Sarepta Therapeutics (SRPT 0.11%) and Vertex Pharmaceuticals (VRTX +8.28%) have a lot in common: Both operate in the tricky biotech industry, and both seek to develop treatments primarily for rare diseases or, at least, for conditions with severe unmet needs.
However, there is one significant difference between the two. Vertex has a long track record of clinical and regulatory success in its core therapeutic area, which has allowed it to generate growing revenue, profits, and outsized returns for years.
If Sarepta Therapeutics can come close to matching the overall performance of its larger peer over the long run, that would make it an excellent stock to buy today. Does the mid-cap biotech have what it takes? Let's find out.
Sarepta Therapeutics is an innovator
One thing that made Vertex Pharmaceuticals what it is today is its ability to innovate and develop treatments for diseases with unmet needs. Specifically, Vertex became the only company that markets drugs that address the underlying causes of a rare disease called cystic fibrosis (CF).
NASDAQ: SRPT
Key Data Points
Sarepta's approach is somewhat similar. The biotech has focused much of its efforts on attacking one illness: Duchenne muscular dystrophy (DMD). This rare genetic condition primarily affects boys and leads to progressive muscle degeneration.
Sarepta Therapeutics isn't the only company in this field, but it hit an important milestone last year. The biotech earned approval from the U.S. Food and Drug Administration (FDA) for Elevidys for the treatment of DMD patients aged four to five.
Elevidys is the first gene therapy approved for DMD in the U.S. and is a one-time treatment, as opposed to Sarepta's other medicines that merely address the symptoms of the disease. Clearly, this is a major step forward. But is there more significant progress coming?
Though Sarepta Therapeutics is hoping for a label expansion for Elevidys in treating patients four to seven, the company's late-stage study to that effect was a bit disappointing. The medicine failed to reach its primary endpoint in the trial. That's one of the major reasons Sarepta has failed to keep pace with the market in the past few months.
Sarepta and its partner on this program, Switzerland-based healthcare giant Roche, still plan to pursue approval because Elevidys hit all secondary endpoints. According to the two partners, regulators aren't closing the door. Considering the dire need for new therapy options, it wouldn't be surprising to see Elevidys still winning that label expansion.
Beyond that, Sarepta Therapeutics boasts a rich pipeline. The company has over 40 ongoing programs, many of which still target DMD. Given the biotech's track record and pipeline, there should be significant clinical and regulatory progress in the next five years.
There is a long road ahead
Sarepta Therapeutics has been recording solid financial results. It has yet to release its full fourth-quarter results, but it recently gave investors a sneak peek. The biotech expects revenue of $1.145 billion for its fiscal 2023. Last year, the company's top line came in at $933 million, so that would represent a solid year-over-year increase of almost 23%.
Elevidys' revenue for 2022 will come in at $200.4 million after being approved in June -- impressive. Given the medicine's momentum, we should expect the biotech to continue delivering solid results for a while, especially if it ends up earning that label expansion. Sarepta Therapeutics isn't profitable yet.
Its preliminary fourth-quarter results did not include bottom-line numbers, but through Sept. 30, its adjusted net loss per share shrunk to $1.39 compared to $2.53 in the year-ago period. Will that trend continue? Given Elevidys' higher revenue and the fact that commercialization efforts don't seem to be having a significant enough impact on expenses to drag down its bottom line, that appears somewhat likely.
More importantly, what do the company's prospects look like long term? Can Sarepta Therapeutics be the next Vertex Pharmaceuticals?
In my view, that's almost out of reach. Vertex is an incredibly high standard to emulate. Still, Sarepta Therapeutics has a good chance of delivering solid returns to patient investors, given its innovative abilities and incredibly deep pipeline. That's why I'd still recommend this biotech stock to investors willing to stay put for five years or more.
