After a rollercoaster few months for Sarepta Therapeutic's (NASDAQ:SRPT) duchenne muscular dystrophy drug eteplirsen, the company appears to be back from the dead with the FDA detailing paths to a new drug application by the end of the year.

Unsurprisingly, the announcement led to surge in share value. However, the value still failed to approach peak values of last summer surrounding Sarepta's initial NDA filing, likely reflecting investor's cautious optimism this go around.

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Sarepta's plan for approval
The FDA offered two options toward accelerated approval in their letter to Sarepta, based on conclusions from meetings conducted since last November.

First, the FDA acknowledged Sarepta's phase 2b clinical trial (Study 201/202) as evidence of an "intermediate clinical endpoint" using the 6-minute walk. However, the agency requested more long-term data from this study and also questioned the interpretation of the data validity of the conclusions drawn from the study. Sarepta has continued to produce data from this study.

One of the major concerns of the FDA was the use of dystrophin protein levels as a marker for clinical improvement. This originally came under scrutiny in studies of GlaxoSmithKline and Prosensa's drisapersen. Some patients exhibited an increase in dystrophin but then clinically deteriorated, potentially weakening the use of dystrophin as a positive marker. At the time, Sarepta chalked it up to age-associated decline in patients; however, it was difficult to prove given a small sample size of just 12 patients.

The FDA's second contention to the company addresses this marker, where it offered a "collaborative better understand the methods and analyses used for the existing market data." In other words, it will take the existing studies at full weight if dystrophin can be verified as an appropriate marker.

Is approval actually on the horizon?
While the FDA encouraged early drug filing, with these two contentions, it also indicated that review of the application would likely require ongoing confirmatory studies as well as additional safety and efficacy data, particularly in a larger and more variable sample of patients.

In response, Sarepta has already detailed an open-label trial for 60-80 patients ranging from 7-16 years old (the age at which the use of dystrophin as a marker was called into question in phase 2 studies) with a starting ability to walk at least 300-450 meters in the 6-minute walk test. Muscle biopsies taken pre and post treatment should help establish the association of the dystrophin protein with the clinical 6-minute walk test. The FDA gave the pass to Sarepta to conduct this study without a placebo control, which will speed up results of the study.

The company also detailed two other trials, one with a patient population younger than 7 years old and a second with more debilitated older patients that cannot walk more than 300 meters in the 6-minute walk test. Both trials are expected to begin later this year.

Looking at the cautionary tale of Prosensa's drisapersen, Sarepta investors will do well to play it safe. Drisapersen also did well in studies initially but failed in its large late-stage study, causing GlaxoSmithKline to ditch the effort and leave Prosensa to flounder on its own. Without any indication yet of how late stage studies of eteplirsen will go, Sarepta is by no means in the clear, and it's anyone's guess what the data will show.

The bottom line
Nonetheless, the FDA appears to be supporting fast approval of Sarepta, which is very likely in part a response to pressure from physicians and patients with DMD, a currently incurable disease effecting 15,000 boys in the US with life expectancy shortened to the early twenties. This is a positive force for Sarepta as the lobbies will continue to call for a treatment to be approved, even if efficacy is questionable.

Best case scenario, Sarepta will get a filing in by the end of 2014 and approval in 2015. The FDA will call an independent advisory panel prior to considering the filing, which should help clarify concerns within the agency and assist in the approval process.

And while Sarepta has already detailed its trials, it still needs to come up with the cash for them. As of the end of 2013, Sarepta had $264.9 million in cash, cash equivalents and restricted investments. It had an operating loss of $90.3 million last year with a $20.5 million increase in R&D. That being said, it looks like it is still in shape to take on these future studies, especially if an approval is at the end.

Eteplirsen is Sarepta's closest pipeline product, and the company now has the green light from the FDA to proceed with clinical trials of several agents targeting different exons of DMD. Exon 51, the target for eteplirsen, accounts for 13% of DMD cases, and Sarepta ultimately plans to target enough exons to cover over 80% of DMD cases.

As such, more is on the line than ever. Eteplirsen will be proof of concept for Sarepta and its fleet of DMD therapies – failure of eteplirsen could make a big dent in Sarepta's clinical pipeline.

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Amy Ho has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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