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Why Sarepta Therapeutics Stock Is Crashing Today

By George Budwell – Aug 20, 2019 at 9:27AM

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A surprise rejection is weighing on Sarepta's shares today.

What happened

Shares of the rare-disease specialist Sarepta Therapeutics (SRPT 3.80%) fell by as much as 20% in pre-market trading today. The drugmaker's shares are cratering in response to a complete response letter issued yesterday by the Food and Drug Administration (FDA) for the Duchenne muscular dystrophy (DMD) drug candidate golodirsen (proposed brand name: Vyondys 53).

Sarepta said that the FDA rejected the drug's accelerated regulatory filing over potential safety concerns, such as the risk of infection and kidney toxicity. The biotech's CEO, Doug Ingram, stated in a follow-up press release that the FDA didn't bring up any of these outstanding issues during the drug's formal review, leaving the company "surprised" by this regulatory decision.

A young woman appearing to be surprised while looking at an open laptop computer.

Image source: Getty Images.

So what

Wall Street expected golodirsen to eventually tack on a healthy $400 million in annual sales to the drugmaker's top line early in the next decade. With the drug's approval now in doubt, however, these projected sales may never materialize. Viewed in this context, investors' decision to hit the exits this morning is easy to understand.

Now what

The bad news is that FDA didn't seem to give the company much wiggle room to readily address these safety concerns. Sarepta reportedly plans on sitting down with regulators as soon as possible to figure out a path forward, but the key takeaway is that there may not be a quick fix in this case. In short, the FDA appears to be taking a far more critical stance on golodirsen than it did with the company's other DMD drug, Exondys 51. That means investors might want to avoid this falling knife today.   

George Budwell has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Sarepta Therapeutics Stock Quote
Sarepta Therapeutics
$114.82 (3.80%) $4.20

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