Loss of these subjects' data could greatly distort effectiveness results and could hide important safety information (for example, toxicity) of a poorly tolerated treatment Allowing subjects to withdraw data could even provide an opportunity for unscrupulous parties to "improve" study results by selectively encouraging certain subjects to with draw from a study.

The importance of ensuring the scientific validity of clinical research is reflected not only in FDA's regulations but in international documents and published literature as well. .

(emphasis added).

46. In summary, data collected on study subjects up to the time of withdrawal must

remain in the trial database in order for the study to be scientifically valid. If a subject withdraws

from a study or is removed from a study, removal of already collected data would undermine the

scientific, and therefore the ethical, integrity of the research. Such removal of data could also put

enrolled subjects, future subjects, and eventual users of marketed products at an unreasonable risk.

Finally, removal of data would fundamentally compromise FDA's ability to perform its mission,

to protect public health and safety by ensuring the safety and effectiveness of regulated products.

C. Sarepta's Eteplirsen Trials

47. DMD is caused by a mutation in the dystrophin gene, which codes for the protein

dystrophin, an important component of muscle tissue that is necessary for structural support, and

eteplirsen works by targeting precursor RNA and forcing the cellular machinery to skip over exon

51 (the DNA segment that codes for the dystrophin mutation), resulting in an altered mRNA

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template. By creating an mRNA template that does not code for exon 51, the cells of patients

diagnosed with DMD are able to produce truncated but functional dystrophin.

48. The safety and efficacy of eteplirsen were evaluated by Sarepta in a 24-week

randomized, double-blind, placebo-controlled study (Study 201). The study enrolled twelve boys

aged seven to 13 years with a confirmed genotype amenable to treatment with an exon-5 1 skipping

drug. These patients were randomized to one of three treatment arms including placebo (n=4),

eteplirsen 30 mg/kg (n=4) and eteplirsen 50 mg/kg (n=4), and received eteplirsen or placebo

weekly by intravenous infusion. After 24 weeks, all placebo-treated patients initiated weekly

eteplirsen treatment at 30 mg/kg (n=2) or 50 mg/kg (n=2). After Week 28, all patients were rolled

over into a long-term open-label extension study (Study 202), which continues to follow patients

on clinical and safety measures and report data.

49. The primary efficacy endpoint in Study 201 and Study 202 was the change from

baseline in the percent of dystrophin-positive fibers present in muscle biopsies. The biological

hypothesis is that restoring semi-functional dystrophin production will restore, or at least, prevent

further deterioration of muscle weakness. Pre-treatment muscle biopsies were collected from all

patients in the study. To evaluate the effect of eteplirsen dose and treatment duration on dystrophin

production, a second biopsy was collected at week 12 from the four patients in the 50 mg/kg cohort

and two placebo-treated patients, and at Week 24 from the four patients in the 30 mg/kg cohort

and two placebo-treated patients. A third biopsy was collected in all patients at Week 48.

According to Sarepta's Phase II clinical trials, eteplirsen resulted in increased dystrophin

production in all patients treated for 12 weeks or longer.

50. A key secondary endpoint and the study's principal clinical outcome measure was

the 6-minute walk test (6MWT), a standard measure of walking ability and clinical function in

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DMD. This clinical endpoint measures how far can a patient walk in 6 minutes. The idea is that

since patients with DMD experience diminished walking ability over time, measuring the

stabilization/lack of regression in walking ability via the 6MWT is clinically meaningful.

Sarepta's Phase II clinical trials showed that when data from all patients who received the 30

mg/kg dose were included in the analysis on this dose, there was no statistical significant difference

between the 6 minute walk test results in overall mobility between patients on eteplirsen and those

on placebo. Similarly, when the patients on the 50 mg/kg dose were combined with the results of

all 30 mg/kg patients, the results did not show significant statistical differences versus placebo. In

order to avoid these adverse results, Sarepta excluded data from 2 patients in the 30 mg/kg cohort

who lost ambulation during the Phase II clinical trials. When the data from these 2 patients was

excluded, Sarepta produced results that were at least arguably statistically significant .6

51. Sarepta has held meetings with the FDA to explore the potential for accelerated

approval of eteplirsen based on dystrophin levels as a surrogate endpoint. Accelerated approval

allows the drug to enter the market sooner, providing the sponsor runs confirmatory trials to

measure the ultimate clinical benefit. In this case, the idea was that Sarepta will then presumably

6 For instance, the adjusted mean change from baseline to week 48 on the 6MWT was negative 68.4 in for the placebo/delayed cohort, and negative 153.4 in and plus 21 in for the 30 and 50 mg/kg eteplirsen-treated cohorts, respectively. The large decline in the 30 mg/kg cohort was again due to Patients 009 and 010, and when they were excluded from the 30mg/kg cohort, the adjusted mean change from baseline was 31.5 m. The data showed no significant differences between the 30 mg/kg and placebo cohorts. When Patients 009 and 010 were excluded from the cohort, the remaining 6 patients in the combined 30 mg/kg and 50 mg/kg cohorts who received eteplirsen for 48 weeks demonstrated stable performance on the 6MWT, which was significantly different (67.3m difference; P [less than or equal to] 0.001) compared to the placebo/delayed cohort. The 50mg/kg cohort was also significantly different (87.4m difference; p [less than or equal to] 0.00 1) compared to the placebo/delayed cohort. See Sarepta's report published in the Annals of Neurology in September 2013 for a more detailed discussion of the Phase II trials for eteplirsen (attached as Exhibit 2).

17


confirm that the increased dystrophin levels lead to improved clinical outcomes and significant

stabilization/improvement of walking long term.

V. PLAINTIFFS' INVESTIGATION

A. A Medical Expert Familiar with the FDA Approval Process Identified Siuificant Problems with the Clinical Trials for Eteplirsen

52. Richard A. Guarino, MD has worked in the pharmaceutical industry for over 40

years. Over the course of his career, he has played numerous roles in clinical research development

and marketing of drugs sold in the United States and globally. Dr. Guarino is intimately familiar

with regulations promulgated by the FDA, which govern the development, sale, and marketing of

drugs. Dr. Guarino regularly advises pharmaceutical companies on the FDA regulatory processes,

which include regulations and guidelines promulgated by the FDA and the International

Committee on Harmonization (ICH) concerning how drug-related clinical research and marketing

of drugs must be conducted. Dr. Guarino is considered to be an expert on the FDA's standards

and regulations for the drug approval process, as well as marketing and promotion related to the

sale of drugs in the United States.

53. Dr. Guarino reviewed the available data regarding the eteplirsen trials, including

the report on Sarepta's Phase lIb trial published in the Annals of Neurology, and found that

Sarepta's clinical trials for eteplirsen suffered from significant problems, which rendered FDA

approval of an NDA highly unlikely. Indeed, in an expert report prepared by Dr. Guarino

("Guarino Report"), attached hereto as Exhibit 1 and incorporated herein by reference, Dr. Guarino

stated that "based on my (1) 40 years of experience of collaboration with the FDA in general and

participation in the regulatory approval process specifically; (2) detailed understanding of the

FDA's approval process; and (3) review of the limited data available from Sarepta's clinical trials,

including Sarepta's report on the Phase lIb trial published in the Annals of Neurology, I am

18


confident that Sarepta's clinical trials would not have given FDA sufficient data to approve

eteplirsen for Sarepta to market this drug." Id. at ¶33. Dr. Guarino explained this position by

stating:

First, the patient population established by Sarepta was insufficient. Phase II clinical trials typically involve a patient population that is robust enough to establish an effective dose that is reasonably safe to administer to patients. Sarepta's Phase II clinical trials included only 12 patients. In all of my 40 plus years of experience, I have never encountered such a small Phase II clinical trial that would establish sufficient data of dose tolerance and efficacy that would lay the grounds for a Phase III program or even to be considered for approval based only on a Phase II study. I would challenge the number of patients used in Sarepta's Phase II program as a sufficient number of patients to establish a safe and effective dose of eteplirsen to administer to children diagnosed with Duchenne Muscular Dystrophy. Moreover, Sarepta was basing their prospective NDA submission entirely on the 12 patient Phase II clinical trial. A Phase II clinical trial is conducted to establish the "probable" dose that is safe and effective to use in the Phase III program. A Phase III study evaluates the drug on a larger patient population, and for a drug like eteplirsen could likely involve close to 100 patients including the control group. Sarepta was seeking to forego the Phase III study entirely, and materially misled investors into believing that there was a legitimate hope that an NDA based solely on the small Phase II clinical data would be accepted and approved by the FDA. Sarepta 's Phase II clinical trial, consisting of only 12 patients, was simply not robust enough to establish a safe and effective dose. A patient population of 12 lends itself to results that may not be indicative of the drug's effects but which may simply be anomalous. Even under an accelerated approval process, if agreed to by the FDA, Sarepta would have had to evaluate a more robust patient population that would satisfy the FDA in order to gain the NDA approval to market eteplirsen.

Second, Sarepta deviated from the intent-to-treat guidelines by excluding 2 ofthe 12 patients from its statistical analysis of the 6-minute walk test, the study's key secondary endpoint and principal clinical outcome measure As previously discussed, it is the responsibility of the sponsor to establish precise inclusion and exclusion criteria and state it in the study protocol. In addition, the statistical section of the protocol must state the endpoint that will be used for efficacy before the initiation of the Phase II and Phase III clinical trials. Establishing a strict inclusion and exclusion criteria for patient selection is critical because it eliminates any bias in the statistical analysis of the clinical results. Including data from all patients meeting the inclusion and exclusion criteria of the protocol will result in an unbiased conclusion of those patients who respond and those that do not respond to the drug being evaluated. Therefore, the FDA's statistical department is adamant about including in the final analysis the data from all patients who were recruited and accepted into the study. The safety and effectiveness of a drug is therefore based on the sponsor's pre-established endpoints that are applied to all patients

19


who participated in a clinical study. By Sarepta, omitting 2 of the patients who were recruited and evaluated in the study from the statistical analysis of the Phase II clinical trial and rationalizing that the pre-established 6-minute walk test endpoint measure was not an effective measure of success for these patients, Sarepta completely biased the clinical trial results. Sarepta rationalized omitting these 2 patients based on their degree of symptoms. However, these patients have had to meet the inclusion and exclusion criteria of the protocol when they were recruited for this study. In doing so, Sarepta drastically deviated from the intent-to-treat guidelines; such a deviation would not be accepted by the FDA. In fact, when the data from the 2 patients who received the 30 mg/kg dose were included in the analysis on this dose, there was no statistical significant difference between the 6 minute walk test results in overall mobility between patients on eteplirsen and those on placebo. Also, when the patients on the 50 mg/kg were combined with the results of the 30 mg/kg patients, without eliminating the 2 outlying patients, the results did not show significant statistical differences versus placebo. This is evidenced in Sarepta's report on the Phase JIb clinical trial published in Annals of Neurology. In my opinion, [the] FDA would be very reluctant to approve any drug based on: (i) an inadequate patient population; (ii) a clinical trial that did not demonstrate meaningfully statistical significant differences versus placebo; and (iii) a clinical study with a modified intend to treat statistical analysis based on the ex post exclusion of 2 patients, which bias the efficacy and safety results of eteplirsen.

Id. at ¶J34-35 (emphasis added where underlined).

B. Information From Former Sarepta Employees

54. Confidential Witness 1 ("CW 1")— CW 1 was a Senior Clinical Director at Sarepta

from September 2010 through November 2012. In this role, CW 1 reported directly to the

Company's Chief Medical Officer (CMO). CW 1 reported to two CMOs over the course of CW

I's tenure - Stephen Shrewsbury initially and then Shrewsbury's replacement, Defendant Kaye.

55. In CW l's position at Sarepta, CW 1 attended meetings with senior executives,

which involved the Company's strategy with regard to DMD and the eteplirsen clinical trials.

Defendant CEO Garabedian led the meetings which were also attended by Defendant CMO Kaye

and Regulatory Department Head Tania Borek.

56. According to CW 1, Sarepta's management planned the clinical trials and the new

drug application (NDA) filing with the FDA. CW 1 recalled that a focus of the meetings CW 1

20


attended with senior executives was to finalize the efficacy endpoints that would be used to

interpret the degree to which eteplirsen treated DMD. CW 1 recalled from the meetings that

Garabedian chose the efficacy endpoints for eteplirsen. CW 1 said that there was not much input

with regard to the endpoint from the Clinical Operations or Regulatory departments and explained

that Garabedian tended to push through his own plans without generating consensus.

57. As CW 1 explained, the Company took on tremendous risk by proceeding with the

Phase JIb eteplirsen trial without first obtaining a Special Protocol Assessment. According to CW

1, the FDA tends to respond to summary protocols with extensive recommendations, which

companies use as guidelines, incorporating such recommendations into their trials in hopes of

obtaining FDA approval. CW 1 explained that while foregoing Special Protocol Assessments has

proved a successful strategy for some drugs in the past, it was a much riskier strategy for eteplirsen.

CW 1 said this was because the FDA had never before approved a drug in eteplirsen's class. There

was thus no existing clinical data to support eteplirsen's approval beyond what was collected

during the Company's trials. Additionally, CW 1 explained, the substantially small group of

clinical participants posed further challenges, since participant dropouts would have a significant

impact on the trial results/data and legitimacy, in that it called into question what could be viewed

as an incomprehensive data set. According to CW 1, "it was a long shot that the FDA would

have approved [eteplirsen] based on the small number ofpatients." CW 1 further explained that

"a lot of those relative endpoints are hard to measure with a small number of patients."

58. CW 1 also said that the likelihood of FDA approval was hampered by Sarepta's

failure to consult with the FDA on trial design for eteplirsen, which opened Sarepta up to a "very

finicky" review criteria from the FDA's Neurology Division. According to CW 1, the Neurology

21


Division of the FDA prefers for applicants to follow the traditional process of consulting with the

FDA on trial design.

59. Confidential Witness 2 ("CW 2") - CW 2 was the Associate Director of Business

Development at Sarepta from October 2011 to May 2013. CW 2 reported to the General Counsel

and to Sarepta's CEO, Defendant Garabedian. CW 2 also worked closely with Sarepta's CMO,

Defendant Kaye.

60. According to CW 2, Defendant Garabedian (CEO) was very involved and was

informed on every facet of the Company, including the progress of Sarepta's key drug eteplirsen.

CW 2 said that Garabedian "micro-managed" and "weighed in on everything, down to the type of

letterhead on the stationary."

61. As Sarepta's Associate Director of Business Development, one of CW 2's primary

objectives was to solicit companies that might prospectively form a joint-venture with SRPT.

While CW 2 declined to provide specific names of companies that Sarepta reached out to, CW 2

said none of the companies Sarepta approached decided to pursue a venture because of various

concerns they had about eteplirsen and its ability to get FDA approval. CW 2 explained that two

concerns were repeatedly raised: (1) there was no previous clinical data history for this type of

indication; and (2) the clinical trial participant pool was very small. As a result of these two issues,

CW 2 explained, the companies that CW 2 courted expressed doubt that the drug would be

approved by the FDA.

62. Confidential Witness 3 ("CW 3") - CW 3 worked as Director of Medical Writing

at Sarepta from May 2012 to May 2013. As Director of Medical Writing, CW 3 prepared and

reviewed Sarepta's clinical documents for submission to the FDA. These clinical documents

22


included clinical study reports, protocols, protocol amendments, investigator's brochures (IBs),

and lB updates pertaining to the Phase JIb eteplirsen clinical trial.

63. CW 3 explained that clinical data for the eteplirsen trials originated at the site of

the clinical trial - Nationwide Children's Hospital in Columbus, Ohio. According to CW 3, the

Biostatistics Department (comprised of just one Biostatistician) first scrubbed the data, and then

Sarepta's senior management reviewed it.

64. CW 3 said that Defendant Garabedian (CEO) was very "hands on" in the design of

the eteplirsen clinical protocol, interpretation of clinical data, and medical writing relating to the

data. CW 3 recalled that Garabedian frequently requested that clinical documents regarding

eteplirsen be edited per his comments and instructions.

VI. MATERIALLY FALSE AND MISLEADING STATEMENTS ISSUED DURING THE CLASS PERIOD

65. On July 3, 2013, shortly before the beginning of the Class Period, Sarepta

announced that it had entered into a second At the Market ('ATM") offering (the 2013 ATM),

allowing the Company to sell, at its option, up to an aggregate of $125 million of shares of common

stock at market prices. The Company further announced that "Sarepta intends to use any proceeds

from this offering for general corporate purposes, including for manufacturing scale up for

eteplirsen, the planned confirmatory Phase III clinical study of eteplirsen and early development

activities related to follow-on Duchenne muscular dystrophy drugs and other programs."

66. The Class Period begins on July 10, 2013. On that day, Sarepta gave a power point

presentation to analysts and investors at the JMP Securities Healthcare Conference. Defendant

Gaberidian discussed eteplirsen and Sarepta's Duchenne muscular dystophy program, in relevant

part:

23


So now I would like to share with you the most recent clinical data we have shared on the 6-Minute Walk Test which we now have data through week 84 with Eteplirsen treatment. And we did our primary clinical outcome analysis on the maximum score. So at baseline we took two measures of 6-Minute Walk and we knew that as an effort to pin a test sometimes the patients can have a bad day and we wanted to always take the maximum score, whether they were on placebo or treatment. And this was our primary analysis.

