What happened
Shares of the rare disease juggernaut Sarepta Therapeutics (SRPT 6.09%) fell by 12.6% through the first three and a half days of trading this week, according to data provided by S&P Global Market Intelligence. The biotech's stock fell almost on cue ahead of the upcoming advisory committee meeting this Friday for its Duchenne muscular dystrophy (DMD) gene therapy known as SRP-9001.
It's almost tradition at this point for smaller companies with high-value product candidates to dip ahead of an advisory committee meeting. The key reason is that the Food and Drug Administration (FDA) releases what are known as "briefing documents" prior to the meeting. These briefing documents tend to point out weaknesses in the regulatory filing, which then become important topics for the panel of experts to mull over during the meeting.
So what
In this case, the briefing documents called SRP-9001's efficacy into question and raised safety concerns regarding the administration of a potentially ineffective gene therapy. Now, investors clearly shouldn't brush off these concerns as standard operating procedure for the FDA. The FDA, after all, has become considerably more strict in recent years, especially in regard to cutting-edge therapies like SRP-9001.
That being said, the negative tone in these documents shouldn't necessarily be viewed as a harbinger of things to come given the fact that these review panels are inherently unpredictable, and scores of drugs with overtly negative briefing documents have been approved by the agency in the past.
Now what
Should bargain hunters buy Sarepta's stock on this weakness? It all depends on your comfort with risk. SRP-9001 does represent a sizable commercial opportunity for the biotech, but there's also no way to foretell the therapy's regulatory fate. As such, this mid-cap biotech stock is probably best suited for aggressive investors at this critical juncture in its life cycle.
