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2 Reasons Behind Sarepta Therapeutics Inc.'s 6.9% February Jump

By Brian Feroldi - Mar 3, 2017 at 11:11AM

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Here's a closer look at why this rare-disease biotech stock rallied last month.

What happened

Shares of Sarepta Therapeutics (SRPT 4.73%), a commercial-stage biotech focused on rare diseases, gained 6.9% in February, according to data from S&P Global Market Intelligence.

So what

Sarepta's jump can be traced to two main developments:

First, management announced that it will be selling its Rare Pediatric Disease Priority Review Voucher that it received last year when Exondys 51 was approved by the Food and Drug Administration. The company stated that it reached a deal with Gilead Sciences to sell the voucher for $125 million. That addition cash will go a long way toward padding its bank account without having to dilute existing shareholders. 

Businessmen shaking hands and exchanging money

Image source: Getty Images.

Second, shares ticked higher toward the end of the month in anticipation of the company's fourth-quarter earnings. Once the report became available, investors learned that sales of Exondys 51 hit $5.4 million in the fourth quarter. That was a bit higher than the $5 million in sales that market watchers had expected. Sarepta also said that it ended the year with more than $329.3 million in cash on its books, which doesn't include the proceeds from the voucher sale. 

When combined, these two events helped drive the company's stock higher during the period.

Now what

While Exondys 51's fourth-quarter sales were impressive, Sarepta poured cold water on expectations for the drug during its conference call with investors. Management projected that total sales of Exondys 51 would land between $13 million to $15 million in the first quarter. That's quite a bit shy of the $21.7 million in sales that Wall Street forecasted. In addition, management predicted that sales would exceed $80 million for all of 2017. That's also a far cry from the consensus expectation of $120 million in sales.

Sarepta's shares took a nosedive following the conference call, but they have since completely recovered. That could be because some analysts think that management is being overly conservative with its guidance so it can be raised later. 

Looking ahead, Sarepta's plan is to keep expanding reimbursement access to the drug and continue its clinical studies related to Exondys 51 and its other product candidates. Sarepta also reaffirmed that Exondys 51 is already in European regulators' hands, so investors can expect an update on that front in the quarters ahead.

While Sarepta is well capitalized and will remain in growth mode, this company still has a long road ahead of it before it can hope to generate a profit. That makes this an interesting story to watch, but I, for one, think that this stock is far too risky to touch.

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Stocks Mentioned

Sarepta Therapeutics, Inc. Stock Quote
Sarepta Therapeutics, Inc.
$75.22 (4.73%) $3.40
Gilead Sciences, Inc. Stock Quote
Gilead Sciences, Inc.
$63.08 (0.80%) $0.50

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