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In a previous article, I speculated on the race to develop a Duchenne muscular dystrophy, or DMD, drug and who might win it. It seems now that Sarepta Therapeutics (NASDAQ: SRPT ) has moved a step ahead after disappointing mid-stage study results from GlaxoSmithKline (NYSE: GSK ) and Prosensa (UNKNOWN: RNA.DL ) . Their drug, drisapersen, failed to show a statistically significant sustained response, leaving investors to question its potential phase 3 results and whether Sarepta's eteplirsen now has an edge over its larger rival.
In the last 12 months, Sarepta stock had a significant spike and traded at price range of $9.82-$47.35. The upward trend is due to positive studies on its flagship novel candidate eteplirsen. On approval, eteplirsen would be considered as the first-in-class therapeutic against DMD.
Market opportunity for eteplirsen
Eteplirsen is an antisense oligonucleotide developed on Sarepta's proprietary RNA-based technology. The product is moving through mid-stage clinical trials with encouraging efficacy and was well-tolerated with no side effects across all studies. Sarepta expects to submit the new drug application (NDA) in the first half of 2014.
DMD is a rare disease that usually affects one in 3,500 boys worldwide. Around 35,000 patients have DMD across the U.S. and EU. The disease is due to absence or defect in dystrophin protein. Dystophin acts as a shock absorber for muscles, and its absence hampers muscle function. There is no specific disease modifying therapy currently available.
Sarepta estimates that around 1,950 patients in the U.S. need the eteplirsen therapy. It is estimated that the cost of therapy for a rare disease is approximately $300,000-$500,000 per year. Considering the target population and treatment costs, Sarepta expects to generate sales of $585 million-$975 million from the U.S. alone. In addition, EU will add 2,600 additional patients to the therapeutics market. Overall, Sarepta's eteplirsen has huge potential.
Sarepta's development programs
Compared to other RNA technologies, Sarepta's technology modulates generic expression and target specific sequences. It allows chemical modification of specific tissues and target pathogens and also has excellent safety profile. In addition, the product is resistant to enzyme degradation. Most of these are advantages that traditional antisense technology does not have.
Sarepta is developing products based on its proprietary technology. Sarepta's RNA-based drug programs are clinically evaluated for treatment of rare and infectious diseases. In addition to eteplirsen, the company is also developing SRP-4045, SRP-4050, and SRP-4053 against DMD. The technology based program is also being assessed against antiviral activity in infectious diseases such as Marburg and H1N1 influenza, with product candidates such as AVI-7537, AVI-7288, and AVI-7100. Eteplirsen, therefore, is not just a single success but could be the vanguard of a whole slew of products using RNA technology.
Strong alliances for development
The company has strong alliances with both the U.S. and EU governments on research programs for rare diseases.
U.S. government: In 2012, Sarepta signed a contract for $3.9 million with the U.S. Department of Defense to evaluate the feasibility of AVI-7288 through IM route against the Marburg virus. Earlier, the company had an agreement for the development of therapeutics AVI-6002 and AVI-6003 against Ebola and Marburg viruses. The government continues to support Sarepta's clinical programs for the Marburg portion of the contract in four steps. It is expected that Sarepta will receive around $84.4 million to carry out the remaining development activities. Also, the company will receive additional revenues of $0.4 million related to H1N1 influenza.
EU agreement: In November 2012, Sarepta signed an agreement of approximately $2.5 million with EC Health Innovation for development related studies for DMD. Sarepta will receive around $1.2 million.
Competition in antiviral segment
In influenza, Sarepta's antiviral candidate currently competes with two FDA-approved products -- Tamiflu from Roche (NASDAQOTH: RHHBY ) and Relenza from Glaxo. Tamiflu posted significant growth of around 44% in the second quarter ending in 2013, and is expected to grow further from increasing demand for H1N1 flu in China. However, in the U.S. it has been losing market share for the last four years and is expected to continue doing so. However, Roche has a whole has shown significant upside in sales, operating profit, and earnings per share this quarter.
Eteplirsen's success with DMD will trigger in a lot of activity for Sarepta's core RNA technology. I expect significant upside in licensing fees, technology sharing agreements and other milestone payments for the RNA technology. Overall, the market optimism in Sarepta seems to be based on good foundation.
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