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Sarepta Therapeutics' Long-Term Potential Is in Flux

By Brian Orelli, PhD and Keith Speights - Mar 25, 2021 at 7:47AM

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While revenue continues to grow, the biotech's future hinges on its gene therapy SRP-9001.

Sarepta Therapeutics (SRPT 4.80%) continues to make progress selling its drugs to treat Duchenne muscular dystrophy (DMD). But the biotech's valuation is still largely based on its potential to treat a large portion of DMD patients with its gene therapy SRP-9001. In this video from Motley Fool Live, recorded on March 8, Fool.com contributors Brian Orelli and Keith Speights discuss Sarepta's fourth-quarter results and why investors should still be focused on the company's pipeline.

Brian Orelli: Moving on to Sarepta Therapeutics, which is focused on Duchenne's muscular dystrophy. It reported fourth-quarter earnings last week. Fourth-quarter net product sales jumped 23% year over year to $122 million. Net loss for the quarter was $189 million. Maybe that was a little bit worse than expected; even though they have products on the market, they're still a developmental-stage biotech. They're siphoning a lot of money into R&D. What did you think about Sarepta's results?

Keith Speights: I think Sarepta is one of those companies, as you mentioned, Brian, even though they have products on the market, there's still heavy in development. I think it's best for investors not to focus too much on their quarterly numbers at this point, honestly. Instead, the most important thing to focus on with Sarepta is its growth potential going forward and of course, that ties into its pipeline. The company didn't provide 2021 guidance, which isn't unusual. One of the keys to their growth is they recently won FDA approval for Amondys 45. That product enables the company to treat around another 8% of the DMD population. That's a pretty key growth driver for Sarepta going forward.

But the company also had some bad news recently. One of their pipeline candidates, SRP-9001, missed the primary endpoint in a study. Now Sarepta still thinks there's a path forward to potentially winning approval. But that certainly was bad news for Sarepta. The stock tanked on that news. They've been amazing in how they've managed to win FDA approvals even when a lot of folks, like me, thought they might not when FDA approvals for some of their products. This is not a stock I would bet against, but there's obviously a lot of uncertainty with the company in terms of how much growth can they continue to deliver?

Orelli: Yeah. I think you really have to be focused on the pipeline even though they have multiple drugs on the market. I think the ability to treat multiple different types -- Duchenne's muscular dystrophy is caused by different mutations and each one of their drugs now only treats a subset of the -- SRP-9001, I think it could treat basically most or all. I'm not quite sure, but definitely not individual hits treatment and selecting it. That's the drug that you really want to be looking ahead for the long-term future of Sarepta.

Speights: Yeah. Again, Sarepta has pulled the rabbit out of the hat, at least on a couple of occasions, and won FDA approvals when a lot of skeptics didn't think they would. I think the jury is still out, but I'll be interested to see what they do with that particular candidate going forward.

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