And so when we take the maximum scores at baseline or at the time points we collected two measures which is week 12, 24, 48, this is the analysis.

So through week 84, the treated patients with Eteplirsen showed less than a 5% decline from their baseline 6-minute walk values. By any measure of the natural history assessment, this is very stable and unlike what you would expect to see in an ambulatory DMD population. Remember they typically lose their ambulation sometime going from let's say 350 to 450 meters on average after peak, let's say at seven years of age, to potentially losing ambulation completely between the ages of 10 and 12 years of age.

So, this is of very rapidly progressing disease where they are losing hundreds of meters over the course of several years.

So again we saw our placebo group did show this level of decline through 36 weeks and week 36 was the last time point that we measured before we confirmed dystrophin to be present in every one of these patients at week 48J71 So, what we have done is we have shaded the areas of when we would expect to have good diffuse dystrophin in the muscle biopsies and when we would expect to see some level of clinical outcome.

And here what is remarkable beyond the treated group showing stability over now more than a year and a half is that after we showed a precipitous decline in the placebo group, where their average 6-Minute Walk Test at 36 weeks was below 330 meters, which the latest natural history suggests that you shouldn't even include these patients in an ambulatory study because of the risk of losing ambulation, we stabilized even that population now for 48 weeks of stability on 6-minute walk.

We also looked at the mean score and this analysis holds up regardless of how we - what measure of the 6-minute walk we use. So and in fact here they lose about 2% from baseline and, again, we still show that stability in the placebo crossover. We are also just showingyoufor thefullness of the analysis. We looked at minimum scor& And here they maintained their 6-minute walk scores and we look at their worst 6-minute walk score baseline. They have at every time point averaged a greater 6-minute walk score all the way through week 84. And again

The placebo group only received placebo for the first 24 weeks and were then placed on eteplirsen and continued to be monitored.

24


the placebo group also is doing better at week 84 than they were at week 36.

And of course, we always get the question, well, how do we know that there is not a couple of outliers that are driving these averages in your cohorts. So a few months ago we actually started sharing the individual patient data. And here again, a high level of consistency. And again every single patient in the study showed the dystrophin levels robustly at 48 weeks and from that earlier time point, week 36 onward, you see in the far right column after we confirmed dystrophin in every one of these patients, every single patient has shown stable walking times. Not one through week 84 from that week 36 time point has declined by more than 5%. In fact, none declined more than 3%.

So, we think this is clear evidence that the dystrophin we are producing at the levels we are showing at week 48 is resulting in this stabilization or essentially halting of the progression of this disease in terms of ambulation.

And again Ijust want to highlight when pati ents are younger,you can sometimes see even improvement especially ifyou are dealing with a population that is less than seven years of age. Not only did we include patients that were over seven years of age, but now we are talking about patients who on average are 11 years of age in the Eteplirsen group through week 84 and 10.4 years in the placebo. I will also highlight that the placebo group was younger and so if anything that cards were stacked against the Eteplirsen group because they were more than a half a year older. But again this is not a young population. If you talk to any researchers or any more importantly parents of a Duchenne child -- I was just at a conference in Baltimore put on by Parents Project Muscular Dystrophy-- and there were many kids with DMD in the audience who were wheelchair dependent by 10, 11 years of age. Andhere we are showing good ambulation and good walking times distances in this age cohort

And of course, any of you that have been following the Company story, we have been having discussions with the FDA about whether or not this data set that I have described to you along with our previous studies that were conducted with Eteplirsen are supportive of acceptance of an NDA application. And we believe under the guidelines, particularly under accelerated approval where a surrogate marker, in this case dystrophin, seems to be reasonably predicting the clinical response we are seeing here, would be sufficient to be acceptable for a filing. And that is something we hope we will find out in the next month or two and be able to communicate our intention of whether or not we will file on this application for approval.

25


And we believe that dystrophin is the surrogate marker for Duchenne muscular dystrophy. And that is why we have used it as our primary endpoint and why we believe our data is supported to see this as a surrogate.

And this has important implications for the follow-on exons where it is infeasible to do the clinical studies to power for a clinical outcome like you have shown here and we have shown with the 6-Minute Walk Test and that you need to be able to approve drugs on evidence that we can produce the same level of dystrophin that we have produced here with the subsequent exon targets at a similar dose.

So we believe there is a pathway for the FDA to base the subsequent drug approvals on the basis of the proof of concept that we are producing with Eteplirsen and maybe the next second or third exon beyond that.

And we have described this in other venues in more detail of how we can enable what we call a class approval, which is based on the evidence of Eteplirsen first and foremost clinically, safety database-wise and dystrophin correlation. Then subsequently, showing this with a couple of other exons particularly to show the dystrophin levels would be consistent with a standard dose across another couple exon targets.

Sometimes there isn't a clear decision and the FDA likes to memorialize their decision in minutes and that, sometimes, comes later up to 30 days afterwards. But we think at the very latest, by the end of August, we would have at least our decision on whether we would pursue an NDA application on Eteplirsen based on the FDA feedback.

(emphasis added).

67. Defendant Garabedian's July 10, 2013 statements, particularly those in bold and

italics above, were materially false or misleading because his statements omitted that: (i) 2 patients

(out of only 12 patients in the study) lost ambulation entirely; (ii) the results being presented were

based on the exclusion of data from the 2 patients who lost ambulation; (iii) when data from the 2

patients is included in the statistical analysis, the result does not show a statistically significant

improvement in walking ability based on eteplirsen; (iv) the 2 patients who lost ambulation

continued to show significant increases in dystrophin production, which undermines the

26


correlation between the dystrophin increases and the stabilization of walking ability, thereby

decreasing the likelihood that dystrophin would be an accepted surrogate endpoint; (v) the FDA's

statistical department has a well-established practice of requiring data from all patients admitted

into a study to be included in the statistical analysis; and (vi) gaining FDA approval based on the

statistical analysis that excluded data, on a post hoc basis, from 2 out of 12 patients (1/6 of the

patients) was unlikely given the FDA's strict adherence to the intent-to-treat approach.

68. For instance, Defendant Gaberidian stated that "every single patient has shown

stable walking times," emphasized that the study showed "a high level of consistency" of stabilized

walking, and further touted the conservativeness and comprehensiveness of the study by its

inclusion of older patients. These statements were materially false or misleading based on

Garabedian's failure to disclose that the results he emphasized were based on the ex-post exclusion

of data from 2 patients (out of only 12 patients) who happened to show adverse results (i.e., the

loss of ambulation).

69. Defendant Garabedian further reported that the results of the Phase II trial showed

"clear evidence" that the increased dystrophin levels produced by eteplirsen resulted in the

"stabilization or essentially halting of the progression of this disease in terms of ambulation" while

emphasizing Defendants' belief that dystrophin was a "surrogate marker." These statements were

again materially false or misleading based on material omissions. Garabedian failed to point out

that 2 patients had lost ambulation entirely despite showing significant increases in dystrophin

levels, which substantially undermined the correlation between dystrophin and walking

stabilization and consequently lowered the likelihood that dystrophin was an appropriate surrogate

endpoint.

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70. On July 24, 2013, Sarepta issued a press release announcing its plans to submit an

NDA in the second quarter of 2014 for approval of its lead product candidate eteplirsen:

Sarepta Therapeutics Announces Plans to Submit New Drug Application to FDA for Eteplirsen for the Treatment of Duchenne Muscular Dystrophy in First Half of 2014

CAMBRIDGE, MA (Marketwired) 07/24/13 Sarepta Therapeutics, Inc. (NASDAQ: SRPT), a developer of innovative RNA-based therapeutics, today announced it plans to submit a New Drug Application (NDA) to the U.S. Food and Drug Administration (FDA) in the first half of 2014 for the approval of eteplirsen for the treatment of Duchenne muscular dystrophy (DMD). Eteplirsen is Sarepta's lead exon-skipping compound in development for the treatment of patients with DMD who have a genotype amenable to skipping of exon 51.

The decision to submit an NDA for eteplirsen in 2014 is based on productive interactions with the FDA in a meeting that occurred this week That meeting was a follow-up to the FDA's review of two recently submitted summary documents that included data on dystrophin and clinical outcomes from the existing eteplirsen studies. The FDA stated in pre-meeting comments that the Agency is "open to considering an NDA based on these data for filing." The Agency, however, requested additional information related to the methodology and verification of dystrophin quantification. Sarepta believes the requests from the Agency can be addressed and incorporated into an NDA submission in the first half of 2014.

"We are encouraged by the feedba ckfrom the FDA and believe that data from our ongoing clinical study merits review by the Agency and will be sufficient for an NDA filing," said Chris Garabedian, president and chief executive officer of Sarepta Therapeutics. "We plan to work closely with the FDA to prepare an NDA submission in the first half of 2014 as we continue to prepare for our confirmatory study and our manufacturing scale up."

The Agency would not commit to declaring dystrophin an acceptable surrogate endpoint under the CFR 314 Subpart H Accelerated Approval pathway prior to an NDA filing and commented that a decision by the Agency to file "the NDA would not indicate that we have accepted dystrophin expression as a biomarker reasonably likely to predict clinical benefit. A filing would only indicate that the question merits review, and that we deem the data to be reviewable."

Sarepta anticipates submitting an NDA for eteplirsen in the first half of 2014; however, the exact timing of the submission will be dependent on further discussions and agreement with the FDA on the information needed for an acceptable filing. Sarepta also intends to have an End-of-Phase II meeting with the agency later this quarter to discuss the requirements for the Chemistry, Manufacturing, and Controls (CMC) section of the NDA.

28


(emphasis added).

71. That same date the Company held a conference call to update analysts and investors

on its plans for eteplirsen and to submit an NDA for approval of same. Defendants Garabedian

and Mahatme participated in the call:

CHRIS GARABEDIAN, PRESIDENT & CEO, SAREPTA THERAPEUTICS,

INC.: ... Yesterday we met with the FDA's division of neurology products as a

follow up to our end of Phase lIb clinical meeting that took place earlier this year.

This meeting took place as a follow up to the agency's review of the two summary

documents that we provided them in May, one of which described dystrophin as a

surrogate marker for the treatment of DMD, while the other provided a summary

of all of our clinical outcomes from the trial. I'm excited to communicate that

based on the feedback from the FDA and pre-meeting comments and in the

meeting, we plan to submit an NDA with data from the ongoing Phase lib data

set in the first half of 2014.

While the agency would not provide any guarantee or assurance that an NDA submission would be acceptable for filing, they indicated that they are, quote, open to considering an NDA based on these data for filing, closed quote. And further indicated that they're not prepared to declare dystrophin as an acceptable surrogate marker prior to an NDA filing and stated that the question of quote, whether the production of a truncated but potentially functional dystrophin is reasonably likely to predict clinical benefit will be a review issue, close quote. Furthermore, they requested additional information on the dystrophin methodology and potential verification of the dystrophin quantification data that was provided to them in previous briefing and summary documents.

However, based on our discussion yesterday with the agency, we are confident that any additional information that would need to be compiled and included in an NDA submission would still allow us to keep our timeline of submitting an

application in the first half of next year. It is important to note that our discussions with the FDA and the feasibility of an NDA filing has centered

largely on our clinical and pre-clinical data sets and if the biochemical outcomes,

clinical outcomes and safety database are sufficient for an NDA filing.

29


As we've previously reported, we continue to follow patients on Eteplirsen treatment in our Phase JIb extension study and we recently reported six minute walk test data through week 84 with demonstrated stability in the six minute walk test in

all patients in our modified, inten[t] [to] treat analysis.

Let me end my prepared comments with my appreciation for the collaboration

and involvement that we've experienced on this program from the FDA and how

they continue to help with our DMD program by providing clear feedback and direction in their communication. As I stated before, we are very pleased with the level of responsiveness and engagement from the Division of Neurology Products and from the leadership in [theater], and we worked with them to determine -- as we work with them to determine the most expeditious path forward toward a product approval.

In summary, we're very encouraged by the FDA feedback and the Sarepta organization will be working hard in preparing for an NDA submission to take place in the first half of 2014.

BRIAN SKORNEY, ANALYST, ROBERT W. BAIRD & COMPANY, INC.: My question is, in your dialogue, would this be an accelerated approval? I

think there's been some speculation given the clinical data and some of [Bob] Temple's comments at the PPMD [Parent Project Muscular Dystrophy] meeting around whether or not dystrophin would be acceptable, could potentially actually be a full approval based on the clinical data. Any sort of color you could give on whether the FDA is primarily looking at dystrophin as the end point in the study and would approve on dystrophin with the clinical data is supportive of that or the focus is on the clinical data with dystrophin as support to the Six-minute walk?

CHRIS GARABEDIAN: Brian, thanks for that question. So a lot of our discussion with the FDA has centered around dystrophin because we believe that dystrophin is a viable surrogate marker for the treatment of Duchenne and while it is important for Eteplirsen, we believe it is as important if not more important to the broader DMD program as we bring forth follow on exon skipping targets for Duchenne, and eventually would pursue a class approval so that every Duchenne boy that could benefit from our technology with exon skipping could have drug available to them. So we are committed to establishing dystrophin as a surrogate and we understand that the FDA needs to be thorough before they declare a new surrogate marker for a disease is acceptable. And so we've focused a lot of our attention and really understanding what does it require.

So the other thing that the FDA communicates to us is that an NDA is an NDA. We

30


don't submit an NDA under accelerated approval. We submit an NDA and the FDA has at their discretion how they interpret the data set and what type of approval they'll consider given that data set. So we understand the FDA has a lot of flexibility. We are committed to establishing dystrophin as a surrogate marker. We will work with the FDA to determine the best way to achieve that But we're

focused on submitting an NDA in the first half of 2014.

We have a very rich clinical outcome data set, we believe, based on the Six-minute walk benefit now through week 84 and we continue to follow these pati ents and based on the safety profile and given the risk benefit in Duchenne. So we're just very pleased with all of the data and what that could mean for potential approval. But it's too early to speculate how the FDA may consider our NDA submission and if they file, what type of approval they might consider.

ROBIN KARNAUSKAS, ANALYST, DEUTSCHE BANK: Hi, guys, congratulations and thanks for taking my question. Two quick questions. First of all, how much of the commentary in the press release is standard commentary from the FDA about how there's no guarantee that the filing will be accepted and in your opinion, at the meeting, do you feel like there's anything that made you skeptical they wouldn't even accept the filing?

CHRIS GARABEDIAN . .... Again, we are encouraged by our dialogue with [the FDA], we are preparing to submit an NDA because we believe it has a good likelihood that the FDA would accept itfor filing. They've told us what I've stated in the press release which is they're open to considering an NDA filing based on the data we've shared with them to date. But again, we're not expecting them, nor have I seen them, provide any guarantees or assurances prior to any NDA submission. I don't believe there's any precedence for that, for them for to make that kind of declaration before a sponsor has actually submitted an NDA application. Again, we are encouraged by the communication and the clarity of feedback and direction we are getting from the FDA and are confident based on that to prepare for an NDA submission.

LIISA BAYKO, ANALYST, JMP SECURITIES: Hi, thanks for taking the question and congratulations on the news, certainly very exciting. Is one point of flexibility the FDA has dose? Might they go with a dose other than 30 mg and what doses will you be considering for the Phase III?

CHRIS GARABEDIAN: We believe that our data set to date strongly supports 30 mg per kg as the appropriate dose. We continue to follow boys at a dose of 50mg per kg because we believe it is good, supportive safety data for potential dose escalation if physicians aren't seeing a clinical response eventually but ultimately, the biochemical data and dystrophin analysis suggests that 30 mg per kg is as good

31


as 50 mg per kg. In fact, numerically it was better at 48 weeks and clinically, now that we have followed these patients, both that were early treatment and on the placebo, is suggestive that the stabilization we're seeing is as good in the 30 mg per kg group as the SO mgper kg, and that includes the placebo cross over 30 mg versus 50 mg.

So, again, we feel strongly that there's strong evidence that 30 mg per kg is as good as a higher dose and we wouldn't want to unnecessarily expose these boys, pediatric population, to a higher dose than is necessary. Obviously, the pursuit of that dose would be what we choose for our confirmatory study. And in terms of approval on the data package that we would submit as part of an NDA, that would be a review issue obviously and our arguments would be stated in the NDA and the FDA would, just as they have at their discretion, how they might consider approval of the drug under accelerated approval or a full approval scenario, they could have commentary on the dose that would be approved. But again, our case would be made for 30 mg per kg. That's all we can provide in terms of guidance at this point.

YARON WERBER, ANALYST, CITIGROUP . ....The question is, as you mentioned, really has to do about the predictability of the reasonably likely [sic] to forecast a clinical benefit, what are the levels and does it correlate between the level of dystrophin correction and an actual clinical benefit? Can you address to us what is the thought from FDA? Is your Phase I-Il data in the 12 patient, is that going to be enough to get them comfortable about the predictability of it? Do you -- is this something that they need to get comfortable with a priority before approving you or is that something that can be done as part of a confirmatory study? What I'm really trying to understand is -- that's the discussion, because your data is Phase I-II had a modified ITT [Intent-To-Treat], the overall study wasn't very robust patient-wise and the number of patients at the dose were very small, we're talking about four to six patients per dose at the 30 or the 50. That's my question kind of, is that enough to answer the question also in terms of safety?

