What happened

Shares of Sarepta Therapeutics (SRPT 0.60%) surged 18.8% higher in August, according to data from S&P Global Market Intelligence, after the biotech released solid second-quarter earnings results. Sales of Sarepta's only approved drug, Duchenne muscular dystrophy treatment Exondys 51, came in at $73.5 million, more than double the year-ago quarter.

So what

Sarepta Therapeutics has made the most of Exondys 51, a drug that many thought the FDA wouldn't approve. Once it did, it was believed that doctors wouldn't prescribe it because of limited efficacy data. Annualized out to around $300 million a year, Sarepta isn't going to get rich selling the drug, but at least it's putting a large dent in its expenses to develop the rest of its pipeline.

Of course, Sarepta Therapeutics is still losing money. In fact, it's lost substantially more in the second quarter, to the tune of $109.3 million, compared with the year-ago quarter's $63 million lost. Most of the increased loss came from additional spending on research and development, some of which were one-time items. For example, the company made a $60 million upfront payment to Myonexus Therapeutics to license five new drug candidates and a $22 million milestone payment to Summit Therapeutics (SMMT) for treating the last patient in the safety arm of the PhaseOut DMD study.

Backing out the one-time items and other things the company would like investors to forget about, such as stock-based compensation, the loss was only $28 million on a non-GAAP basis, only slightly larger than the $26.5 million adjusted loss in the year-ago quarter.

August 2018 calendar

Image source: Getty Images.

Now what

Exondys 51 is important to Sarepta Theapeutics' short-term valuation, but longer term, investors should be focused on its other pipeline candidates, including a gene therapy, dubbed AAVrh74.MHCK7.micro-dystrophin, that looked promising in the first couple of treated patients. While Exondys 51 can only treat Duchenne muscular dystrophy patients with a specific mutation, the gene therapy could theoretically cure any patient, increasing the market opportunity substantially.