Sarepta Therapeutics (NASDAQ: SRPT ) won't be the only stock choice for a biotech focusing on Duchenne muscular dystrophy, or DMD, much longer. Its one potential challenger on the scene, Prosensa, recently announced plans to move forward with an initial public offering. Here are three views on what a Prosensa IPO could mean for Sarepta.
Prosensa's IPO won't have much impact on the progress of its DMD drug, drisapersen. The Dutch biotech didn't need to raise money to keep development going for the drug. GlaxoSmithKline (NYSE: GSK ) obtained rights to drisapersen back in 2009 and funds the development effort. Similarly, Prosensa doesn't really need to worry about footing the bill for commercialization of the drug, assuming it ultimately gains regulatory approval. Glaxo will also handle the finances there.
A publicly traded Prosensa doesn't threaten Sarepta any more than it would as a privately held company. However, it could possibly have a negative impact on Sarepta's shares. How? Investors could decide to hedge their bets by buying Prosensa shares (when available) rather than buying more Sarepta stock. This would lessen demand for Sarepta to some extent. Weaker demand would serve as a drag on the stock, keeping it from rising as high as it could reach.
On the other hand, a couple of aspects of Prosensa going public could boost Sarepta's shares. The fact that Glaxo didn't buy Prosensa is interesting, to say the least. Some investors could read between the lines and suspect that the big pharmaceutical company knows something that makes Prosensa less attractive as an acquisition target. If this proves to be the case, Sarepta wins.
Prosensa's SEC filing also raises questions yet again about the safety profile for drisapersen. There have been serious concerns in the past about the protein in the urine of patients taking the drug. In its F-1 document filed in preparation for the IPO, Prosensa mentioned this along with several other adverse effects. The reminder about possible safety issues with drisapersen could make eteplirsen look that much better in the eyes of investors. Of course, the better eteplirsen looks, the better Sarepta looks as an investment alternative.
The third view is that Prosensa's planned IPO doesn't matter much at all for Sarepta. After all, Glaxo owns the rights to drisapersen. Whether Prosensa is publicly traded or owned by aliens from another planet shouldn't really have bearing on what happens with drisapersen.
Another possible twist to this view is that we don't have to necessarily rule out negative or positive effects on Sarepta's stock from the Prosensa IPO. However, under this twist, whatever effects occur will cancel each other out.
Count me in the neutral corner on this one. Prosensa filed its F-1 on May 28. While Sarepta's shares bounced up and down some since then, they're close to the same price level where they were before the IPO announcement.
What really matters for Sarepta right now is how quickly eteplirsen can get to market. Whether the company can gain accelerated approval makes nearly everything else irrelevant in the near term. I'm in the undecided corner there, because I think it could go either way.
I'm not neutral or undecided on Sarepta over the long run, though. My take is that the company will gain approval for eteplirsen (sooner or later). The stock has more room to run. If you're an investor, room to run is always the room with best view.
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