CHRIS GARABEDIAN: First, the safety I think I addressed in the previous question and we've been very clear on the FDA feedback on safety, but your question around the dystrophin and the robustness of that, again, this is the dialogue as it relates to accepting dystrophin as a surrogate under the sub part h accelerated approval. Again, separately, the clinical outcomes, I think we have highlighted even the FDA themselves have been out there talking about that it's not about the size of the study but it's about the treatment effect. And even Bob Temple in recent comments that was noted earlier in the call by one of the analysts at PPMD was really talking about clinical outcomes that are robust in a small study can form the basis of a full approval. I think we need to separate the distinction of the clinical outcomes we are seeing and how the FDA may interpret that versus the evidence of dystrophin and that correlation and the definition of reasonably likely to predict.

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So I think that we believe that our dystrophin analysis is robust and is consistent across genotypes. We see it independent of the dose and we see it correlating with the range that we've seen of30% to 60% dystrophin positive fibers at the 48 week time point that this is leading to stabilization in all of our available ambulatory patients, now out through week 84 from the previous time point So this will only be added to in terms of data as we continue to follow these patients through 96 and beyond.

(emphasis added).

72. Later that day Defendant Garabedian spoke with business reporters concerning

Sarepta's July 24th announcement. In an interview published in TheStreet.com , "Sarepta To Seek

Early U.S. Approval For Muscular Dystrophy Drug (Updated), " Defendant Garabedian is quoted:

Sarepta CEO Chris Garabedian, in a phone interview this morning, says the company chose deliberately to use cautious language to describe the meeting with FDA and the decision to file eteplirsen.

"The FDA has to be very careful with their language and their words, and because th cy 're measured with their words, it requires us to be equally careful," he said

Still, Sarepta chose to announce its intention to seek eteplirsen's approval today, less than a day after its sit-down with FDA, because the agency made it clear that it was ready to review the drug.

"The last time we met with FDA to discuss an early filing, we waited for the [meeting] minutes because we didn't have the level of clarity needed to provide a public communication. In this instance, we felt we have that level of clarity from FDA on the question of whether or not to pursue the New Drug Application. That's what we were lookingforfrom this meeting: Can we go ah cad and submit an application or not? From the FDA 'spre-meeting comments and the comments made by the FDA during the meeting, we received enough clarity to give the guidance we did today," said Garabedian.

(emphasis added).

73. Defendants' July 24, 2013 statements, particularly those in bold and italics, were

materially false or misleading because they omitted that: (i) 2 patients (out of only 12 patients in

the study) lost ambulation entirely; (ii) the results being presented were based on the exclusion of

33


data from the 2 patients who lost ambulation; (iii) when data from the 2 patients is included in the

statistical analysis, the result does not show a statistically significant improvement in walking

ability based on eteplirsen; (iv) the 2 patients who lost ambulation continued to show increases in

dystrophin production, which undermines the correlation between the dystrophin increases and the

stabilization of walking ability, thereby decreasing the likelihood that dystrophin would be an

accepted surrogate endpoint; (v) the FDA's statistical department has a well-established practice

of requiring data from all patients admitted into a study to be included in the statistical analysis;

(vi) gaining FDA approval based on the statistical analysis that excluded data, on a post hoc basis,

from 2 out of 12 patients (1/6 of the patients) was unlikely given the FDA's strict adherence to the

intent-to-treat approach; and (vii) Sarepta had not applied for, and did not receive, any Special

Protocol Assessments in connection with its clinical testing of eteplirsen, which decreased the

likelihood of FDA approval, especially since the FDA had never approved a drug in eteplirsen's

class.

74. On August 8, 2013, Sarepta announced the publication of its eteplirsen clinical

study results in the Annals of Neurology in a press release partially entitled "Results Show a

Significant Increase in Dystrophin Production and a Stabilization of Walking Ability in Duchenne

Muscular Dystrophy Patients:"

CAMBRIDGE, MA, Aug 08, 2013 (Marketwired via COMTEX) -- Sarepta Therapeutics, Inc. SRPT, a developer of innovative RNA-based therapeutics, today announced the first peer-reviewed publication of the 48-week results from the Phase lIb clinical study of eteplirsen in the Annals of Neurology. Eteplirsen is an investigational medicine in development for the treatment of patients with Duchenne muscular dystrophy (DMD) who have a genotype amenable to skipping of exon 51.

Published study results showed that once-weekly treatment with eteplirsen resulted

in a statistically significant increase from baseline in novel dystrophin, the protein that is lacking in patients with DMD. In addition, eteplirsen-treated patients

34


eva/u able on the 6-minute walk test (6MWT) demonstrated stabilization in walking ability compared to a placebo/delayed-treatment cohort Eteplirsen was well tolerated in the study with no clinically significant treatment-related adverse

events. These data wi//form the basis of a New Drug Application (NDA) to the U.S. Food and Drug Administration (FDA) for eteplirsen planned for the first

half of2014.

"These unprecedented data for eteplirsen in DMD patients with genetic mutations correctable by skipping exon Si represent a significant milestone in the scientific community's efforts to address the tremendous needfor treatments for this devastating and deadly disease in children," said Jerry Mendell, MD., director of the Centers for Gene Therapy and Muscular Dystrophy at Nationwide

Children's Hospital, principal investigator of the Phase lib study and lead author

of the publication. "For the first time in this disease, we have a potentially disease-modifying treatment that has demonstrated strong evidence of a relationship between a biochemical effect on dystrophin production and a clinically meaningful outcome on the 6-minute walk test In addition, we believe this technology can potentially be applied to target additional genetic mutations in DMD in the future."

"The peer-reviewed publication of these data is an important achievement as we continue to advance eteplirsen through late-stage clinical development with the goal of bringing to patients and their treating physicians a safe and effective therapy that addresses the underlying cause of this devastating disease," said Edward Kaye, M.D., senior vice president and chief medical officer of Sarepta Therapeutics and a co-author of the publication. "The results published today provide the

foundation of efficacy and safety data that we continue to build upon with our ongoing study of eteplirsen in DMD patients, with consistent results now seen through 84 weeks of treatment

Summary of the Phase JIb Study and Key Results Through Week 48

The safety and efficacy of eteplirsen were evaluated in a 24-week randomized, double-blind, placebo-controlled study (Study 201). The study enrolled twelve boys aged seven to 13 years with a confirmed genotype amenable to treatment with

an exon-5 1 skipping drug. These patients were randomized to one of three treatment arms including placebo (n=4), eteplirsen 30 mg/kg (n=4) and eteplirsen 50 mg/kg (n=4), and received eteplirsen or placebo weekly by intravenous infusion. After 24 weeks, all placebo-treated patients initiated weekly eteplirsen treatment at 30 mg/kg (n=2) or 50 mg/kg (n=2). After Week 28, all patients were rolled over into

35


a long-term open-label extension study (Study 202), which continues to follow patients on clinical and safety measures with data reported through 84 weeks.

Dystrophin Production: The primary efficacy endpoint in Study 201 and Study 202 was the change from baseline in the percent of dystrophin-positive fibers present in muscle biopsies. Pre-treatment muscle biopsies were collected from all patients in the study. To evaluate the effect of eteplirsen dose and treatment duration on dystrophin production, a second biopsy was collected at week 12 from the four patients in the 50 mg/kg cohort and two placebo-treated patients, and at Week 24 from the four patients in the 30 mg/kg cohort and two placebo-treated patients. A third biopsy was collected in all patients at Week 48.

After 48 weeks of treatment, eteplirsen administered at either 30 mg/kg or 50 mg/kg for 48 weeks (n=8) resulted in a statistically significant increase (p iE 0.001) in dystrophin-positive fibers to 47.3 percent of normal. The placebo/delayed-treatment cohort, which had received 24 weeks of eteplirsen at either 30 mg/kg or 50 mg/kg following 24 weeks of placebo (n=4), also showed a statistically significant increase in dystrophin positive fibers to 37.7 percent of normal (p iE 0.008).

Results from the study suggested that at least 12 weeks of treatment was needed to observe increases in dystrophin production in muscle biopsies. In addition, there was no meaningful difference in dystrophin production between the 30 mg/kg and 50 mg/kg dose arms at 48 weeks.

Walking Ability: A key secondary endpoint and the study's principal clinical outcome measure was the 6-minute walk test, a standard and well-accepted measure of walking ability and clinical function in DMD.

After 48 weeks, patients in the 30 mg/kg and 50 mg/kg dose cohorts who were able to perform the 6MW]' (modified Intent-to-Treat or mITT population; n=6) showed a statistically significant treatment benefit of 67.3 meters ( 0.001) when compared to the placebo/delayed-treatment cohort (n4). This difference exceeds the 28 to 44 meter treatment effect reported in clinical studies that have served as a basis for the FDA approval of treatments for other neuromuscular

disorders.

The mITT population used in the 6MWT analyses consisted of 10 of the 12

enrolled pati ents, includingfour patients in the 50 mg/kg cohort, two patients in

the 30mg/kg cohort and four patients in the placebo/delayed-treatment cohort

Two patients in the 30 mg/kg cohort showed rapid disease progression upon

enrollment and lost ambulation by week 24, and thus were excluded

36


(emphasis added).

75. Also on August 8, 2013, the Company held its earnings conference call for the

second quarter ended June 30, 2013. Defendants Garabedian, Mahatme, and Kaye participated in

and spoke during the call:

[Garabediani A couple of weeks ago we announced the outcome of our follow-up meeting with the FDA that took place in July and announced our plan to submit an NDA or New Drug Application for eteplirsen in the first half of next year. This decision was based on discussions with the agency and the Division of Neurology Products where they indicated that based on the Phase II data we've shared with them, they are open to considering an NDA filing. This feedback is particularly encouraging because it recognizes that our Phase IIB study data set is sufficient for the FDA to consider a filing and allows us to initiate the first step of the registration process for approval of a new drug.

There are a number of distinct steps that form the registration process in getting a new therapy approved by the FDA. The first step is the submission of a New Drug Application by a sponsor which is essentially a request by the sponsor asking the FDA to consider approving a new drug for a particular disease. Often a sponsor does not seek guidance from the FDA on the feasibility of whether or not an NDA submission would be acceptable for filing and review because there are general guidelines on the evidence that is required to consider an NDA for filing. However because Sarepta studies with eteplirsen produced a compelling and favorable data set on a mid stage or smaller trial it was important for us to gain feedback from the FDA if an NDA filing would be acceptable.

Specifically, we wanted to understand if it was possible for the FDA to consider an NDA filing and potential review without having to complete a confirmatory study to form the basis of approval. Again, we are encouraged we have accomplished this goal by obtaining feedback from the FDA that confirms our Phase II data set is sufficient for them to consider an NDA filing

Once an NDA submission is accepted by the FDA, it then begins the review process. It is in the FDA's purview to determine the type of review to apply based on the totality of the data included in an NDA. This means that the FDA can choose to review an application under the accelerated approval pathway, on the basis of a surrogate end point such as dystrophin, or under a full approval pathway, on the basis of a clinical end point such as the six-minute walk test. As part of our application, the FDA will have the totality of our data available to it including a robust biochemical effect in the form of dystrophin production, positive clinical outcome data including the six-minute walk test results, and a favorable safety profile in patients who will have more than two years of treatment at the time of submission, as this week represents the two-year mark of the first patients who were dosed in our Phase JIB study.

37


As part of our dialogue with the FDA, including two end of Phase II meetings, we asked for specific feedback on the acceptability of dystrophin as a surrogate endpoint to better understand whether the FDA would review our application under an accelerated approval pathway, as we were not sure if they would consider the acceptance of an NDA filing on the basis of our clinical outcomes data andfelt that accepting dystrophin as apotential surrogate marker that would reasonably predict clinical benefit would be onepossiblepathway th at they would consider. In response the FDA stated it would review the potential for dystrophin as a surrogate endpoint during the review following their acceptance ofthe NDA.

By considering the acceptance of an NDA for filing, it indicates that they would evaluate the totality of the data and consider all pathways for approval of eteplirsen and will determine if the agency's review will be under an accelerated approval pathway or a full approval pathway after an NDA filing. During our recent meeting we had a productive discussion about dystrophin as an acceptable surrogate end point and the agency shared feedback on what it would like to see in the application including information on the methodology of our analyses and the potential verification of the dystrophin quantification data. While we have not yet received meeting minutes and we expect further discussion with the agency in the coming months, we believe based on the feedback so far we have received to date that we will be able to address their needs in our NDA submission.

To sum up our progress to date we believe the FDA's willingness to consider an NDA based on our Phase II data set represents a tremendous achievement for our Company.

ED KAYE, SVP & CHIEF MEDICAL OFFICER, SAREPTA THERAPEUTICS, INC.: Thanks, Chris.

We have very pleased to have received this feedback from the FDA and to know the FDA is open to considering an application for eteplirsen. It provides us the clarity we need to implement critical clinical and regulatory activities in the near term. We believe that we are well prepared for the tasks ahead and we appreciate the urgency to make this drug available to boys with DMD.

Moving on to recent clinical activities, last quarter, we reported very encouraging 84-week results from the long term Phase IIB extension study with eteplirsen. We think the most important takeaways from these updated data are that we continue to see a stabilization of walking ability across all of the ambulatory eteplirsen-treated boys and the long term data offer increasing confidence in the potential benefit and safety profile of the drug. As we know from the natural history in DMD,

38


we would not expect to see stabilization in these boys who are now on average about 11 years of age.

Also as you know, we have reported individual patient results showing increases in novel dystrophin expression in all of the patients and also a stabilization of walking ability and those boys who remain evaluable on the six-minute walk test. We continue to follow the two boys who essentially lost ambulation by the time we were able to confirm dystrophin in their muscle biopsies. Data from other clinical outcome measures such as pulmonary function suggests that these boys are also stable.

TIM LUGO: Thanks, and can you maybe just discuss well the nature of any questions in your mind that may be answered when you receive the meeting minutes coming up?

CHRIS GARABEDIAN: Well Brian, obviously, we felt comfortable with putting out a communication following the meeting and so if there was a lot of information that we were awaiting in the minutes, we probably wouldn't have been as confident in communicating the p1 ansfor a submission of an NDA.

ROBIN KARNAUSKAS, ANALYST, DEUTSCHE BANK: Hi guys thanks for taking my question. I was just wondering on the accelerated approval versus full approval, how common is that for the FDA to give that option out after an FDA meeting when you file for accelerated approval for them to remind you that it could be full approval. And then maybe if you give us some precedence for an accelerated approval filing originally turning into a full approval.

CHRIS GARABEDIAN: Robin so there's a few questions in there, so I think we can address all of them. So first regarding how common it is, again I'd say what's less common is a company going to the FDA and clarifying if a data set is sufficient for acceptance of an NDA submission. We believe that because it was a small Phase II study but because the results were quite robust, both biochemically, clinically and safety wise, that it might warrant a review and potential approval. And so this is why the Company has put a lot of effort into getting guidance from the FDA on the feasibility of this data set to form the basis of approval.

Now we focused initially on dystrophin as a surrogate under an accelerated approval pathway because it was our primary end point. We had every patient that showed dystrophin. We believed we had levels that were high and kind of reproducible and consistent across many samples. And we believe we had, and still believe we have a very strong basis that the dystrophin that we're producing is validating the clinical outcomes that we're seeing and should be acceptable as a surrogate endpoint under the accelerated approval pathway. So we focused on

39


that and we believed that the FDA might say dystrophin could be considered as a surrogate end point but we're not going to weigh in on the clinical outcomes and the rest of the data set as a basis of approval.

What we ended up getting was a yes answer to the bigger question which is an NDA filing acceptability based on the totality of our data. So while they decided to say that they would make a decision on dystrophin after an NDA filing and during the review process, they told us yes, we would consider an NDA filing on the totality of the data and that would include the clinical outcomes. So again, many sponsors who might do two large well controlled studies where they know based on the guidelines that it would be acceptable for an NDA filing, we wanted to met guidance a priori before we put all of the effort that Ed described is needed to submit an NDA. Andso we got our answer and this is why we're very confident in moving forward with that NDA submission. ... But I'll have Ed describe the various approvals that Genzyme, his experience at Genzyme demonstrated on relatively small samples in various forms.

ED KAYE: Sure. . . .1 think one important aspect to remember is when they say they look at the totality of the data, if you can show a clinical improvement and the drug is acting in the same biologic way that you expect it such as you have a dystrophin deficiency, you replace it, you see a clinical benefit, then it helps again to allow them to make a decision. Because you have scientific and clinical evidence that the drug is doing what you're supposed to do.

BILL TANNER: And then as it relates I don't know if you can, and I've not looked at your paper yet, I don't know if its mentioned in there, but can you comment as to the extent of a correlation between the dystrophin production and the six minute walk test and whether or not you think that that's going to be something that is actually going to be important to have?

