Please ensure Javascript is enabled for purposes of website accessibility

Is Sarepta Therapeutics Worthy of Redemption?

By Jia Jie Chen - Updated Apr 1, 2021 at 5:33PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

A potentially misinterpreted clinical trial readout from January may mean a market opportunity for bargain hunters.

Sarepta Therapeutics (SRPT 3.52%) is a medical research and drug development company based in Cambridge, Mass. Founded in 1980, Sarepta currently has three drugs approved for a condition known as Duchenne muscular dystrophy, or DMD. Another potential treatment for the condition, SRP-9001, is undergoing phase 2 trials, and while complete biomarker data has not yet been released, partial results that came out in January were not well received. While the primary endpoint was achieved, statistical significance was lacking.

Sarepta's stock price fell 51% on the news, from about $168 to its current price of about $75. Is now a good time to buy in?

Someone transferring liquid into vials in a lab

Image source: Getty Images.

What is DMD?

DMD is a degenerative disease characterized by progressive muscle weakness that primarily affects young boys, with onset often taking place between three to six years of age. With 16,840 patients in the U.S., DMD is a rare disease, and clinical trial test subjects are relatively difficult to obtain. While no curative treatment exists, the U.S. Food and Drug Administration (FDA) has approved various treatments, including three of Sarepta's. While those drugs (eteplirsen, golodirsen, and casimersen) work on RNA, SRP-9001 works on DNA.

Risk and opportunity

The information Sarepta released in January 2021 compared SRP-9001's results to placebo, and the data showed that at 24 weeks, changes in the placebo arm alarmed investors. Ideally, to show statistical significance, the SRP-9001 treatment results should stay as far as possible from placebo.

However, this was not the case in Sarepta's released North Star Ambulatory Assessment, or NSAA, results. The higher the change from baseline for NSAA scores, the bigger the patient improvement observed was. Initially, the NSAA results demonstrated statistical significance between the two arms, but this converged and overlapped at 24 weeks.

Another factor: The number of patients reporting data dipped by approximately 20% at 24 weeks, right around the time when COVID-19 was declared a pandemic in the U.S.. Sarepta also acknowledged that it did not separate participants in the trial accurately according to age group, therefore creating unbalanced cohorts. And finally, the statistical calculation method used was one that might have increased the undue influence of outliers on the final data reported.

What does all that mean? More data -- or even a reinterpretation of this existing data -- could lead to a drastic change to Sarepta's fortunes.

Time to buy?

Redemption rarely comes without risks. Pfizer (PFE 0.52%) has a candidate, PF-06939926, in phase 3 trials for DMD, and while this drug led to serious hospitalizations in three out of six patients in its phase 2 trial, it is not entirely out of the race. If another company beats Sarepta to FDA approval, Sarepta's entire DMD pipeline may be jeopardized. In addition, if negative data comes out in the final analysis for SRP-9001, the stock price could fall even more.

However, there are several new treatment options coming into the market for DMD (PTC Therapeutics and NS Pharma also have candidates approved), and placebo treatment might not be as relevant in practicality once standard-of-care treatments are established.

Therefore, I advise healthcare investors to be on the lookout for more data coming from Sarepta in the next few months -- and to hold off on initiating a position until it arrives.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Sarepta Therapeutics, Inc. Stock Quote
Sarepta Therapeutics, Inc.
SRPT
$70.90 (3.52%) $2.41
Pfizer Inc. Stock Quote
Pfizer Inc.
PFE
$53.99 (0.52%) $0.28

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
332%
 
S&P 500 Returns
118%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/27/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.