Prosensa (NASDAQ: RNA) blew up on Friday after announcing the failure of a phase 3 trial that its partner, GlaxoSmithKline (GSK 0.18%), was running on their Duchenne muscular dystrophy drug drisapersen.

Fellow Fool Keith Speights has a rundown of the data. Shade your eyes; it isn't pretty.

As is often the case in biotech, one drugmaker's loss is another drugmaker's gain. Sarepta Therapeutics (SRPT 3.80%), which is developing its own Duchenne muscular dystrophy drug, eteplirsen, is up big today. While I generally agree that this is good news for Sarepta, investors should realize this isn't as black and white as the double-digit gain would suggest.

The good: No more competition
Best case scenario, drisapersen is dead and Sarepta has the entire Duchenne muscular dystrophy market to itself. Worst case scenario, Glaxo figures out what the problem is, runs a second phase 3 trial, and Sarepta is either well ahead -- if the FDA gives eteplirsen accelerated approval -- or in the same time frame if the agency makes Sarepta run a phase 3 trial prior to approval.

If drisapersen had passed its phase 3, it looked like the best Sarepta could do was to launch at the same time as drisapersen, and if it had to wait for a standard approval, could have been a year or more behind. In that regard, drisapersen's failure is clearly good news for Sarepta in the long term.

The bad: Same fate?
Drisapersen has the same mechanism of action as eteplirsen. They work to restore dystrophin production by skipping the mutated exons in Duchenne muscular dystrophy patients. The question is whether the failure was a problem specific to drisapersen or with the mechanism.

At this point, it seems reasonable to assume that the issue is drisapersen-specific. Eteplirsen's phase 2 data generally look better than the phase 2 data for drisapersen, including better dystrophin production. With just a failure of just one exon-skipping drug, it seems unreasonable to make assumptions about the whole class.

Of course, if drisapersen had passed its phase 3 trial, the worry wouldn't be there, so we'll leave it in the bad category even if there's only a small chance of it being an issue.

The ugly: FDA unknowns
It's unclear how drisapersen's failure will affect the FDA's view of eteplirsen.

Best case scenario, the agency recognizes the unmet need for Duchenne muscular dystrophy patients and, with only one real choice at this point, approves eteplirsen based on its small phase 2 trial.

While possible, especially in these more lenient regulatory times, I can't help but worry that the FDA will be slapping itself on the back for making Glaxo and Prosensa run a phase 3 trial and will be just as cautious with eteplirsen.

The likelihood of an accelerated approval for eteplirsen could ultimately be hidden in the individual patient data from Glaxo's trial. If there's a strong correlation between the patients that responded well to drisapersen and the ones that had increased levels of dystrophin, there's a strong argument for approving eteplirsen based on increases in dystrophin, a surrogate endpoint that eteplirsen passed with flying colors.

Long term vs. short term
In the long term, drisapersen's failure is clearly a benefit to Sarepta. Assuming eteplirsen works, potentially having the market all to itself will be a huge benefit.

In the short term, though, Sarepta's investors might have been better off if drisapersen had succeeded. It may not end up mattering one way or the other, but the failure introduces more uncertainty.