CHRIS GARABEDIAN: Bill, this is Chris. Here is what we are ready to say at this point. Every patient showed dystrophin levels positive fibers between 30% to 60% after 48 weeks of treatment. Every patient whose evaluable on six minute walk has stabilized their six minute walk test distances. We think that the range we're showing on immunofluorescence of dystrophin is clearly above that threshold that Ed's describing because every patient that we follow, the individual patient data we've shared have all stabilized The last 84 week update from the last time point before dystrophin was confirmed, not one patient declined by more than 5% from that last time point before dystrophin was confirmed at the levels I'm describing. So again, we think that correlation is very clear. We've shared all that data with the FDA. And again, we're confident that that helps validate this dystrophin endpoint, but obviously, that's ultimately the FDA's call and they've indicated that that will be a review issue before they make that determination.

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JOSEPH SCHWARTZ, ANALYST, LEERINK SWANN & COMPANY: Hi, thanks very much. I was wondering about the two patients that lost ambulation and they are discussed in a little more detail in the Annals of Neurology paper, and in particular I was struck by the fact that they had a similar increase to the mean in terms of the dystrophin that was put back into their muscles. I would have thought that based on the discussion in there regarding MRI assessments et cetera that their muscles [would] seem to be more fatty and fibrotic. So how is it that they are able to take up the dystrophin in the muscle and then still advance? What does that say about the limits of the technology?

ED KAYE: Yes, no, I think remember that the biopsies were done in the upper extremities and the boys lost ambulation. So we weren't testing, to finalize we weren't testing the upper extremity. So I think what happens is that the muscle that's remaining is able to take up the dystrophin and produce novel dystrophin, but unfortunately once that muscle is fibrotic, we can't repair it and based on all Of the data it appears that it was too late for these boys. We couldn't get dystrophin. We couldn't change the process and turn the disease process around fast enough. But what we have seen is that the upper extremity function seems to have been stabilized and pulmonary and cardiac function is also stable, so the remaining muscle seems to be responding to the dystrophin, so I wouldn't look at this as they are non-responders. I think their legs were too far gone before we could make a difference

(emphasis added).

76. Defendants' August 8, 2013 statements, particularly those in bold and italics, were

materially false or misleading because they omitted that: (i) when data from the 2 excluded patients

is included in the statistical analysis, the result does not show a statistically significant

improvement in walking ability based on eteplirsen; (ii) the 2 patients who lost ambulation



decreasing the likelihood that dystrophin would be an accepted surrogate endpoint; (iii) the FDA's


into a study to be included in the statistical analysis; (iv) gaining FDA approval based on the


patients) was unlikely given the FDA's strict adherence to the intent-to-treat approach; and (v)

41


failed to disclose that Sarepta had not applied for, and did not receive, any Special Protocol

Assessments in connection with its clinical testing of eteplirsen, which decreased the likelihood of

FDA approval, especially since the FDA had never approved a drug in eteplirsen's class.

77. In particular, Defendants crucially downplayed the exclusion of data from 2 of the

12 patients by flatly explaining that the 2 patients were "too far gone." Defendants' statements on

their ex-post exclusion of data from 1/6 of the patients in their study, and the attendant touting of

results based on that excluded data, were materially misleading because Defendants failed to

explain the FDA's longstanding position that all data must be included in the statistical analysis.

Indeed, Dr. Guarino found Sarepta's post hoc exclusion of this data to be essentially fatal, stating:

[During Sarepta's August 8, 2013 press release, the Company materially exaggerated the efficacy of eteplirsen suggested by Sarepta's own clinical trials by arriving at its results for the 6-minute walk test only through the exclusion of data from 2 of the 12 patients who participated in the Phase II clinical trial. As explained in Sarepta's August 8, 2013 press release: "Two patients in the 30 mg/kg cohort showed rapid disease progression upon enrollment and lost ambulation by week 24, and thus were excluded." (emphasis added).

In my expert opinion, Sarepta's statements regarding the exclusion of 2 of the 12 patients, including the statements summarized above and similar statements made during the Class Period, were materially misleading because they improperly inflated the success of the data and suggested that the FDA would adopt those inflated results by similarly excluding those 2 patients. The Company's statements about the 2 patients who were non-responsive to eteplirsen indicate that these 2 patients were simply "too far gone," making their adverse walking test results non-indicative. However, sponsors are required to establish inclusion and exclusion criteria in a clinical trial at the outset of the trial and are then obligated to consider the results of all participating patients as indicative of the effectiveness of the drug. It is not the case that a sponsor may simply exclude post-hoc any patients who demonstrate non-responsiveness to treatment. Based on my decades of experience and my extensive familiarity with the FDA process, when the FDA considers data from a clinical trial, it considers the results of all patients who participated in the trial, and measures those results based on the endpoint standard established by the sponsor. Because Sarepta omitted this important fact from their statements about the data and the exclusion of 2 of the 12 patients, such statements were materially misleading.

Guarino Report at ¶32.

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78. In addition, Defendants materially misstated that "feedback from the FDA

recognizes that our Phase JIB study data set is sufficient for the FDA to consider a filing" when

the FDA had clearly explained that it needed additional information related to the methodology

and verification of dystrophin quantification. While Defendants disclosed in its July 24, 2013

press release that the FDA had requested such information, it was substantially downplayed and

was, by August 8, 2013, replaced with a materially stronger representation that the FDA had

deemed Sarepta's "Phase II study data set [as] sufficient." By requesting the additional

information about methodology and dystrophin quantification, the FDA was communicating that

the information it had seen was insufficient. Dr. Guarino, explained this in no uncertain terms in

his report (attached hereto) wherein he states: "Based on my 40 years of experience and my

understanding of the FDA's approval process, it is clear that the FDA viewed the clinical data that

Sarepta had submitted as insufficient, which could render the entire clinical trial unacceptable."

(Guarino Report at ¶31). Dr. Guarino's interpretation of the FDA's position is corroborated by

the FDA's explanation, announced on November 12, 2013, that "[s]ince [the FDA's] last meeting

[with Sarepta], [the FDA's] concern about the shortcomings of your current quantification methods

has grown." Such a statement from the FDA, in conjunction with the FDA's request for additional

information about methodology and quantification strongly suggests that the FDA raised concerns

about Sarepta's methodology and quantification during the July 2013 meeting. Sarepta's failure

to publish the minutes from its meeting with the FDA further suggests that Defendants understated

negative feedback while bombastically emphasizing even moderately positive feedback.

79. On August 8, 2013, Sarepta also announced that "[subsequent to second quarter

end [June 30, 2013] and up to August 7, the Company raised $37.9 million in proceeds and issued

43


approximately 1.0 million shares of common stock under the At-The-Market (ATM) equity

financing that was put in place in July 2013."

80. On August 13, 2013, Defendant Garabedian presented on behalf of Sarepta at the

Wedbush 2013 Life Sciences Management Access Conference:

So, on July 24th, we announced the results of a meeting with the FDA where they told us that they were open to considering an NDA filing on our phase II dataset. This is a type of information that every company hopes for which is an encouraging sign from the FDA that a mid-stage trial, a phase II study is strong in enough to consider for an NDA filmg.

So we announced that we will be submitting an NDA in the first half of next year and we believe that this allows the FDA to use all their tools in their tool box to approve drugs that are important therapies and diseases where there is no currently approved drugs. We have a disease modifying treatment for Duchenne muscular dystrophy, a devastating, irreversible, progressive disease and we believe our data, both biochemically and clinically, along with our safety profile really supports that this drug should be made available to patients as soon as possible.

We also announced thepublication of our data in the Annals of Neurology. This is one of the most influential journals among the specially that we would be targeting that would be utilizing this drug. Neurology is a very fragmented specially and we'd be going after pediatric neurology base primarily, but we believe that this pre-review publication really supports the strength of our data and highlights this increase in dystrophin production that we showed has led to a stabilization of walking ability was the conclusion from the authors.

Duchenne, as I mentioned, is devastating irreversible progressive disease and currently there is no approved FDA disease modifying therapies, mostly oral corticosteroids are used. So this is an important milestone for the FDA to give a signal to a disease modifying therapy that could be as early as the end oftheyear.

So to share the 6-minute walk test results, the last data we shared was through 84 weeks, and you can see this was using the maximum score. So at baseline and at all the time points that we took dystrophin we took two values and we predefined that we would take the maximum value in that because this is an effort-dependent test, you have some boys they may have a bad day and so we wanted to make sure that we're taking the maximum score regardless of if they were on the placebo/delayed-treatment cohort or on the treatment cohort.

44


And so this is the maximum score change from baseline. And you see there was only a loss of 21 meters over 84 weeks. Again, the average was approximately 400 meters at baseline using the maximum scores 395 to 399 using the maximum scores. And you can see again this is less than 5% change which most natural history experts would say this is very stable within the kind of range that you'd expect for an effort-dependent test.

And then, more importantly, we saw the placebo group after dystrophin was materialized, we saw stabilization there and, in fact, no loss of ambulation from the last time point that was captured before dystrophin was confirmed.

This is the mean score and again this is consistent with that baseline value of 370 on average across the cohort. And again here we only loss nine meters in the treatment cohort and again the placebo group stabilized after crossover and actually improved from their week-36 time point, the last time point before dystrophin was confirmed. And again this is very different than what natural history would suggest.

This is based on recent published data that was the 24-month longitudinal study, the most comprehensive and longest follow-up of the 6-minute walk test and natural history in Duchenne addition. And importantly, almost every natural history expert in Duchenne has now come to the conclusion that if you look at the boys based on age, you see increases in 6-minute walk on average; if they are younger than seven, if they are older than seven you start to see a more progressive linear decline and again we included only those patients that were older than seven and I just showed you on average they over nine years of age at baseline.

So the decline that we saw before dystrophin was produced was consistent with what we see in natural history and more recently we know of publications that are pending that further support this thesis of natural history progression on 6-minute walk consistent with what we've seen in our study and this is just an example of the published literature and what was presented from a placebo arm in the ataluren study looking at greater than seven years of age, and you see again a decline anywhere from 12% to 15% to 36% in various placebo arms in natural history cohorts, up to 33% in the Mizon paper I just described over two-year timeframe.

When you start to contrast that with our 84-week data, you see a very different course of the disease with eteplirsen treatment And we believe this is what the FDA responded to, the totality of our data and the strength of our 6-minute walk combined with our biochemical dystrophin data and our safety profile led them to say they were open to considering an NDA filing even on a small sample set because again the strength of this 6-minute walk was quite robust

We wanted to make sure that before we put the effort in to submitting an NDA that we got really good clear guidance from the FDA of the acceptability of this dataset and we put a lot of effort and energy into that and we were incredibly

45


encouraged that although they did not weigh in on our primary endpoint dystrophin as a surrogate under accelerated approval, they did say they would consider it after a NDA filing.

But more importantly, they said the totality of our dataset, everything that they have reviewed to date, led them to say they're open to considering an NDA filin g , which says that they're considering the totality of a data including the clinical outcomes and we know from our precedent

81. On August 15, 2013, Sarepta presented at the Canaccord Genuity Growth

Conference. Defendants Garabedian, Kaye and Mahatme participated in the call.

CHRIS GARABEDIAN: Yes, sure, Ritu. So, obviously Sarepta as a company focused on RNA technology and our lead program is in Duchenne muscular dystrophy. We have a Phase II program that's ongoing of which we shared our latest data with the FDA and asked them if they would consider an NDA filing based on our Phase II data. And we had good; productive discussions with the FDA, and they indicated recently that we announced on July 24 that they are open to considering an NDA filing based on our current data set So, we announced that we will be submitting our NDA for our drug eteplirsen for the treatment of Duchenne muscular dystrophy for those amenable to an exon 51 skipping drug. So that's the latest news we've shared.

RITU BARAL: Did you count the minimum number of fibers?

CHRIS GARABEDIAN: We did.

I think the bigger question or I guess the debate around dystrophyn is what's the magic number? What's the level that we can have confidence in that will translate to clinical outcome? And we believe we have that in our study. Even though it's 12 patients, every single patient in which we have confirmed dystrophyn from the last time point in which dystrophyn was confirmed, they've all been completely stable.

(emphasis added).

82. Defendants' statements on August 13, 2013 and August 15, 2013 were materially

false or misleading because they omitted that: (i) when data from the 2 excluded patients is

included in the statistical analysis, the result does not show a statistically significant improvement

in walking ability based on eteplirsen; (ii) the 2 patients who lost ambulation continued to show

significant increases in dystrophin production, which undermines the correlation between the

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dystrophin increases and the stabilization of walking ability, thereby decreasing the likelihood that

dystrophin would be an accepted surrogate endpoint; (iii) the FDA's statistical department has a

well-established practice of requiring data from all patients admitted into a study to be included in

the statistical analysis; (iv) gaining FDA approval based on the statistical analysis that excluded

data, on a post hoc basis, from 2 out of 12 patients (1/6 of the patients) was unlikely given the

FDA's strict adherence to the intent-to-treat approach; (v) failed to disclose that Sarepta had not

applied for, and did not receive, any Special Protocol Assessments in connection with its clinical

testing of eteplirsen, which decreased the likelihood of FDA approval, especially since the FDA

had never approved a drug in eteplirsen's class; and (vi) failed to explain that the FDA had

concerns about the study's methodology and dystrophin quantification, which prompted the FDA

to request additional information.

83. For instance, Defendant Garabedian stated that: "[the FDA] said the totality of our

data set, everything that they have reviewed to date, led them to say they're open to considering

an NDA filing, which says that they're considering the totality of a data including the clinical

outcomes .... This statement was materially false or misleading because it attributed inflated

weight to the FDA's comments. First, it was materially false or misleading because it suggested

that the FDA had determined Sarepta's data set to be complete when, in fact, FDA had requested

additional information about Sarepta's methodology and dystrophin quantification twomajor

requests, which suggested, as Dr. Guarino found, that "the FDA viewed the clinical data that

Sarepta had submitted as insufficient, which could render the entire clinical trial unacceptable."

(Guarino Report at ¶31). Second, the statement is materially false or misleading because it

suggests that the FDA had made a preliminary decision as to the significance of "the clinical

outcomes." This was simply not true. Even were the FDA to accept the NDA for filing, this would

47


only mean that the data set was not facially insufficient. At the time Garabedian made his

statement, the FDA had not even accepted the NDA for filing, nor had it indicated that it likely

would accept the NDA for filing, and the FDA had certainly not made a statement that the clinical

outcomes were sufficient.

84. On September 9, 2013, Sarepta presented at the Morgan Stanley Healthcare

Conference. Defendant Garabdian spoke.

[Garabedian] So, Sarepta is an RNA-based technology company. Our lead program is in Duchenne muscular dystrophy. Our lead product in development, eteplirsen, is in a Phase JIb extension study. We recently shared that Phase II data with the FDA over the last six months and they recently in July communicated that they are open to considering an NDA filing based on the data we've shared with them or not requiring a confirmatory study before they would consider an NDA filing. So, we had communicated that we would be submitting an NDA, new drug application, in the first half of next year. We have an upcoming CMC meeting on the calendar with the FDA. And that's the update for now.

SARAH SUBCOMB: Okay, great. Are there any questions from the audience?

So last month or a few weeks ago, there was some data released from one of your competitors that caused a little concern. And I think the general concern was that it's actually a similar technology but benefits weren't seeming to correlate that well with dystrophin production. So, do you have a view on whether this is going to kind of hurt your chances at the FDA or the differences between your drug and Prosensa's drug and to why you're not seeing a great correlation there?

CHRIS GARABEDIAN: We don't like to comment on competitor data sets, but we do look forward to the emerging data set that we expect in the coming months drive the person.

Look, we believe that our data set stands by itself in that we have shown not only a very favorable safety profile in patients who have taken the drug for nearly two years, we also have biochemical data that's very consistent across genotypes, across samples within patients and then across all 12 patients in our study in a range that has really been unprecedented of a 30% to 60% range of dystrophin Positive fibers. And we're seeing clinical benefit conferred by that dystrophin production. So, we think it's very important to show all three of those elements - - a strong safety profile that allows for chronic dosing in apediatric population, biochemical response that is consistent across 100% of the patients at levels that

48


would be deemed meaningful, and a clinical benefit that correlates, that supports the dystrophin that we're seeing.

I think, you know, we would like -- we did hear about the recent top-line dystrophin where upwards of more than 25% to 40% of patients did not show dystrophin increases by any measure that they were evaluated on.

So, the criteria was any dystrophin increase which was not defined by any measure of either RT-PCR immunofluorescence or Western blot. That's a very low threshold to show dystrophin and they still didn't meet it in 100% of the patients using that criteria. So, conversely, we were showing 100% of the patients at 12 weeks, even in our previous UK study, at lower doses by RT-PCR. So, again, we think we have a strong data set that's very robust and consistent across the population. And that's the message that we're going to go out to the market with.

(emphasis added).

85. On October 17, 2013, Sarepta presented at the DMD Development Program

Update. Defendants Garabedian and Kaye spoke at the conference:

[Garabedian: ] Before I turn the call over to Ed Kaye to provide the latest clinical data with eteplirsen and our plans for our confirmatory study, I'd like to highlight the strong data set related to our technology and the proof of concept that we are producing meaningful levels of dystrophin, and that the doses we are studying in the clinic are producing the desired effect in support of our drug's mechanism of action and our ability to produce the essential protein dystrophin that is lacking inpatients with Duchenne and the root cause of the disease.

