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Sarepta Drops -- Is There Reason to Sell?

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The markets tend to struggle at this time of year, and Washington is giving you plenty of reason to pause. Shares of several recent high-flying biotech companies have taken a hit, calling into question whether hype trumped reason last month.

One of the most hard hit has been Sarepta Therapeutics  (NASDAQ: SRPT  ) , a biotech company hoping to file a new drug application for eteplirsen next year. Eteplirsen is a treatment for Duchenne muscular dystrophy, or DMD, patients, a rare genetic muscle-wasting disease caused by the absence of dystrophin, a protein that is necessary for muscle function. The disease affects one in 3,500 boys worldwide and is one of the most common fatal genetic disorders. Currently, there is no approved treatment for DMD.

Eteplirsen works by skipping exon 51, helping resolve a genetic mutation and allowing for the creation of dystrophin. This, in turn, corrects the body's inability to build muscle. Eteplirsen showed promising results in phase 2b studies, which, following a meeting with the FDA in July, led the company to report that the FDA was willing to consider those results as part of an early approval process. As a result, the company indicated its plans to file an application with the FDA in early 2014.

A good deal has changed since the July conversation with the FDA
Several things have changed since that announcement. Most important, an announcement came that GlaxoSmithKline's (NYSE: GSK  ) and Prosensa's (UNKNOWN: RNA.DL  ) competing exon-skipping drug drisapersen came up short in phase 3 trials. In that trial, drisapersen failed to significantly improve muscle function despite showing considerable promise in earlier trials.

That late-stage failure kicked off a flurry of interest in eteplirsen. Investor hopes for early approval may have jumped the gun, however. Given that Glaxo's drug and eteplirsen similarly produce dystrophin by exon skipping, some are wondering if the FDA will back away from its earlier willingness to solely consider phase 2b data.

You should also recognize that the current Washington shutdown is affecting the ability to file new drugs, which potentially creates another stumbling block if FDA appropriations remain halted into next year (though let's hope not).

If the FDA does back away, Sarepta is prepared. In July, the company announced an at-the-market equity offering worth $125 million to raise money to fund both final trials and manufacturing capacity. In the company's most recent press release, it also indicated plans to initiate phase 3 confirmatory trials in the first quarter of 2014.

Sarepta's drug appears to have an advantage
Glaxo's failure adds pressure to the FDA to advance eteplirsen quickly. Eteplirsen's clinical results match up favorably to Glaxo and Prosensa's. In phase 2b, patients on eteplirsen saw a 40-meter improvement on a six-minute walk test. That's exceedingly better than the 10 meters for patients on drisapersen in phase 3. While there were reports of excessive protein in the kidneys of Glaxo patients, which resulted in hospitalizations, there were no such cases in eteplirsen patients.

Those are compelling advantages. You shouldn't ignore the potential for Glaxo and Prosensa to find a subset of the DMD population drisapersen can benefit when they combine and analyze trial data, however. If they're able to, that could salvage some hope for commercialization. Prosensa has a host of other DMD treatments in clinical trials for other genes beyond exon-51 as well.

Assuming that the FDA is open for business next year and eteplirsen can make its way quickly through FDA hurdles, the  drug will offer new hope to DMD patients. You should keep in mind that eteplirsen targets just 13% of those with DMD, however, suggesting that the majority of DMD patients will need to wait for other drugs from both Sarepta and Prosensa to make their way through trials.

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  • Report this Comment On October 12, 2013, at 11:22 AM, EllenBrandtPhD wrote:


    A whopping 16 percent of the long-term Short position came out in the last period, announced two days ago. That reflects the big move up on very high volume for several days about two weeks ago.

    This last little trading "incident" in the biotechs hopefully allowed another group of long-term Shorts to cover and switch direction.

    I think the 13-Ds, etc., for last quarter are going to be very impressive, showing that several influential fund supporters have greatly inceased positions. Let's see if I'm right, because that would be the Last Hurrah for recalcitrant large -professional - long-term Shorts. The baby Shorts and situational Shorts who come in very short term will always be there in this kind of stock. It is not for the faint-hearted.

    Article that came out in the Boston Business News yesterday was superb! and everyone needs to read it.

    The expanded website is a great idea. And the conference call this coming Thrusday - geared towards the charities and maybe towards getting discouraged RNA trial participants to change their allegiance to Sarepta in future trials - should be a nice Bullish catalyst event.

    The biggies in the catalyst arena on the immediate horizon, besides news of which supporter funds have upped their positions, will be the promised (at the Baird and Morgan Stanley conferences) announcement of which two additional products the company intends to bring to trial stage early in 2014, and the possibility - furiously rumored the past week or so - that GSK will now assist Sarepta in getting European approvals, in return for royalties.

    The latter announcement would be worth 10 upwards points in the stock, IMO. It would be HUGE, because people would think it was a prelude to a full-scale bid for the entire company, with GSK either dropping RNA or somehow setting up a new division within itself that combines the two companies.

    They would face a possible bidding war, however, with several possible interested bidders already being speculated upon by analysts and commentators.

  • Report this Comment On October 17, 2013, at 2:36 PM, EllenBrandtPhD wrote:

    News is now 100 percent positive!

    Parents/patients main groups coming over to SRPT from RNA - whether some want to admit it or not - is just terrific. And it looks like Placebo group from prior RNA trials are cleared to become subjects in SRPT trials - an exceptionally big concession.

    Moreover, SRPT now adding in "Becker MD" to DMD mentions in its current boilerplate. Hmmmmmmm??? Hint: Another MD genotype coming into play? Soon, perhaps, ALL MD genotypes will come into play.

    Of course, the blockbuster news is the medical journal article which came out two days ago and has now gotten coverage in the medical press literally around the world.

    What it means is that SRPT new introductions in TB and the Horror Viruses - Ebola, Marburg, etc. - are now a near certainty.

    When the announcements will formally be made is anyone's guess.

    But note that one of the Analyst Bulls already upped Targets again this week, with anothe 7 or 8 of 'em probably to follow very soon now. The Herd of Bulls probably will not go to DB's gutsy and brilliant 71 Target quite yet.

    But I would suspect we will see the Mean and Median Consensus Targets move up fairly swiftly to the 65-66 range.

    Everyone suspects that the next spate of Fund Holding declarations are going to be at least spiffy and possibly fabulous. And they are now dead ahead.

    Long-term Shorts in the stock are coming out fast now.

    Short-term Shorts are Ninnies and deserve whatever they get. "Ninny" is a highly technical trading term meaning "not bright."

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