Shares of the clinical-stage biopharma Sarepta Therapeutics (NASDAQ:SRPT) are up over 50% this morning following a surprise announcement that the U.S. Food and Drug Administration has apparently changed its mind about accepting a New Drug Application for the company's Duchenne muscular dystrophy (DMD) drug, eteplirsen. Last November, the FDA informed Sarepta that they were no longer willing to consider an accelerated approval for eteplirsen, after a similar drug called drisapersen, co-developed by Prosensa (NASDAQ: RNA) and GlaxoSmithKline (NYSE:GSK) failed to show any form of clinical benefit in a large, late-stage study.

The sticking point was that Sarepta had only progressed eteplirsen into a mid-stage trial followed by an open-label extension study at the time. Moreover, the FDA cited the study's small sample size as cause for concern, especially after drisapersen showed promise in a mid-stage trial only to flame out in a larger study. GlaxoSmithKline has since handed the rights for drisapersen back to Prosensa, who is trying to figure out a way forward as well.

What now?
What's important to understand is that Sarepta's clinical pipeline hinges on the success, or failure, of eteplirsen. Duchenne muscular dystrophy comes in various forms that depend on the specific mutation underlying the disease. Sarepta's clinical platform is based on the idea that its diversity of exon-skipping drugs can target different mutations in order to restore expression of the protein dystrophin. Eteplirsen targets exon 51 of the dystrophin gene, which gives rise to about 13% of DMD cases.

To date, open label extension studies have shown that some patients participating in the original mid-stage trial have higher levels of dystrophin, can walk for longer periods of time based on the 6 min walk test, and appear to have improved lung function.

Given that there are essentially no therapeutic options for this devastating disease, patient advocate groups have lobbied the FDA extensively in hopes of forcing the agency to review an accelerated regulatory filing based on this mid-stage data. And today, it looks like they got their wish. 

That being said, you need to understand that there are still major hurdles to the drug's approval. Firstly, it's not clear why the FDA decided to reverse course and allow Sarepta to file an NDA now. According to the scant information available, the FDA is still concerned about the small sample size of the mid-stage study and a primary endpoint has yet to be agreed upon for the review. Sarepta has lobbied the FDA to accept levels of dystrophin expression as a primary endpoint, but the agency has seemed to lean more toward results from the walking test. Put another way, the FDA wants to know that increased dystrophin production means something in terms of increasing a DMD patient's ability to function. And therein lies the problem.

Some of the boys in the study did show increased dystrophin expression, but rapidly lost their ability to walk anyways. Sarepta pointed to the fact that this is normal for older boys afflicted with DMD and suggested that patients should be treated at earlier ages as a result. Indeed, one of the studies Sarepta is proposing as part of the drug's accelerated review is a trial focusing on boys who are under 7 years old. And it's not that the FDA disagreed with this line of reasoning, it's only that they wanted to see more data before approving the drug.

Foolish final thoughts
While today's news is certainly a step in the right direction, you should keep in mind that a lot of issues still have to be worked out before eteplirsen can be approved. The good news is that an accelerated approval could meet the aims of both the FDA and Sarepta. Put simply, the FDA can take the drug off the market if further studies show the drug isn't effective or is unsafe. Meanwhile, Sarepta could get this much needed therapy to patients and their families that are desperate for treatment options. If pressed on the issue, I am cautiously optimistic that eteplirsen will end up being approved in 2015. That said, Sarepta now has a market cap north of $2 billion following this news and has yet to file the drug's application. So, you may want to wait until the smoke clears before jumping into this volatile biotech.

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