Sarepta Therapeutics (NASDAQ: SRPT ) announced yesterday after the market closed that the U.S. Food and Drug Administration requested additional information before it could make a decision on acceptability of an accelerated approval filing for its Duchenne muscular dystrophy drug eteplirsen. Sarepta shares were down more than 12% in early trading.
This market reaction reflects a decidedly negative view of the FDA news, but is that outlook on target? Here are two ways to look at it.
If the FDA needs more information after receiving a briefing summary about the eteplirsen dataset and meeting with Sarepta representatives, things likely don't look great for accelerated approval, right? Surely Sarepta's shares would drop in the double-digits only if the news was bad.
The FDA asked for two additional written summaries. The first was for "a coherent and comprehensive summary to support dystrophin as a surrogate." The second was for "a detailed discussion of all clinical outcomes in the eteplirsen study."
Pessimists would say that the first request could indicate skepticism by the FDA that the dystrophin results from the phase 2 study of eteplirsen can be used as an acceptable surrogate for clinical efficacy. They would also probably note that the second request could reflect negatively on the small size of the study, which included only 12 patients.
Even if this reading between the lines isn't on target, the request for additional information knocks the winds out of the sails of those who thought that accelerated approval was a slam dunk. That clearly isn't the case now.
Could there actually be good news in spite of the market's reaction? Possibly.
For one thing, the FDA could have just said "no way." It didn't. The agency specifically stated that it has not made a final decision and would only make one after it reviews the supplemental information from Sarepta.
Sarepta management thinks that their detailed discussions with the FDA went well. These talks, though, went into greater detail than the briefing documents that had been supplied earlier. It seems reasonable that the FDA could want more information after these more in-depth discussions.
The second potential piece of good news stems from the nature of the FDA request itself. As Baird analyst Brian Skorney pointed out in the conference call discussion last night, the questions that the FDA is asking typically are part of the actual New Drug Application review.
The fact that officials are wanting the data earlier could be positive. As Sarepta CEO Chris Garabedian said, "It seems that they're digging a little deeper here than they would normally, and almost bridging it into a review of our data."
If this is the case, a go-ahead from the FDA for Sarepta to submit eteplirsen for accelerated approval should mean that the chances of ultimate approval are high.
What's the real story? I think it could go either way for accelerated approval. Right now, all anyone can do is speculate.
All along, my view was that Sarepta probably would file for and ultimately gain accelerated approval. The FDA's request for additional information doesn't dismantle that view. On the surface, the news appears to be bad. However, there could be a silver lining.
Either way, I still like the long-term prospects for eteplirsen and Sarepta. Of course, the timing of those prospects will surely be affected if accelerated approval doesn't happen. However, the stock's pullback could make a great opportunity to buy shares. Whether your view of Sarepta's latest FDA news is positive or negative, the best view of all is a long-term one.
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