CHRIS GARABEDIAN: Thanks, Ed And before I move on to describing our Let's Skip Ahead website, I wanted to address a question that has come up a lot over the last few weeks as it relates to the failed drisapersen studies and what it means to our program.

While the failed studies with drisapersen were a disappointment to the DMD community, we believe it underscores how important it is to have a chemistry that does not have dose-related toxicity that may prohibit a dose that is active enough to produce a clinical effect.

Eteplirsen uses a very different chemical structure as what we call the drug's backbone, and this unique chemistry allows us to achieve doses in our studies that are five- to eightfold greater than those doses studied in the drisapersen trials. And the dystrophin data set I described earlier underscores the importance of achieving a dose that produces the type of robust and consistent response that we have seen in our studies.

49


We understand the disappointment of the drisapersen trial participants, particularly those who were discontinued from drisapersen treatment upon the announcement of the failed clinical trials. While we understand this disappointment, we are exploring the feasibility of addressing these patients who were in the drisapersen trials.

So in summary, we have a lot going on for the remainder of this year, and for the next six to nine months, as we have several FDA meetings. We are currently putting together sections of our NDA and planning for an NDA submission in the first half of 2014, and clarifying exactly what needs to go into that NDA with the FDA in these subsequent meetings.

JANE LARKINDALE, VP RESEARCH, MUSCULAR DYSTROPHY ASSOCIATION:

We have a number of questions related to the OSK data announcement. I was wondering if you would be able to address some of the repercussions from that data announcement. How do you think the failure of that large trial will impact your chances of getting accelerated approval, and do you still think the six-minute walk test is going to be the best endpoint for your larger studies?

CHRIS GARABEDIAN: So Ed, why don't you address the six-minute walk test vis-a-vis the drisapersen failed studies, and then I can address the accelerated approval question.

ED KAYE: Sure. Jane, I think, obviously we really can't comment on the drisapersen study because we were not participants and don't really understand all the aspects of that.

But I think it has caused concern about whether the six-minute walk test is an appropriate clinical test for DMD boys. And I think the short answer is we still firmly believe that it is a good test. In our review of all the data and certainly the data in our hands, we found it to be the most sensitive end point.

I think an important aspect that we focused on is really the patient selection to use this endpoint, because eteplirsen is really focused on maintaining the six-minute walk test distance. We are not improving on the six-minute walk test, but we are trying to keep the boys stable and preventing further deterioration.

So it's really important to have a cohort that you would expect to deteriorate during the time of the study. And so, we focused on the over seven, and there has been a number of Natural History Studies just this year alone that have confirmed that boys over seven years of age really do continue to deteriorate, on average, from 40 to 80

50


meters. And even in the recent drisapersen study, the boys who were over seven years of age deteriorated, on average, between 75 and 82 meters.

So I think by having a very homogeneous population that should decline during the focus that we can demonstrate that these boys are stable, then that, I think, should be a good study design. And Chris, I will let you comment further.

CHRIS GARABEDIAN: Great. Yes, so Jane, on your question related to accelerated approval, we believe these two drugs are very different, so in terms of will the FDA look differently upon our NDA submission in light of the drisapersen data, again, we think our data set is very differentiated, as I described earlier with our dystrophin analysis. That is because they are very different chemical entities.

Our drug chemistry backbone is very different, and we think the data will stand alone and stand on its own in front of the FDA and won't confuse our clinical data set because, again, we had a dose that was five- to eightfold higher with a different drug chemistry, so we do not think that the failed studies of drisapersen are an indictment at all on exon skipping or our drug's ability to see that exon skipping, as we demonstrated in 100% of our patients.

So with that, again, our plans are intact to submit an NDA....

(emphasis added).

86. Defendants' statements on September 9, 2013 and October 17, 2013 were

materially false or misleading because they omitted that: (i) when data from the 2 excluded patients

is included in the statistical analysis, the result does not show a statistically significant

improvement in walking ability based on eteplirsen; (ii) the 2 patients who lost ambulation



decreasing the likelihood that dystrophin would be an accepted surrogate endpoint; (iii) the FDA's


into a study to be included in the statistical analysis; (iv) gaining FDA approval based on the


patients) was unlikely given the FDA's strict adherence to the intent-to-treat approach; (v) failed

51


to disclose that Sarepta had not applied for, and did not receive, any Special Protocol Assessments

in connection with its clinical testing of eteplirsen, which decreased the likelihood of FDA

approval, especially since the FDA had never approved a drug in eteplirsen's class; and (vi) failed

to explain that the FDA had concerns about the study's methodology and dystrophin

quantification, which prompted the FDA to request additional information. Indeed, Defendants'

statements downplayed the possibility that dystrophin might not be an acceptable surrogate

endpoint and distanced Sarepta's studies from the adverse drisapersen Phase II trial (which failed

to show a correlation between increased dystrophin production and clinical benefit) by continuing

to tout the "robust" and "strong data set" supporting eteplirsen and dystrophin while failing to

explain that the dystrophin correlation was considerably undermined by the fact that the 2 patients

who lost ambulation showed significantly increased levels of dystrophin.

VII. THE TRUTH IS REVEALED

87. On October 30, 2013, the price of Sarepta's stock fell $3.26, a 7.8% decline from

its closing price of $41.89 per share on October 29, 2013, to close at $38.92 per share on October

30, 2013 following reports published that day questioning the significance of the data set from

Sarepta's Phase JIb study of eteplirsen.

88. For instance, on October 30, 2013, the investment website, SeekingAipha published

an article entitled "Short Sarepta: DMD Prognosis is Dismal." The article stated in part:

Investors' bullish outlook on eteplirsen went into hyper-drive last month when GlaxoSmithKline (OSK) and Prosensa (RNA) announced that their DMD candidate drisapersen failed to meet its primary endpoint in a pivotal Phase III trial. Despite showing promising Phase II results and increased dystrophin expression as well, drisapersen wasn't even close to outperforming placebo in terms of improving walking performance in a larger sample of DMD patients. This news sent Sarepta shares into orbit (up 25% in one day) because it essentially gives the entire DMD market to eteplirsen, pending approval.

So everything is good, right? Eteplirsen will be approved, etc...

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While Sarepta is publicly spinning a compelling tale for investing in eteplirsen's prospects, the science tells a wholly different story. In fact, I am confident eteplirsen is not going to receive early approval by the FDA, and will in fact go on to fail in a Phase III trial.

The worst part is that the company seems to share my bearish sentiment, which is why they are pushing for early approval based on an extremely small Phase II trial.

To understand what's really going on, we need to look past the company propaganda. By contrast, the truth can be found in the dense, off-putting, boring scientific literature. Indeed, this is probably why the market has failed to recognize eteplirsen's imminent doom, and instead has pushed the stock to new heights.

With that in mind, I'll do my best to distill the important, and wholly misunderstood, aspects of eteplirsen. And subsequently, why the drug is actually in deep trouble and Sarepta knows it.

Didn't eteplirsen significantly improve walking performance in clinical trials?

The simple answer is no. Despite multiple reports that eteplirsen did in fact show a clinically significant improvement in the 6mwt in a Phase II trial, the opposite is true.

Why did investors believe eteplirsen improved walking performance?

Again, the answer is simple. People didn't understand the statistics, and the company didn't exactly promote results that ran counter to their goal of selling stock.

The problem arises largely because the Phase II trial conducted by Sarepta only included 12 patients. Such a small sample size is problematic for a number of reasons. Chief among these is the fact that small sample sizes lead to low statistical power by default, and tend to have weird, non-normal distributions. And Sarepta's study was no different.

In their analyses including all 12 patients, eteplirsen failed to show a significant improvement in the 6mwt when the data was properly analyzed. Going directly to the actual peer-reviewed paper, it reports for the 6mwt at 24 weeks:

"As data distribution analysis revealed severe violation of normality assumption, the analysis was repeated using AZVCO VA for ranked data, showing no significant differences between the 2 eteplirsen and placebo cohorts."

At 48 weeks, the paper states the following:

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"As data distribution analysis revealed severe violation of normality assumption, the analysis was repeated using ANCO VA for ranked data, showing no significant differences between the 30 mg/kg and placebo cohorts but a statistically significant difference between the 50mg/kg and placebo/delayed cohorts (p < 0.016)."

So it's a dosing and time issue, right? Eteplirsen works at the higher dose, correct?

While that would be a nice result, it's not quite right. The truth is that two boys in the lower dose group (30mg/kg) severely skewed the group's distribution. Sarepta researchers thus argued that the two boys should be excluded from further analyses because they are "outliers" due to their age, height, and rapid disease progression.

Regarding the minimally significant result in the higher dose, you should keep in mind that this result is not corrected for Type I error, which is explicitly stated in the paper. In other words, this "significant" result for the higher dose could very well be what's known as a false positive, and is probably not significant after applying Type I correction. No way to know with such a small sample size. But again, Sarepta hasn't gone out of their way to inform the general investor of such statistical issues...

What happens when the boys are excluded?

At 48 weeks, the 6mwt suddenly becomes highly significant (p < 0.0001) for the low dosage cohort compared to placebo.

So are the two boys really outliers? Which analysis is correct?

First off, I need to explain what an outlier means in statistical terms. An outlier is generally a datum that lies well outside the distribution of the overall dataset. Legitimate reasons to deem a datum an outlier include, incorrect data entry, suspicion of incorrect measurement, methodological problems, and so on. There are ways to specifically test for outliers and statisticians do tend to get grumpy when you don't have a good reason to include a particular datum in your analysis.

Why? Because excluding data that doesn't fit your hypothesis is tantamount to cherry picking. And unfortunately, that's what Sarepta did with their Phase II data.

The twin boys showed dramatic increases in dystrophin production

The entire hypothesis is that eteplirsen increases dystrophin production, which in turn, should increase ambulatory performance. Yet, these two boys showed marked increases in dystrophin-positive fibers at both weeks 24(20.8% and 15.9%) and 48 (48.3% and 43.6%).

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The significant increase in dystrophin production thus flies in the face of the researchers' decision to exclude them as "outliers" in the 6mwt. In fact, I would be much more bullish on eteplirsen's prospects if these extreme DMD patients showed stable ambulatory performance when taking eteplirsen, rather than getting worse. Biologically, these two boys were not outliers, and should never have been excluded from the analysis. In all fairness, the peer-reviewed paper did report the correct analysis, but the company has actively chosen to promote the more liberal interpretation of the results.

So let me get this straight. Dystrophin production increases yet ambulatory performance worsens?

Yes. This is why Sarepta is pushing the FDA to accept dystrophin production as their primary endpoint in in NDA filing, not the 6mwt that drisapersen was evaluated on. The FDA has yet to agree this is an appropriate primary endpoint, and I doubt they ever will.

Bottom line: Eteplirsen does not appear to provide a clinically meaningful benefit in terms of increased walking performance when the data is analyzed properly. To get the desired result, Sarepta had to inappropriately massage this miniscule dataset, and forgo any correction for Type I error.

But that's not all...

Why Sarepta chose such a small sample size is beyond me. Phase II clinical trials for drisapersen included 48 subjects and didn't involve any unwarranted data massaging. Sarepta's design, by contrast, is so small that Type I error corrections cannot be applied without losing a big chunk of statistical power, which is probably why it wasn't performed. The FDA tends to like to err on the side of caution, and it's common for them to ask for the more conservative p-values post-correction. My bet is that Sarepta's story falls apart at that point.

Is Sarepta aware of these problems?

Sarepta is most definitely aware of these issues. They did report the correct analyses in their peer-reviewed work, and were upfront about not correcting for Type I error. It just wasn't trumpeted in their marketing materials to investors.

89. And that same date, a second article posted on Seeking Alpha entitled "Sarepta

Therapeutics: Underappreciated Clinical And Regulatory Risk Following Analysis Of Prosensa

Failure," stated:

Disclosure: I have no positions in any stocks mentioned, but may initiate a short position in SRPT over the next 72 hours. (More...)

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Recently, two companies led the race in developing new drugs to treat Duchenne muscular dystrophy (DMD): eteplirsen from Sarepta Therapeutics (SRPT), and drisapersen from Prosensa (RNA) [partnered with (I}laxoSmithKline (C}SK)]. These

novel, late-stage drug candidates from both companies feature the same mechanism of action and target specific forms of DMD. Recently, and unfortunately for investors and patients, Prosensa/OSK's drisapersen failed to meet its primary endpoint (p = 0.41) and all secondary endpoints in its pivotal phase 3 clinical trial. The trial was double-blind, placebo controlled, and robust, enrolling 186 patients in 47 trial sites across 20 countries. Prosensa even possessed the coveted "Breakthrough Designation" from FDA, highlighting its preliminary efficacy and potential. In the accompanying conference call, management did not provide any additional analyses supporting efficacy, or offer any credible hypotheses for the lack of perceived clinical benefit. In short, it was a total failure.

However, Sarepta Therapeutics stock, reacted positively on the news, increasing almost 18% that day on heavy volume and later peaking near $56/share (although, the stock is now only up 14% since the announcement). One can only speculate, but the increase is presumably based on the notion that the major competitor has now been eliminated. But what does the Prosensa failure really mean for investors? We have done a thorough scientific analysis, which is described below.

Our objective analysis of drisapersen's failure and comparison with Sarepta's eteplirsen points to significantly increased clinical risk for Sarepta's proposed phase 3 confirmatory trials as well as plans for accelerated approval in 2014. We do not think the largely retail investor base, which is responsible for Sarepta's high valuation, has an understanding of these risks.

Eteplirsen and Drisapersen Mechanism of Action - The dystrophin gene is the largest gene in the body, consisting of 79 exons. In DMD, the open-reading frame of certain key exons is disrupted, resulting in a non-functional dystrophin protein and the severe symptoms and forms of DMD. While the chemistry backbone underlying drisapersen and eteplirsen differ, (explored later in the article), the mechanism of action is similar. These drugs both seek to skip exons (in this case, exon 51) and thereby correct the reading frame to enable the production of a novel, functional dystrophin protein. This novel, truncated dystrophin is designed to be similar to that seen in the milder Becker muscular dystrophy patients.

Currently, to measure efficacy in DMD, both SRPT and RNA utilize the 6 minute walk test (6MWT). This clinical endpoint is exactly what it sounds like: how far can a patient walk in 6 minutes. The idea is simple, for patients who still are able

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to walk; this ability will diminish over time until patients become wheel chair bound. Thus, measuring the stabilization/lack of regression in walking ability via the 6MWT is clinically meaningful. There is little doubt that FDA is moving

towards straightforward, all encompassing, and clinically meaningful endpoints such as this, but it also raises significant challenges. This endpoint is extremely variable, as we'll see below. As a result, this makes statistical analysis, powering, and interpretation of studies that much more difficult. Furthermore, this variability makes larger clinical trials a necessity. Before looking into the dystrophin hypothesis, a look at the 6MWT results provides insight into the challenges facing SRPT and other developers of novel drugs for DMD.

Prosensa's Clinical Trials - Drisapersen has been evaluated in multiple small trials

and the previously mentioned, pivotal trial.

In summary, the smaller phase 1/2 dose escalation study portion demonstrated stabilization in the long-term extension study where the patients received 6 mg/kg for 141 more weeks, stabilizing walking in 8 out of 10 patients, shown below:

In addition, Demand 2 and Demand 5 also demonstrated stabilization/improvement in walking.

So what happened and what does this mean?

There are a number of potential factors at work. First, it demonstrates that walking stabilization over long time periods is indeed possible, and even likely in smaller, open-label trials with a highly variable clinical endpoint. More broadly, many factors may be at work that are not necessarily specific to DMD. For example, doctors may select only the most promising patients, and parents who are most

motivated may enroll their children in these studies. The 6MWT is a highly variable endpoint. In addition, there is likely strong placebo effect, especially in open label trials. These factors can easily lead to a false signal of efficacy. This is undoubtedly the case for drisapersen, where the promising results in small numbers of patients did not translate to the results of a larger study.

Sarepta's eteplirsen - Taking a look now at SRPT's eteplirsen clinical trials results, a similar pattern emerges. While the trial designs are slightly different (ages varied slightly), many of the same characteristics are seen, facilitating the comparison. In

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particular, SRPT's primary efficacy trials, study 201 and its extension study 202, enrolled 12 patients, identical to the extension study by Prosensa which tested the phase 3 dose of 6 mg/kg. Eteplirsen was given in 30 mg/kg and 50 mg/kg doses,

and compared with a placebo arm. After 24 weeks, the placebo arm was randomized and patients (2 each) were either given 30 mg/kg or 50 mg/kg. Therefore, after 24 weeks all patients are receiving drug, although at 2 different doses.

In these trials, eteplirsen demonstrated improvement in walking. SRPT removed two patients from the modified intent to treat analysis due to rapid loss of ambulation early on (two patients in Prosensa's trial also lost ambulation). It is easy to get bogged down in the statistical details and the validity of the various tests used, but this misses the bigger picture. Looking at the aggregated data below from a recent SRPT poster, stabilization of walking was seen. Overall, the graphs do not look far different than the ones above for Prosensa. In addition, SRPT's trial was conducted at a single center and the extension portion was open label. Hence, we have the same set-up for SRPT as we had for RNA.

