Sarepta Shares Slammed in FDA Smackdown

Smackdown!

That's perhaps the best way to describe the impact from today's announcement that the Food and Drug Administration won't accept the New Drug Application, or NDA, for Sarepta Therapeutics' (NASDAQ: SRPT  ) eteplirsen. Sarepta's stock plunged nearly 60% in early trading.

Considerable doubt
The FDA told Sarepta that it considered the NDA filing for eteplirsen in treating Duchenne muscular dystrophy, or DMD, as "premature." This has been a concern for many observers, since Sarepta completed a phase 2 study of the drug with a grand total of only 12 patients. But Sarepta's hope was that the FDA would look at what the company viewed as compelling evidence of efficacy.

Instead of seeing Sarepta's study results as compelling, the FDA expressed skepticism. The agency stated that there was "considerable doubt" about the use of dystrophin expression as a predictor of clinical benefit.

This doubt arose in part after Prosensa (NASDAQ: RNA  ) and GlaxoSmithKline (NYSE: GSK  ) reported a stunning failure of their DMD drug, drisapersen, in a late-stage study. That double-blind study included 125 young boys taking drisapersen and 61 boys taking placebo. The patients in the drisapersen group didn't show any statistically meaningful difference in walking ability than those in the placebo group.

It wasn't just the Prosensa/Glaxo issue that hurt Sarepta, though. The FDA said that "considerable doubt" (there's that phrase again) was cast on the positive findings from the six-minute walk test in Sarepta's phase 2 study. The agency felt that those stellar results reported by Sarepta could be explained by expected variability in patients with DMD.

In short, the FDA doesn't think dystrophin production is enough and that Sarepta's study results could be meaningless. That's a smackdown in the biotech world.

What's next
Sarepta CEO Chris Garabedian said that the company was "very disappointed" by the FDA decision. He could probably add "stunned," "blown away," and "hopping mad," but it wouldn't do any good.

Now, the company's best path forward is to prove the FDA wrong. It will only be able to do so by conducting a robust phase 3 clinical study that clearly shows the clinical benefit of eteplirsen for DMD patients. The FDA even suggested that endpoints other than the six-minute walk test might be needed.

Garabedian said that Sarepta will work with the FDA on the study design while also attempting to address issues in the NDA submission based on the current data. The company had a little over $281 million in cash, cash equivalents, and restricted investments at the end of last quarter. That's good news -- but unfortunately it's about the only good news Sarepta has right now.

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