What happened

After reporting early-stage data from a drug candidate for the treatment of Duchenne muscular dystrophy (DMD) on September 6, shares in Sarepta Therapeutics (NASDAQ:SRPT) jumped 12.6% last month, according to S&P Global Market Intelligence

So what

DMD is a muscle-wasting disease that's caused by the inadequate production of dystrophin, a key protein necessary for building and maintaining muscle. DMD patients fail to produce enough dystrophin because of mutations at specific exons in the dystrophin production sequence, and as a result, most patients fail to live beyond their 30s.

A golden pill sits atop a pile of gold coins.


Because of the significant unmet need for new treatments, Sarepta Therapeutics' scored a controversial FDA approval last year for Exondys 51, an exon 51 skipping drug that can help increase dystrophin production in about 13% of DMD patients. 

Although Exondys 51 only targets a small group of patients (3,400 to 5,000 patients globally), Sarepta Therapeutics is researching other exon-skipping drugs that could help more patients. For example, a phase 1/2 study of drugs that skip exon 53 and exon 45 is ongoing, and about 16% of the DMD patient population is amenable to skipping those exons.

On September 6, management reported that golodirsen, which skips exon 53, increased average dystrophin protein to 1.019% of normal compared to a mean baseline of 0.095% of normal. The dystrophin improvement suggests drugs in Sarepta Therapeutics' pipeline could end up being used to treat far more DMD patients in the future.

Sarepta Therapeutics investors also cheered news last month that competitor PTC Therapeutics (NASDAQ:PTCT) got a negative recommendation for approval by an FDA review committee. The negative recommendation doesn't mean the FDA will reject PTC Therapeutics' drug, but it does increase the odds against an OK.

Now what

Exondys 51 overcame steep odds to win an FDA OK last year, and it hit the market with a $300,000 annual price tag. A large unmet need for new treatments and premium pricing resulted in second-quarter sales of $35 million, despite the drug's small amenable patient population.

With Exondys 51 already generating sales at a $140 million clip and golodirsen putting up positive efficacy in trials, it's not hard to imagine peak sales of Sarepta Therapeutics' exon-skipping drugs being in the high 9-figures. 

Undeniably, the potential sales associated with treating more DMD patients is bullish news for investors, but the company's likely to continue losing money for a while longer. Research and development expenses were $58.9 million, and selling, general, and administrative expenses were $36.1 million in the second quarter of 2017, and as a result, the company reported a net loss of $63 million. Absent a path to profitability, Sarepta Therapeutics is still a risky stock to buy.

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