Dystrophin levels - In addition to the 6MWT, the clinical endpoint, dystrophin levels were also measured by muscle biopsy during these trials, primarily to validate the biological hypothesis and mechanism of action as well as to support regulatory approval. On the surface, the biological hypothesis is clean and logical; restoring semi-functional dystrophin production will restore, or at least, prevent further deterioration of muscle weakness. While Prosensa and Sarepta both measured dystrophin levels (they look at % of fibers expressing dystrophin as well

as intensity per fiber), there are differences in methodology and timing of biopsies. SRPT calibrates their results to baseline biopsies, while Prosensa does not explicitly do so for all patients. However, results can still be compared on a qualitative basis. It is well documented by both Prosensa and SRPT that patients have "revertant" fibers that express some dystrophin, and any analysis must take this into account. Overall, it appears that SRPT's eteplirsen acts more slowly, given the 0.8% increase in dystrophin positive fibers at 12 weeks at the 50 mg/kg dose and 22.4% at 24 weeks at the 30 mg/kg dose vs. Prosensa's drisapersen which appears to work much more quickly; large increases in overall dystrophin positive fibers (57%-75% in 7 weeks and earlier compared to baseline levels of 7% and lower signal intensity). Therefore, it is unlikely that eteplirsen will succeed based on this dystrophin data.

In addition, in study 201, there was a discrepancy in dystrophin production and its correlation with the 6MWT. Dystrophin production was measured for the 50 mg/kg

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dose and demonstrated a 0.8% increase in dystrophin positive fibers at 12 weeks (not stat. significant), but demonstrated stat. significance for the 50 mg/kg dose on the 6MWT combined with the significant dystrophin production at the 30 mg/kg

(22.5% at 24 weeks) but insignificant benefit on the 6MWT calls into question the biological hypothesis of dystrophin production and its associated clinical benefit. Also, the lack of a robust dose response in the 30 and 50 mg/kg arms calls for a larger study to confirm these results (the 30 mg/kg results in higher dystrophin positive fibers than the 50 mg/kg, and the opposite is true in the delayed treatment arm).

Key Publications: SRPT Annals of Neurology 2013, SRPT (AVI Biopharma) Lancet 2011, RNA NEJM 2011, RNA NEJM 2007.

FDA accelerated approval - As investors know, accelerated approval allows a drug to be approved based on a surrogate or an intermediate clinical 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. SRPT has held meetings with FDA to explore the potential for accelerated approval, and based on these meetings and conversations with FDA, SRPT believes and has disclosed that the agency is willing to consider approval of eteplirsen based on dystrophin

levels as a surrogate endpoint. Accelerated approval allows the drug to enter the market sooner, providing the sponsor runs confirmatory trials to measure the ultimate clinical benefit. In this case, the idea is that SRPT will then presumably confirm that the increased dystrophin levels lead to improved clinical outcomes and significant stabilization / improvement of walking long term.

However, this raises two key questions for the FDA reviewers (and investors):

1. Is increased dystrophin predictive of clinical benefit?

2. How much dystrophin is required for a clinical benefit?

The previous analysis of Prosensa's dystrophin data and comparison with Sarepta's data (although not all of it is available, particularly for the 50 mg/kg dose) suggest that at the current levels, the answer so far to 1) is no, dystrophin levels are not predictive of clinical benefit. Would higher doses over much longer time frame make a difference? Potentially, but not based on the evidence so far. Based on the

large amount of data that has been generated to date, which has not been

thoroughly analyzed by investors, we think the default position should be that

dystrophin levels are not predi dive of clinical benefit.

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A literature report characterizing different cohorts based on severity of disease provides clues to help answer question 2).

However, the use of dystrophin as a surrogate endpoint and its correlation with the 6MWT is not based on robust evidence. Furthermore, there is no clear evidence that eteplirsen produces more functional dystrophin than drisapersen, and in light of the drisapersen failure, there is extremely limited evidence to support that increases in the levels of dystrophin seen by RNA and SRPT are indicative of clinical benefit. In addition, the lack of a strong dose response for eteplirsen and lack of strong correlation with a clinical outcome casts doubt over the trial results. As such, it is highly unlikely that FDA will grant accelerated approval to SRPT based on the small, single center trial. It is likely that FDA will require them to run

a phase 3 trial prior to approval, which has a significant chance of failing to demonstrate efficacy, just as drisapersen did. We strongly believe, given the large amount of data now available, that the default assumption for investors should be that FDA will not grant accelerated approval and eteplisren will likely fail a large randomized study just as drisapersen did. We further believe that SRPT's proposed open label confirmatory trial with a "placebo" arm of patients with non-amenable mutations will be rejected by FDA.

(emphasis added).

90. Then, on November 12, 2013, Sarepta issued a press release announcing an update

on developments concerning eteplirsen and its intentions to submit an NDA:

Sarepta Therapeutics Announces FDA Considers NDA Filing for Eteplirsen Premature in Light of Recent Competitive Drug Failure and Recent DMD Natural History Data

FDA questions dystrophin as a biomarker due to failed studies of other investigational drugs for DMD;

FDA questions 6-minute walk test results for eteplirsen, suggesting study population should be stable over two-year timeframe due to recent natural history data;

FDA requests further discussion on endpoints, design of confirmatory clinical study

CAMBRIDGE, Mass. - November 12, 2013 - Sarepta Therapeutics, Inc. (NASDAQ: SRPT) today provided an update on its discussions with the U.S. Food and Drug Administration (FDA) regarding its planned New Drug Application (NDA) submission and confirmatory clinical study with eteplirsen for the treatment of Duchenne muscular dystrophy (DMD). Citing recent developments since

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Sarepta's last meeting with the agency, including a failed study with a competitive product and recent natural history data in DMD, the FDA indicated the new data raise "considerable doubt" about both the dystrophin biomarker and the supportive clinical efficacy assessed on the 6-minute walk test (6MWT) in the Phase JIb clinical study of eteplirsen. As a result of these recent data, the FDA stated that they "currently consider an NDA filing for eteplirsen as premature."

"We are very disappointed with the FDA's decision to reconsider their openness to a potential NDA filing based on our current data and the resultant impact this change may have on our efforts to achieve an earlier approval of eteplirsen," said Chris Garabedian, president and chief executive officer of Sarepta Therapeutics. "We strongly believe in the potential of eteplirsen to address a serious unmet medical need in DMD and we are committed to its development.

The FDA provided the feedback in pre-meeting comments and clarified them in a meeting with Sarepta that took place late last week to discuss the eteplirsen clinical program.

Excerpts from the FDA's pre-meeting comments on reconsidering an NDA filing included:

"Since our last meeting, a large phase 3 trial of drisapersen, a drug with a similar mechanism of action, was reported to be negative, despite increased expression of dystrophin. The disconnect between increased expression of dystrophin and clinical efficacy for drisapersen, combined with previous negative reports for PTC124, another drug thought to act by increasing dystrophin, raises considerable doubt about the biomarker, and consequentially, its ability to reasonably likely predict clinical benefit."

the quantity of dystrophin that might be necessary to be considered reasonably likely to predict clinical benefit is even less clear; small or perhaps even moderate increases are seemingly not enough, at least in the subpopulation of boys studied so far. An adequately validated quantitative assay for dystrophin now seems a prerequisite to further consideration of the biomarker as supportive of approval. Since our last meeting, our concern about the shortcomings of your current quantification methods has grown."

"Recent natural history data in DMD indicate that a baseline 6-Minute Walk Test (6MWT) [greather than or equal to] 350 meters predicts continued general stability for such patients, not the 75- to 83-meter yearly decline you suggest in the meeting package. Thus, considerable doubt is also cast on the efficacy support provided by your ongoing open-label study (4658-us-202, 96-week data submitted), in which baseline 6MWT was >350 mfor all patients."

the expected variability of 6MWT values appears sufficient to explain differences between arms on which the post-hoc analysis was based. Because of this, together with our lack of confidence in the capacity of your dystrophin

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biomarker to predict clinical benefit, we currently consider an NDA filing for eteplirsen as premature."

Additional excerpts from the FDA's pre-meeting comments on the eteplirsen confirmatory study design included:

"Recent trial failures in DMD suggest it may be productive to re-examine study enrollment criteria and endpoints.

it seems worthwhile to consider selection of other endpoints and/or populations for the next trial of eteplirsen. We stress that we would still accept 6MWT in an appropriately powered study; however, because 6MWT excludes both younger boys who cannot perform such a demanding test, and older boys who are no longer ambulatory, we are concerned that seemingly avoidable limitations on enrollment could undermine study feasibility. Many possible combinations of endpoints and subpopulations appear possible. Motor scales that measure a broader range of function and demand less sustained effort than 6MWT could be appropriate for a much wider range of boys, perhaps including non-ambulatory boys. To allow inclusion of a broader range of patients, a study could also be designed that mathematically combined findings from, for example, an ambulation endpoint in less advanced patients with findings from an upper-limb or respiratory endpoint in more advanced patients. We remain open to consideration of endpoints and populations you may suggest."

we believe that a placebo-controlled trial would be the most likely method for developing interpretable evidence of efficacy for eteplirsen, because efficacy endpoints in DMD are effort-dependent and susceptible to bias, and the natural history is highly variable and has recently improved with steroid use and advances in ancillary care. We would like to discuss the perceived barriers to conducting such a trial with you."

The FDA's request to discuss different clinical endpoints, combined endpoints, and different DMD subpopulations for a confirmatory clinical study, along with their questions about dystrophin as a biomarker and the need for a placebo-controlled study, will delay the initiation of dosing in the eteplirsen confirmatory study until at least the second quarter of 2014. A follow up meeting with FDA has been scheduled to take place this month to discuss the confirmatory study design.

(emphasis in bold added).

91. That same date, November 12, 2013, the Company held its earnings conference call

for the third quarter ended September 30, 2013.

[Garabediani Last Friday, at 4 PM Eastern Time, we had a meeting with the FDA that was intended to focus on finalizing our confirmatory study design with eteplirsen. ... While the express purpose of the meeting was to finalize our

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confirmatory trial design, the Agency provided unsolicited comments related to a change in their thinking on the regulatory status of eteplirsen, our clinical data, and our clinical development plans, as a result of new data that they have considered and interpreted since our last meeting in July. Specifically, they indicated that since the last meeting with Sarepta, and based on the recent failed Phase III trial of drisapersen (I}SK and Prosensa's exon-skipping drug candidate for DMD, as well as citing negative reports for PTC's therapeutic drug, ataluren, another drug using a different mechanism of action to attempt to produce dystrophin, along with recently published natural history data on DMD that their concern has increased. And it has raised considerable doubts about dystrophin as a biomarker, and about our supportive 6-minute walk efficacy data.

As a result, they have shifted their stance, from being open to considering an NDA for filing, to now considering an NDA filing for eteplirsen as premature. We do not fully understand nor do we agree with many of the FDA's comments and new perspectives, as we believe our dystrophin data has been well-characterized and compares favorably to, and is differentiated to other dystrophin-producing technologies including drisapersen and ataluren. And our 96 week 6-minute walk test data is not typical of what has been characterized in the broader natural history literature, and in clinical studies including the placebo and failed drisapersen ARMs of their Phase III study. With regard to our 6-minute walk test efficacy data, the FDA's decision to reconsider being open to NDA filing since our last meeting is based in part on recent national [sic] [natural] history data that has led them to believe that DMD boys that can walk over 350 meters at baseline of a study in their words quote, predicts general stability for such patients, end quote. Not the 75 to 83 meters that we had described for them based on historical data, and what has been reported in the greater than seven-year-old population of the Prosensa and OSK case study across both the drisapersen and placebo arms, respectively. That study also had a population that represented a similar exon-5 1 amenable population in our studies.

They stated that as a result of the new natural history data that quote, considerable doubt is also cast on the efficacy supports, end quote of eteplirsen, which was provided to them through 96 weeks from our Phase II extension study, and that quote, it may be productive to re-examine study enrollment criteria and endpoints, end quote in connection with a start of a confirmatory clinical study. These new perspectives and their request to re-examine study enrollment criteria, endpoints, and subpopulations will result in a delay in our clinical program, and the earliest we would expect to begin dosing in a confirmatory study will now be the second quarter of next year. Additionally, the agency has reiterated their demand for a placebo-controlled study because in their view quote, efficacy endpoints in DMD are effort-dependent and susceptible to bias, and the natural history is highly variable and has recently improved with steroid use and advances in ancillary care, end quote. Since the placebo-controlled trial would require a doubling of the sample size of our planned confirmatory study, and could pose problems obtaining IRB approval to obtain two surgical biopsies with general anesthesia in placebo patients in order to protect the blinding, this would significantly delay our ability to recruit

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an ambulatory age-appropriate exon-5 1 amenable population in the US. Recognizing the potential challenges of recruitment, the FDA suggested exploring additional subpopulations and endpoints, and were open to discussing novel approaches to designing a placebo-controlled study, although the type and extent of these endpoints and subpopulations remains open.

To be clear, we will be pursuing a more traditional path of approval, while we concurrently try to persuade the FDA to reconsider the potential of an early filing strategy for eteplirsen. However, we know that many patients had put a lot of hope into our ability to convince the FDA that the drug deserves early approval, and had expectations that with the potential NDA filing in the first half 2014, that the possibility of an eteplirsen FDA approval could have come in late 2014 or early 2015. The delay of our clinical study and the request by the FDA to revisit enrollment criteria and endpoints, and to consider the possibility of subpopulations and combinations of endpoints pushes the potential timeline of an eteplirsen approval out two years or more.

BRIAN SKORNEY, ANALYST, ROBERT W. BAIRD & COMPANY, INC.: Hi, good morning. Thanks for taking the question, and sorry to hear about the disappointing notification from the FDA. I guess, Chris, it sounds like a lot of what you are saying, you are still thinking about a potential for an early filing. Did the FDA leave any opening to reconsider this decision on the acceptability of an early filing? Or give us some color around what you think the path forward is here, and how hard and fast, the FDA is about say no to an early NDA?

CHRIS GARABEDIAN:

So we will continue this compiling those documents and NDA modules, in the hopes that we can convince them over the next weeks to months to reconsider. So I think, we believe the door is opened for them to reconsider this. But at this time what we have disclosed is all we can provide us an update at moment. But we do believe, just like the FDA kind of changed their position from July to now, we think, as we are able to describe more of the data, that they may change their position yet again.

KIMBERLY LEE, ANALYST, JANNEY MONTGOMERY SCOTT: Good morning, thanks for taking the questions. Apologize if I missed this, but what are your plans for the rest of the drugs in the pipeline? And what are the implications you think of, the results from the FDA on, with regards to the rest of your pipeline and clinical endpoints and study designs? Thank you.

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CHRIS GARABEDIAN: Yes, Kim, that is -- it's a great question, because our entire program was largely predicated on dystrophin as an acceptable surrogate biomarker. And so, we were going to do that with the eteplirsen study, because we can enroll enough patients to show that clinical benefit correlated to the dystrophin that we are capturing. Again, with the FDA calling into question dystrophin as a biomarker, we don't believe that is something that can be a firm decision. Because it would render us unable to get other drug approved for the rare exon, because we would not be able to power studies on a 6-minute walk or these other endpoints.

(emphasis added).

92. On the same date of the Company's disappointing announcement, November 12,

2013, Sarepta announced that "[through September 30, 2013, the Company has sold approximately

3.4 million shares under the 2013 ATM generating $123.0 million in net proceeds and has

completed the sales of common stock available under the arrangement." Thus, the Company was

able to generate much needed capital, i.e., net proceeds of $123 million at an average net price of

approximately $36.18 per share.

93. The market's reaction to the negative news of November 12, 2013 was pronounced.

Sarepta's stock price fell $23.40, a decline of 64% from its closing price of $36.56 per share on

November 11, 2013, to close at $13.16 per share on November 12, 2013 on extraordinary volume.

94. Numerous business writers and analysts commented on Sarepta's disappointing

news.

95. An article posted November 12, 2013 on the MotleyFool.coni website entitled

"Sarepta Shares Slammed in FDA Smackdown," commented:

Smackdown!

That's perhaps the best way to describe the impact from today's announcement that the Food and Drug Administration won't accept the New Drug Application, or NDA, for Sarepta Therapeutics' (NASDAQ: SRPT) eteplirsen. Sarepta's stock

plunged nearly 60% in early trading.

Considerable doubt

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The FDA told Sarepta that it considered the NDA filing for eteplirsen in treating Duchenne muscular dystrophy, or DMD, as "premature." This has been a concern for many observers, since Sarepta completed a phase 2 study of the drug with a

grand total of only 12 patients. But Sarepta's hope was that the FDA would look at what the company viewed as compelling evidence of efficacy.

Instead of seeing Sarepta's study results as compelling, the FDA expressed skepticism. The agency stated that there was "considerable doubt" about the use of dystrophin expression as a predictor of clinical benefit.

This doubt arose in part after Prosensa (NASDAQ: RNA) and (I}laxoSmithKline (NYSE: 05K) reported a stunning failure of their DMD drug, drisapersen, in a late-stage study. That double-blind study included 125 young boys taking drisapersen and 61 boys taking placebo. The patients in the drisapersen group didn't show any statistically meaningful difference in walking ability than those in the placebo group.

