Sarepta Therapeutics (SRPT -0.60%) 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?
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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 1.10%) 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.
