What's next for Sarepta Therapeutics (SRPT -0.80%)? After announcing encouraging results last October from a phase 2b study of eteplirsen targeting treatment of Duchenne muscular dystrophy, or DMD, shares nearly tripled in value overnight. While the initial exuberance faded to some extent, the stock is still up around 87%. Will Sarepta march back up to those October highs and beyond? Here are three key next steps that will make the difference.

1. To file or not to file?
Sarepta has two important meetings with the Food and Drug Administration over the next few weeks. One is the end-of-phase 2 clinical meeting while the other is the end-of-phase 2 Chemistry, Manufacturing, and Controls -- or CMC -- meeting. Both are standard meetings for drug companies that conclude phase 2 testing. However, for Sarepta these meetings with the FDA are especially important.

Much speculation has centered on Sarepta filing for accelerated approval of eteplirsen. The FDA can decide to grant accelerated approval for drugs that fill an unmet medical need by allowing the drug company to use surrogate endpoints rather than clinical outcomes. Obtaining accelerated approval allows the company to begin marketing the drug earlier than normal. Sarepta's management has stated that the decision whether to file for accelerated approval will depend on how the first quarter meetings with the FDA go.

Gaining accelerated approval certainly isn't always easy. Onyx Pharmaceuticals (NASDAQ: ONXX) found that out in December 2011 when the FDA initially rejected accelerated review of Kyprolis. The agency's concern at that time was that Onyx had not conducted sufficient clinical trials for the faster approval. Kyprolis did ultimately gain FDA approval in 2012.  

It isn't easy, but it can be done. The FDA last week approved accelerated approval for Celgene's (CELG) Pomalyst in treating multiple myeloma. However, the phase 2 study for the drug included 221 patients -- much larger than the 12 patients in Sarepta's study.

The challenge for Sarepta will be in proving to the FDA that the data establishes that eteplirsen is both effective and safe. As for effectiveness, Sarepta will argue that dystrophin production is a solid surrogate endpoint and that all 20 patients across several studies who took at least 10 mg/kg/week of eteplirsen experienced increased dystrophin production.

Regarding safety, the company will try to convince the FDA by noting that no patients experienced significant adverse events related to taking the drug even at high dosages. I expect that Sarepta will also emphasize that the morpholino chemistry upon which eteplirsen is based has been used safely in 400 patients with other diseases.

2. Further clinical testing
Regardless of whether accelerated approval is pursued and given, more clinical testing is on the horizon for eteplirsen. If the FDA grants accelerated approval, confirmatory studies will be required in larger patient groups. If it doesn't, Sarepta will move forward with phase 3 studies with more patients.

Either way, look for Sarepta to begin lining up patients and sites for additional testing in the second half of this year. Dosing of patients participating in the study would probably begin in the first quarter of 2014. Announcements of interim results could occur later in the year, although it seems likely that final results would be pushed back to early 2015.

If we assume the company goes down the phase 3 path, each announcement would potentially serve as another catalyst for Sarepta. Confirmation of efficacy and safety in a larger study should pump up shares.

3. More exons on the way
DMD is caused by low production of muscle protein dystrophin. The problem is that a section of the gene called an exon is deleted and the rest of the gene can't be built as a result. Eteplirsen works by skipping the deleted exon and allowing dystrophin to be produced without it.

So far, Sarepta has focused primarily on skipping exon 51. Around 1,950 DMD patients in the U.S. could potentially be helped by skipping this exon. The company estimates that market potential to be between $600 million and $1 billion per year. Around 2,600 additional patients in Europe could also possibly be treated with eteplirsen.

However, the exon-skipping approach can also be used for other exons. Sarepta projects that four other targeted exons represents a potential market nearly twice the size of the population affected by exon 51. The company plans to have a Pre-Investigational New Drug Application meeting with the FDA in the second half of 2013 to discuss moving forward with clinical trials for these other exons.  

Pathway to success
I'm not sure whether Sarepta will convince the FDA on the merits of accelerated approval for eteplirsen. If it does, shares will undoubtedly skyrocket. If not, shares will fall on the disappointment. However, that could present an excellent buying opportunity for investors. Good news on further clinical studies or progress on targeting other exons should bolster the stock.

What's immediately next for Sarepta? We'll see. I think that what's ultimately next for Sarepta, though, should be a pathway to success.