It wasn't just the Prosensa/Glaxo issue that hurt Sarepta, though. The FDA said that

"considerable doubt" (there's that phrase again) was cast on the positive findings from the six-minute walk test in Sarepta's phase 2 study. The agency felt that those stellar results reported by Sarepta could be explained by expected variability in patients with DMD.

In short, the FDA doesn't think dystrophin production is enough and that Sarepta's study results could be meaningless. That's a smackdown in the biotech world.

96. An article published on The Street.coni website that same date entitled "Sarepta

Serious Setback: FDA Says No Early Approval Filing for Eteplirsen (Updated)," commented:

The FDA has told Sarepta Therapeutics (SRPT) that it should not seek accelerated approval for its Duchenne muscular dystrophy drug eteplirsen because regulators have "considerable doubt" about results from the small phase II study, the company said Tuesday.

Sarepta shares are down 57% to $15.62 on the significant regulatory setback, which means the company will have to conduct a phase III study of eteplirsen -- with positive results -- before seeking approval.

The risk that FDA would ask Sarepta for a larger and positive phase III study of eteplirsen as a pre-requisite for an approval filing increased after GlaxoSmithKline

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(OSK) and Prosensa (RNA) announced negative results from a pivotal study of their competitive DMD drug drisapersen. What's more surprising, however, is FDA apparently no longer believes in what appeared to be promising and positive data

from Sarepta's phase II eteplirsen study, albeit conducted injust 12 DMD patients. Or, perhaps regulators had doubts about the eteplirsen data all along.

In its meeting with Sarepta, FDA questioned the robustness of the six-minute walk test data and the correlation with dystrophin production resulting from the phase II study.

Sarepta shares soared in October when drisapersen failed because investors believed eteplirsen had the DMD market to itself. The lack of competition was more of a positive than any risk of FDA asking Sarepta to run a pre-approval phase III study. Sarepta shares are tanking today because now FDA appears to have lost faith in the exon-skipping technology that underlies both drisapersen and eteplirsen. Sarepta and its investor fans believe etepiirsen is different, more potent, than drisapersen. They believe drisapersen's failure shouldn't cast doubts on eteplirsen. But FDA apparently disagrees, based on comments made public today by Sarepta.

It's these FDA doubts coupled with uncertainty about the design and timing of the now-necessary eteplirsen phase III study, which explains why Sarepta shares are getting hit so hard Tuesday.

(emphasis added).

97. An article in Forbes dated November 12, 2013, entitled "What The Delay of a

Promising Muscular Dystrophy Drug Means for Patients, Investors and All of Biotech,"

commented on Sarepta's negative results:

Unfortunately, great results from small trials have a history of not bearing out in larger studies. Even for rare disease drugs, this study was tiny. Worse, the Sarepta results only look good when two of the 12 patients are excluded - two boys were too sick to be helped by the drug. The FDA usually insists that clinical trials be presented in what is known as an "intent-to-treat" analysis, which means that if you even thought about treating a patient they need to be included when you do the math on the study's results. This is intended to keep scientists from lying to themselves, convincing themselves that a drug works when it doesn't. One biotech executive with a great deal of experience in rare diseases told me recently that this issue meant the data "would never fly" with the FDA. The recent failure of a similar, but less effective, drug from Prosensa and (I}laxoSmithKline (1+5K -0.38% made the odds dimmer.

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What made FDA approval seem plausible is that the agency has just recently, as a result of a new law, gained the ability to use the "accelerated approval," which means the FDA can approval a drug conditionally, and then automatically yank it if it turns out the medicine doesn't work in larger studies. FDA could have approved eteplirsen, the thinking went, and then design some kind of study that allowed it to confirm the drug's efficacy - perhaps, Sarepta was suggesting, comparing boys on eteplirsen to those whose Duchenne was caused by a different mutation, preventing any boy who could benefit from having to get placebo.

That's not going to happen now. The FDA wants a placebo controlled study. The good news is that for a small study, these results are still compelling, and if Sarepta does run a larger study there is a reasonable chance it will turn out positive. So after the stock has gotten beaten up over this, Sarepta could be a buy.

Still, Sarepta Chief Executive Chris Garabedian should be chastened He has been overly effusive and optimistic in his public statements about eteplirsen and the odds of an early approval to patient groups and investors. It's time for realism now, and he should make sure he has someone on his team who thinks that the odds ofgetting eteplirsen to market could be long and hard andfull of challenges, so that he can make sure he does the right study. If eterplirsen is less effective than it seems - but still effective - the study designs he was discussing might not show it. A placebo-controlled trial will.

(emphasis added).

98. A similar article posted November 13, 2013 on TheStreet.coni entitled "A Post-

Mortem on Sarepta's Epic Explosion, Mea Culpa Included," stated:

I was wrong to be bullish on Sarepta, even if I had warned recently about greater regulatory risk. I'll have more to say about my mistakes below, but first let's start with some thoughts from a fund manager who has been critical of Sarepta and short the stock.

I can't identify him by name but he made the right call and he does a good job explaining

why Sarepta's stock price took such a beating. Below is an email from this investor, reprinted with his permission:

The FDA's issues with trial design are so wide-ranging that it seems like wishful thinking that Sarepta will be able to agree on a study design and start enrolling by the second quarter 2014.

Major questions with dystrophin quantitative assay. Questions with results of anything less than two years. Need for a larger study to power the six-minute walk test (6MWT) data. Possible need to expand study population both high and low and go beyond 6MWT as primary endpoint. The FDA is very deeply skeptical and Sarepta will have a difficult time

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coming to a study design that the company thinks they can do and that the FDA will be satisfied with.

And any trial seems likely to last 2 years. Seems to me that even if all goes well, approval would get pushed out much more than two years. They're going to spend 9 months arguing over study design and probably won't start enrolling until early 2015. Two-year trial plus filing and approval. Sounds like early 2018 approval at best.

I have to say, this is consistent with worries resulting from the Prosensa trial that the market

ignored. But it's actually even more negative that I expected. I thought the FDA would just say, do a larger trial along the same lines. What they're saying is much more confused than that. What is a valid marker and what do you need to get the data to support it?

It makes you wonder whether the FDA really changed their minds lately or 4fSarepta misrepresented (through wishful thinking or worse) what the FDA had been telling them all along.

How did I get Sarepta wrong? Without a doubt, I have been a Sarepta supporter and a believer in eteplirsen. My biggest mistake: Having more confidence in the tiny, 12-patient eteplirsen phase II study than I should have.

In my defense, I was clear about the higher regulatory risk facing Sarepta following the failure of GlaxoSmithKline (OSK) and Prosensa's (RNA) drisapersen phase III study. What I didn't anticipate was FDA "rejecting" eteplirsen before the drug was even filed.

My worst-case scenario was Sarepta filing eteplirsen based on the phase II study, FDA reviewing the application but then rejecting the drug with a request for a confirmatory phase III study. I didn't anticipate FDA not allowing the early filing

to happen at all. Tuesday's scenario was not something I thought would happen. Big mistake.

Some additional thoughts and observations in random order:

6. Sarepta CEO Chris Garabedian used Tuesday conference call to send the not- so-subtle message that FDA was to blame for eteplirsen regulatory setback. Ifeel like the agency could have definitely handled the situation better, mainly by

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shutting down talk of an accelerated approvalfiling months ago. But I also agree again with Forbes' Herper that Sarepta shares some of the blame:

Still, Sarepta Chief Executive Chris Garabedian should be chastened He has been overly effusive and optimistic in his public statements about eteplirsen and the odds of an early approval to patient groups and investors. It's time for realism

now, and he should make sure he has someone on his team who thinks that the

odds ofgetting eteplirsen to market could be long and hard andfull of challenges, so that he can make sure he does the right study. If eterplirsen is less effective than it seems - but still effective - the study designs he was discussing might not show it. A placebo-controlled trial will.

(emphasis added).

99. Since the close of the Class Period, Sarepta has continued to struggle in its efforts

to prepare an NDA for eteplirsen that has any probability of being accepted and approved by the

FDA in the near future. Most recently, on July 10, 2014, Sarepta announced disappointing 144-

week data from its study of eteplirsen.

VIII. ADDITIONAL ALLEGATIONS OF SCIENTER

A. Defendants Knew, or Should Have Known in the Absence of Recklessness, that Their Class Period Statements Were Materially False or Misleadiiw

100. Defendants Gabaredian, Kaye and Mahatame are seasoned veterans of the

biopharmaceutical industry and are well-versed in the regulations, practices and approval process

of the FDA. Garabedian started his biopharmaceutical career in 1991 as a consultant with

Migliara/Kaplan Associates and held positions with Gilead Sciences (VP Corporate Development,

VP Marketing and VP Medical Affairs), Celgene (responsible for business development

transactions), COR Therapuetics, Inc. and Abbott Laboratories prior to joining Sarepta.

Mahatame, who has worked in the pharmaceutical industry since at least 1997, held senior

positions with Celgene (including SVP Corporate Development and SVP Finance) prior to joining

Sarepta. Prior to joining Sarepta as CMO Kaye served as Genzyme's Group Vice President for

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Clinical Development and Therapeutic Head for Lysosomal Storage Disorders and

Neurodegenerative Diseases since 2007, and in additional leadership roles in Clinical

Development and Medical Affairs over 10 years, developing specific experience with pediatric

neuromuscular conditions. Kaye played a leadership role in gaining Myozyme's approval for

Pompe Disease and oversaw collaborations in this field, including the development of ataluren for

DMD.

101. Thus, Defendants were well aware of the limitations of/deficiencies in its eteplirsen

data set and the skepticism this would cause the SEC in considering whether - based on this limited

data set -- to accept for filing an NDA for eteplirsen and/or to approve eteplirsen to be marketed

for the treatment of DMD. CW 3 explained that Sarepta's senior management reviewed the

clinical data for eteplirsen trials, recalling that the clinical data originated at Nationwide Children's

Hospital, the data was then refined in Sarepta's Biostatistics Department, and the data was then

presented to senior management for review. CW 3 further explained that Defendant Garabedian

(CEO), in particular, was very "hands on" in the design of the eteplirsen clinical protocol,

interpretation of clinical data, and medical writing of the data. CW 3 recalled that Defendant

Garabedian frequently requested that clinical documents regarding eteplirsen be edited per his

comments and instructions.

102. Moreover, Defendants, particularly Kaye and Garabedian, based on their

experience must have been aware that the FDA had a firm intent-to-treat policy, that Sarepta had

deviated from these intent-to-treat guidelines by excluding two of the 12 patients from its statistical

analysis of the 6-minute walk test, the study's key secondary endpoint and principal clinical

outcome measure, and that such a deviation would not be accepted by the FDA, in the FDA's

analysis of the eteplirsen data. Defendants were also aware that when the data from the two

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outlying patients was included in Sarepta's analysis of the 30 mg/kg dose, there was no statistically

significant difference of the overall mobility in the 6 minute walk test between patients on

eteplirsen and those on placebo; and when the results of patients on 50 mg/kg were combined with

the results of the 30 mg/kg patients, without eliminating the 2 patients who lost ambulation, there

was no significant statistical difference versus placebo. This is evidenced in Sarepta's report on

the Phase JIb clinical trial published in the Annals of Neurologly—a report co-authored by

Defendant Kaye.

103. Thus, Defendants knew that there was not a strong correlation between the

increased dystrophin levels produced by eteplirsen and stabilization of walking ability: (1) based

on, among other things, the two patients that showed significant increases in dystrophin levels, but

nevertheless completely lost ambulation; and (2) then later based on the results of the Prosena

Phase III trial where significant increases in dystrophin levels in the drisapersen treated patients

did not result in a statistically significant difference in their six mile walk test results versus those

of the placebo treated patients.

104. Even absent the modified-intent-to-treat analysis utilized by the Company,

Sarepta's eteplirsen data set was problematic, as Defendants knew, because it was based on the

limited patient population of 12 patients (including the placebo group) - a sample size that Sarepta

further reduced to only 10 patients, after the twins were excluded from the 6-minute walk test

analysis. Although Defendants acknowledged that Sarepta's sample population was small for an

NDA submission, they assured investors that the Company had vetted it with the FDA and that it

would not be a problem. For example, in Sarepta's August 8, 2013 earnings call, Defendant

Garabedian stated: "So again, many sponsors who might do two large well controlled studies

where they know based on the guidelines that it would be acceptable for an NDA filing, we wanted

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to get guidance a priori before we put all of the effort that Ed described is needed to submit an

NDA. And so we got our answer and this is why we're very confident in moving forward with that

NDA submission....

105. Despite Defendants' assurances, it was recognized at senior levels of the Company

that the small sample size would make FDA approval problematic/difficult. As CW 1 (former

Senior Clinical Director at Sarepta) explained, the substantially small group of clinical participants

posed further challenges, since participant dropouts would have a significant impact on the trial

results/data and legitimacy, in that it called into question what could be viewed as an

incomprehensive data set. According to CW 1, "it was a long shot that the FDA would have

approved [eteplirsen] based on the small number ofpatients." CW 1 further explained that "a

lot of those relative endpoints are hard to measure with a small number of patients." Prospective

joint venture partners viewed the circumstances similarly. According to CW 2 (Associate Director

of Business Development at Sarepta from October 2011 to May 2013), two concerns that these

prospective partners repeatedly raised were: (1) there was no previous clinical data history for this

type of indication; and (2) the clinical trial participant pool was very small. As a result of these

two issues, CW 2 explained, the companies that CW 2 courted expressed doubt that the drug would

be approved by the FDA. CW 2 reported to Sarepta's General Counsel and to Sarepta's CEO,

Defendant Garabedian, and also worked closely with Sarepta's CMO, Defendant Kaye. The small

population was viewed as similarly problematic by Dr. Guarino who found that "Sarepta's Phase

II clinical trial, consisting of only 12 patients, was simply not robust enough to establish a safe and

effective dose. A patient population of 12 lends itself to results that may not be indicative of the

drug's effects but which may simply be anomalous. Even under an accelerated approval process,

if agreed to by the FDA, Sarepta would have had to evaluate a more robust patient population that

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would satisfy the FDA in order to gain the NDA approval to market eteplirsen." (Guarino Report

at ¶34).

106. Moreover, Defendants knew that the chances of receiving FDA approval were

made even less likely based on their decision to proceed with the Phase II eteplirsen trial without

first obtaining a Special Protocol Assessment from the FDA. Special Protocol Assessments

provide the sponsor with an opportunity to receive the FDA's agreement as to the sufficiency of a

particular protocol on the front end. CW 1 explained that while foregoing Special Protocol

Assessments has proved a successful strategy for some drugs in the past, it was a much riskier

strategy for eteplirsen because the FDA had never before approved a drug in eteplirsen's class.

Defendants would also have been aware of their decision not to consult with the FDA on trial

design for eteplirsen, as CW 1 explained, which opened Sarepta up to a "very finicky" review

criteria from the FDA's Neurology Division. Despite Defendants' decision not to seek a Special

Protocol Assessment or to consult with the FDA on trial design, Defendants' repeatedly touted

their communications with, and guidance from, the FDA and thereby suggested that the Company

had received as much FDA guidance as possible.

107. It is also apparent that the FDA had raised more concerns about Sarepta's eteplirsen

data set and its sufficiency to support an NDA filing than Defendants led investors to believe.

108. First, this is evident from Sarepta's disclosure in its July 24, 2013 press release that

the FDA had "requested additional information related to methodology and verification of

dystrophin quantification." As stated by Dr. Guarino, "it is clear that the FDA viewed the clinical

data that Sarepta had submitted as insufficient, which could render the entire clinical trial

unacceptable," and that "the backgrounds of Sarepta's management, ... in particular Sarepta's

Senior Vice President and Chief Medical Officer Ed Kaye, strongly suggest that they knew there

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was no reasonable basis for their statements [that Sarepta's Phase II data set was sufficient for an

NDA filing] and for their dismissal of the FDA's direct statement that additional preliminary data

would need to be submitted." (Guarino Report at ¶31). However, Defendants deemphasized this

request and repeatedly touted that the FDA had deemed Sarepta's "Phase II data set [to be]

sufficient for them to consider an NDA filing" (Defendant Garabedian on August 8, 2013) and

even went so far as to indicate that the FDA viewed the Phase II "clinical outcomes" to be sufficient

(see, e.g., Garabedian's statement on August 13, 2013: "But more importantly, they said the

totality of our dataset, everything that they have reviewed to date, led them to say they're open to

considering an NDA filing, which says that they're considering the totality of a data including the

clinical outcomes and we know from our precedent.").

109. Second, based on post-Class Period statements from the FDA and from Defendants

themselves, it evident that during the Class Period Defendants exaggerated the FDA's comments

regarding eteplirsen. During the Class Period, Defendants repeatedly emphasized that the FDA

had "provid[ed] clear feedback and direction in their communication" 8 and further stated that

Sarepta had "obtain[ed] feedback from the FDA that confirms our Phase II data set is sufficient

for them to consider an NDA filing." 9 In contrast, however, in Sarepta's November 12, 2013

disclosures, the FDA is quoted as saying "since our last meeting, our concern about the

shortcomings ofyour current quantification methods has grown." The FDA's post-Class Period

statement demonstrates that the FDA had already expressed concern about Sarepta's quantification

methods in its July 2013 meeting with Sarepta, as further evidenced by the FDA's request during

that meeting that Sarepta provide more data on that issue. In fact, Defendant Garabedian all but

8 Defendant Garabedian speaking during Sarepta's July 24, 2013 conference call.

Defendant Garabedian speaking during Sarepta's August 8, 2013 conference call.

