Sarepta Therapeutics (SRPT +1.02%) has had a year of extremes. Sarepta came into existence in July, when AVI Bio Pharma announced its name changeand a concurrent 1-for-6 reverse stock split initiated to lift share prices back into compliance with Nasdaq's $1 minimum requirement. Three months later, Sarepta shares were up nearly 200% intraday upon astonishing clinical trial results for eteplirsen, a treatment for Duchenne muscular dystrophy, or DMD.
Here are three things to watch with this volatile stock.
Destined for the fast track?
A hotly contested issue is whether Sarepta's lead drug will qualify for accelerated approval from the Food and Drug Administration. Accelerated approval speeds drugs through that are for serious conditions, meet an unmet need, and have shown a strong endpoint that could be substituted for final clinical data.
Eteplirsen can check off those requirement boxes. DMD is an X chromosome-linked condition affecting approximately 15,000 boys in the United States, though the treatment applies to a subset of about 13% who have a specific gene mutation. The degeneration leads patients to become wheelchair-bound as early as the preteen years, and has an average life expectancy around 30. Current drugs for DMD are mostly steroids for inflammation.
A 48-week phase 2b trial of eteplirsen measured distances traveled in six-minute walks and levels of dystrophin, a protein involved in the production of muscle fibers that normally dwindles in DMD patients. One-third of patients, on a 50 mg dose, were able to improve walking distance, compared with a 68-meter distance decrease in patients receiving the drug for only the second half of the trial. Dystrophin levels increased 47% in patients from the first group and 38% in patients who were receiving the placebo part-time.
On that information alone, it would be hard to see why eteplirsen isn't guaranteed accelerated status. But there are some asterisks that could require the drug to go into another trial.
Competitive advantage?
Accelerated approval also requires that the drug have an "adequate and controlled" study. There's a chance that the phase 2b trial won't qualify as it was tiny, with only 12 participants. Small trials have previously made it through the FDA process, but Sarepta's leaning a bit smaller than is typical.
In 2007, Baxter International (BAX +4.02%) received approval for Ceprotin, a treatment for severe protein C deficiency, following a trial that contained only 18 patients. But the condition that Ceprotin treated only had 20 severe cases in the U.S., so the small study size was understandably tiny.
If eteplirsen is forced to go the standard approval route and participate in further trials, it could give competing companies a chance to catch up -- or move ahead -- in the approval process. GlaxoSmithKline (GSK +1.77%) and Prosensa are teamed up for two new trials of DMD drugs, with the trials focusing on four different subpopulations of DMD for treatment. That's on top of previously existing trials, which include one DMD drug that has made it to phase 3.
Government contracts dwindling
Sarepta has existed for 20 years, in one form or another, but has yet to get a drug to market. The company's recent revenues have come via government contracts. But those are taking a bit of a hit thanks to a recent termination.
In 2010, the company signed an agreement with the Department of Defense regarding the development of treatments for the Ebola and Marburg viruses. The Defense Department issued a stop-work order in August before outright canceling the Ebola portion entirely, right on the back of the clinical trial news. Tekmira Pharmaceuticals will now have the sole Ebola contract. The Marburg portion is continuing, and the Department has the option to pick the Ebola side back up later if it doesn't like the results from competitors.
Final thoughts
Sarepta is bound to remain volatile in the near future because of a narrow pipeline that includes treatments for DMD and infectious diseases. The next catalyst is the potential for accelerated approval from the FDA. If that's denied and the drug is forced through a standard review, it's worth keeping a closer eye on the products coming through the GlaxoSmithKline and Prosensa pipelines.
