Biotech companies working on gene therapies have made significant strides lately, but many of them remain relatively risky stocks. Still, gene therapies have the potential to help transform medicine by unlocking treatments or cures for illnesses that have so far eluded researchers.
This factor makes biotechs focused on gene therapies attractive targets for long-term investors, provided they pick the right stocks in this niche. With that said, let's look at one gene-therapy company that's been having a tough time of late, but is well worth investing in: Sarepta Therapeutics (SRPT 1.08%).
Sarepta's year hasn't been great
Sarepta focuses primarily (though not exclusively) on developing treatments for Duchenne muscular dystrophy (DMD), a genetic, progressive disease that weakens patients' muscles and leads to a shortened life expectancy. All of its four approved products target DMD. But the latest to earn approval from the U.S. Food and Drug Administration (FDA) is arguably the most important.
The treatment in question is called Elevidys, the first FDA-approved gene therapy to treat DMD. Right now, it is indicated for patients between 4 and 5 years old. Sarepta developed Elevidys in collaboration with Switzerland-based Roche.
Elevidys is a one-time treatment that targets the underlying causes of DMD, as opposed to Sarepta's other therapies, which focus on keeping the symptoms of the disease in check. It didn't have an easy path to approval. An advisory committee of independent experts convened by the FDA narrowly voted in favor of the agency granting it the green light (by a vote of 8 to 6).
And the FDA delayed Elevidys' approval as it took longer than expected to complete the review of Sarepta's application. These details matter because Sarepta and Roche plan to request label expansions for Elevidys, including for treating DMD patients between ages 4 and 7.
But the partners just reported that a phase 3 study in this potential indication failed to meet its primary endpoint, which focused on improvement in ambulatory performance according to a rating scale used to measure it in DMD patients. Elevidys did meet all pre-specified secondary endpoints in the study.
Sarepta still plans to apply for a label expansion with the FDA, and according to management, the agency is open to reviewing the data to grant Elevidys another regulatory nod despite the primary endpoint miss.
The broader picture for investors
It's hard to say whether Elevidys will earn another OK from the FDA. If there were scores of DMD treatments on the market, the answer would almost certainly be no. But there aren't, and the data from this latest study wasn't all terrible.
It could go either way, but even if Sarepta doesn't overcome this obstacle, the company has already demonstrated innovative potential in developing gene therapies and has even attracted the partnership of one of the largest pharmaceutical companies in the world.
These are all great signs for the company's future. Sarepta's primary focus on DMD isn't a problem, either. Some biotechs have found success dominating the market for one specific disease. Vertex Pharmaceuticals' work in cystic fibrosis is perhaps the best example.
Sarepta's success has translated to solid financial results. In the third quarter, the company's total revenue of $331.8 million soared by 44% year over year. Elevidys contributed $69.1 million in revenue after being approved just a few months ago.
On the bottom line, the net loss per share of $0.46 was much better than the $2.94 net loss recorded in the year-ago period. And Sarepta has more than 40 pipeline programs -- an impressive number for a mid-cap biotech stock.
That's why, despite the biotech's shares dropping like a rock following its uninspiring clinical results, Sarepta Therapeutics could end up delivering excellent results to its shareholders down the road.