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admitted that he had misleadingly exaggerated the significance of the FDA's July 2013

communications with the Company and the prospects of the FDA's acceptance for filing of an

NDA in the first half of 2014.

110. For instance in Sarepta's November 12, 2013 earnings conference call, Defendant

Garabedian acknowledged that the FDA only "kind of changed their position from July [2013]:"

So we will continue this compiling [of] those documents and NDA modules, in the hopes that we can convince them over the next weeks to months to reconsider. So I think, we believe the door is opened for them to reconsider this. But at this time what we have disclosed is all we can provide us an update at moment. But we do believe, just like the FDA kind of changed their position from July to now, we think, as we are able to describe more of the data, that they may change their position yet again.

(emphasis added).

111. And in comments made in response to investors' questions at the December 2, 2014

Deutsche Bank BioFEST Conference, Garabedian suggested that Sarepta's July 24th

characterization of the significance of the FDA's communications to the Company in July 2013

were rash and overstated:

ROBYN KARNAUSKAS: I have another question from an investor. My question is, this goes back to the trust issue, so a lot of investors now maybe more skeptical about Sarepta. So what have you learned as the CEO from this experience and how will this change how you run the company over the next year?

CHRIS GARABEDIAN . .... Now unfortunately depending on how you look at it, FDA dialog is very material to this company and our pathway and trajectory. And so it makes what it would be under normal circumstances or many companies where run-of-the-mill discussions with the FDA that might be able to play out over longer periods of time, I think the market is seeing this play out real-time And they're watching this process that can sometimes not be as smooth and clear and linear, and it's a negotiation, a discussion that evolves over time.

So the pre-meeting comments were an example of that Many times pre-meeting comments can represent a more conservative or strident view, and sometimes meeting minutes can be more conciliatory or have a more open-minded view on things. But we don't have the benefit ofthat We had to issue something that was material.

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We pushed them to say are you sure you're not suspending your comments until the meeting minutes? And they weren't willing to go that far. So we had to disclose Meeting minutes will come in December. if there's nothing new then we won't disclose anything. If there's something, a material change, then we would obviously be obligated to disclose that.

But I think, honestly I mean, you try to -- the lesson learned is maybe to remind everybody exactly about expectations and not let investor expectations run ahead of what the company is actually saying and what we are communicating.

(emphasis added).

112. Finally, commentators suggested that investors may have been misled:

• "What's more surprising, however, is FDA apparently no longer believes in what appeared to be promising and positive data from Sarepta's phase II eteplirsen study, albeit conducted in just 12 DMD patients. Or, perhaps regulators had doubts about the eteplirsen data all along." (The Street, "Sarepta Serious Setback: FDA Says No Early Approval Filing For Eteplirsen (updated)" (Nov. 12, 2013)) (emphasis added);

• "Sarepta Chief Executive Chris Garabedian should be chastened. He has been overly effusive and optimistic in his public statements about eteplirsen and the odds of an early approval to patient groups and investors." (Forbes, "What the Delay of a Promising Muscular Dystrophy Drug Means for Patients, Investors and All of Biotech" (Nov. 12, 2013)); and

• "It makes you wonder whether the FDA really changed their minds lately or if Sarepta misrepresented (through wishful thinking or worse) what the FDA had been telling them all along." (The Street, "A Post-Mortem on Sarepta's Epic Explosion, Mea Culpa Included" (Nov. 13, 2013)).

113. Indeed, Defendants' decision not to publish minutes of Sarepta's meetings with the

FDA or the FDA's pre-meeting comments further suggests that they were telling investors the

story they wanted to tell rather than the story that most accurately reflected their communications

with the FDA.

B. Motive

114. Defendants were motivated to mislead investors in order to raise, at favorable

prices, capital for Sarepta's operations and to fund its eteplirsen development activities.

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115. As of June 30, 2013, Sarepta had $156.2 million in cash and cash equivalents on its

balance sheet, down from its December 31, 2012 balance of $187.6 million. From its inception

on July 22, 1980 through June 30, 2013 the Company suffered losses of $492.4 million on just

$180.9 million in revenues. During the six month period ended June 30, 2013 the Company posted

revenues of just $2.9 million and a net loss of $61.1 million. Thus, Sarepta was almost entirely

dependent on financing activities as a source of capital to conduct operations.

116. On July 3, 2013, Sarepta announced that it had entered into a second At the Market

('ATM") offering (the 2013 ATM) allowing the Company to sell, at its option, up to an aggregate

of $125 million of shares of common stock at market prices. The Company further announced

that "Sarepta intends to use any proceeds from this offering for general corporate purposes,

including for manufacturing scale up for eteplirsen, the planned confirmatory Phase III clinical

study of eteplirsen and early development activities related to follow-on Duchenne muscular

dystrophy drugs and other programs."

117. On August 8, 2013 Sarepta announced that "[s]ubsequent to second quarter end

[June 30, 2013] and up to August 7, the Company raised $37.9 million in proceeds and issued

approximately 1.0 million shares of common stock under the At-The-Market (ATM) equity

financing that was put in place in July 2013."

118. On November 12, 2013, Sarepta announced that "through September 30, 2013, the

Company has sold approximately 3.4 million shares under the 2013 ATM generating $123.0

million in net proceeds and has completed the sales of common stock available under the

arrangement."

119. Thus, as a result of the artificial inflation of the prices of Sarepta common stock

caused by Defendants' false and misleading statements, the Company was able to generate much

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needed capital (net proceeds of $123 million) at an average net price of approximately $36.18 per

share. In contrast, when the truth was revealed before the market opened on November 12, 2013,

Sarepa's common stock price fell $23.40 per share, a decline of 64% from its closing price of

$36.56 per share on November 11, 2013, to close at $13.16 per share on November 12, 2013.

IX. PLAINTIFFS' CLASS ACTION ALLEGATIONS

120. Plaintiffs bring this action as a class action pursuant to Federal Rule of Civil

Procedure 23(a) and (b)(3) on behalf of a Class, consisting of all those who purchased or otherwise

acquired Sarepta securities during the Class Period (the "Class") and were damaged thereby.

Excluded from the Class are Defendants herein, the officers and directors of the Company at all

relevant times, members of their immediate families and their legal representatives, heirs,

successors or assigns and any entity in which Defendants have or had a controlling interest.

121. The members of the Class are so numerous that joinder of all members is

impracticable. Throughout the Class Period, Sarepta securities were actively traded on the

NasdaqOS. While the exact number of Class members is unknown to Plaintiff at this time and can

be ascertained only through appropriate discovery, Plaintiffs believe that there are hundreds or

thousands of members of the proposed Class. Record owners and other members of the Class may

be identified from records maintained by Sarepta or its transfer agent and may be notified of the

pendency of this action by mail, using the form of notice similar to that customarily used in

securities class actions.

122. Plaintiffs' claims are typical of the claims of the members of the Class as all

members of the Class are similarly affected by Defendants' wrongful conduct in violation of

federal securities law that is complained of herein.

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123. Plaintiffs will fairly and adequately protect the interests of the members of the Class

and have retained counsel competent and experienced in class and securities litigation. Plaintiffs

have no interests antagonistic to or in conflict with those of the Class.

124. Common questions of law and fact exist as to all members of the Class and

predominate over any questions solely affecting individual members of the Class. Among the

questions of law and fact common to the Class are:

. whether the federal securities laws were violated by Defendants' acts as alleged herein;

. whether statements made by Defendants to the investing public during the Class Period misrepresented material facts about the business, operations and management of Sarepta;

. whether the Individual Defendants caused Sarepta to make false and misleading statements during the Class Period;

. whether Defendants acted knowingly or recklessly in making false and misleading statements;

. whether the prices of Sarepta securities during the Class Period were artificially inflated because of the Defendants' conduct complained of herein; and

. whether the members of the Class have sustained damages and, if so, what is the proper measure of damages.

125. A class action is superior to all other available methods for the fair and efficient

adjudication of this controversy since joinder of all members is impracticable. Furthermore, as the

damages suffered by individual Class members may be relatively small, the expense and burden

of individual litigation make it impossible for members of the Class to individually redress the

wrongs done to them. There will be no difficulty in the management of this action as a class action.

126. Plaintiffs will rely, in part, upon the presumption of reliance established by the

fraud-on-the-market doctrine in that:

. Defendants made public misrepresentations or failed to disclose material facts during the Class Period;

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. the omissions and misrepresentations were material;

. Sarepta securities are traded in an efficient market;

the Company's shares were liquid and traded with moderate to heavy volume during the Class Period;

the Company traded on the NasdaqOS and was covered by multiple analysts;

unexpected material news about Sarepta was rapidly reflected and incorporated into Sarepta's stock price during the Class Period;

• as a result of the foregoing, Sarepta's common stock promptly digested current information about Sarepta from all publicly available sources and reflected such information in Sarepta's stock price; and

• Plaintiffs and members of the Class purchased and/or sold Sarepta securities between the time the Defendants failed to disclose or misrepresented material facts and the time the true facts were disclosed, without knowledge of the omitted or misrepresented facts.

127. Based upon the foregoing, Plaintiffs and the members of the Class are entitled to a

presumption of reliance upon the integrity of the market.

COUNT I

(Against All Defendants For Violations of Section 10(b) of the Exchange Act and SEC Rule lOb-S Promulgated Thereunder)

128. Plaintiffs repeat and reallege each and every allegation contained above as if fully

set forth herein.

129. This Count is asserted against Defendants and is based upon Section 10(b) of the

Exchange Act, 15 U.S.C. § 78j(b), and Rule lOb-S promulgated thereunder by the SEC.

130. During the Class Period, Defendants engaged in a plan, scheme, conspiracy and

course of conduct, pursuant to which they knowingly or recklessly engaged in acts, transactions,

practices and courses of business which operated as a fraud and deceit upon Plaintiffs and the other

members of the Class; made various untrue statements of material facts and omitted to state

material facts necessary in order to make statements made, in light of the circumstances under

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which they were made, not misleading; and employed devices, schemes and artifices to defraud in

connection with the purchase and sale of securities. Such scheme was intended to, and, throughout

the Class Period, did: (i) deceive the investing public, including Plaintiffs and other Class

members, as alleged herein; (ii) artificially inflate and maintain the market price of Sarepta

securities; and (iii) cause Plaintiffs and other members of the Class to purchase Sarepta securities

and options at artificially inflated prices. In furtherance of this unlawful scheme, plan and course

of conduct, Defendants, and each of them, took the actions set forth herein.

131. Pursuant to the above plan, scheme, conspiracy and course of conduct, each of the

Defendants participated directly or indirectly in the preparation and/or issuance of the SEC filings,

press releases and other statements and documents described above, including statements made to

securities analysts and the media that were designed to influence the market for Sarepta securities.

Such reports, filings, releases and statements were materially false and misleading in that they

failed to disclose material adverse information and misrepresented the truth about Sarepta's

finances and business prospects.

132. By virtue of their positions at Sarepta, Defendants had actual knowledge of the

materially false and misleading statements and material omissions alleged herein and intended

thereby to deceive Plaintiffs and the other members of the Class, or, in the alternative, Defendants

acted with reckless disregard for the truth in that they failed or refused to ascertain and disclose

such facts as would reveal the materially false and misleading nature of the statements made,

although such facts were readily available to Defendants. Said acts and omissions of Defendants

were committed willfully or with reckless disregard for the truth. In addition, each defendant knew

or recklessly disregarded that material facts were being misrepresented or omitted as described

above.

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133. Information showing that Defendants acted knowingly or with reckless disregard

for the truth is peculiarly within Defendants' knowledge and control. As the senior executives

and/or directors of Sarepta, the Individual Defendants had knowledge of the details of Sarepta's

internal affairs.

134. The Individual Defendants are liable both directly and indirectly for the wrongs

complained of herein. Because of their positions of control and authority, the Individual

Defendants were able to and did, directly or indirectly, control the content of the statements of

Sarepta. As officers and/or directors of a publicly-held company, the Individual Defendants had

a duty to disseminate timely, accurate, and truthful information with respect to Sarepta's

businesses, operations, future financial condition and future prospects. As a result of the dis-

semination of the aforementioned false and misleading reports, releases and public statements, the

market price of Sarepta securities was artificially inflated throughout the Class Period. In

ignorance of the adverse facts, alleged herein, were concealed by Defendants, Plaintiffs and the

other members of the Class purchased Sarepta securities at artificially inflated prices and relied

upon the price of the securities, the integrity of the market for the securities and/or upon statements

disseminated by Defendants, and were damaged thereby.

135. Had Plaintiffs and the other members of the Class known the truth, they would not

have purchased such securities, or would not have purchased them at the inflated prices that were

paid. At the time of the purchases by Plaintiffs and the Class, the true value of Sarepta securities

was substantially lower than the prices paid by Plaintiffs and the other members of the Class. The

market price of Sarepta securities declined sharply upon public disclosure of the facts alleged

herein to the injury of Plaintiffs and Class members.

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136. By reason of the conduct alleged herein, Defendants knowingly or recklessly,

directly or indirectly, have violated Section 10(b) of the Exchange Act and SEC Rule lOb-5.

137. As a direct and proximate result of Defendants' wrongful conduct, Plaintiffs and

the other members of the Class suffered damages in connection with their respective purchases

and sales of the Company's securities during the Class Period, upon the disclosure that the

Company had been making false and misleading statements to the investing public.

COUNT II

(Violations of Section 20(a) of the Exchange Act Against The Individual Defendants Garabedian, Mahatme and Kaye)

138. Plaintiffs repeat and reallege each and every allegation contained in the foregoing

paragraphs as if fully set forth herein.

139. During the Class Period, the Individual Defendants participated in the operation

and management of Sarepta, and conducted and participated, directly and indirectly, in the conduct

of Sarepta's business affairs. Because of their senior positions, they knew the adverse non-public

information about Sarepta's misstatements and omissions of material fact.

140. As officers and/or directors of a publicly owned company, the Individual

Defendants had a duty to disseminate accurate and truthful information with respect to Sarepta's

business, operations, financial condition and results of operations, and to correct promptly any

public statements issued by Sarepta which had become materially false or misleading.

141. Because of their positions of control and authority as senior officers, the Individual

Defendants were able to, and did, control the contents of the various reports, press releases and

public filings which Sarepta disseminated in the marketplace during the Class Period concerning

Sarepta's business and operations. Throughout the Class Period, the Individual Defendants

exercised their power and authority to cause Sarepta to engage in the wrongful acts complained of

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herein. The Individual Defendants therefore, were "controlling persons" of Sarepta within the

meaning of Section 20(a) of the Exchange Act. In this capacity, they participated in the unlawful

conduct alleged which artificially inflated the market price of Sarepta securities.

142. Each of the Individual Defendants, therefore, acted as a controlling person of

Sarepta. By reason of their senior management positions and/or being directors of Sarepta, each

of the Individual Defendants had the power to direct the actions of, and exercised the same to

cause, Sarepta to engage in the unlawful acts and conduct complained of herein. Each of the

Individual Defendants exercised control over the general operations of Sarepta and possessed the

power to control the specific activities which comprise the primary violations about which

Plaintiffs and the other members of the Class complain.

143. By reason of the above conduct, the Individual Defendants are liable pursuant to

Section 20(a) of the Exchange Act for the violations committed by Sarepta.

PRAYER FOR RELIEF

WHEREFORE, Plaintiffs demand judgment against Defendants as follows:

A. Determining that the instant action may be maintained as a class action under Rule

23 of the Federal Rules of Civil Procedure, and certifying Plaintiff as the Class representative;

B. Requiring Defendants to pay damages sustained by Plaintiff and the Class by reason

of the acts and transactions alleged herein;

C. Awarding Plaintiffs and the other members of the Class prejudgment and post-

judgment interest, as well as their reasonable attorneys' fees, expert fees and other costs; and

D. Awarding such other and further relief as this Court may deem just and proper.

DEMAND FOR TRIAL BY JURY

Plaintiffs hereby demand a trial by jury.

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Dated: July 21, 2014 Is! William B. Federman William B. Federman (admitted pro hac vice) FEDERMAN & SHERWOOD 10205 N. Pennsylvania Avenue Oklahoma City, OK 73120 Telephone: (405) 235-1560 Facsimile: (405) 239-2112

[email protected]

Lead Counsel for Plaintiffs

Alan L. Kovacs Law Office of Alan L. Kovacs 257 Dedham Street Newton, MA 02461 Telephone: (617) 964-1177 Facsimile: (617) 332-1223 alankovacsyahoo.com

Liaison Counsel for Plaintiffs

Gregory M. Nespole WOLF HALDENSTEIN ADLER FREEMAN & HERZ LLP 270 Madison Avenue New York, NY 10016 Telephone: (212) 545-4600 Facsimile: (212) 545-4653

Additional Counsel for Plaintiffs

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CERTIFICATE OF SERVICE

This is to certify that on July 21, 2014, I electronically transmitted this document to the Clerk of Court using the ECF System for filing and transmittal of a Notice of Electronic Filing to the counsel of record.

Is! William B. Federman William B. Federman

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united states district court for the district of...

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