SRPT Chart

SRPT data by YCharts

What: Shares of Sarepta Therapeutics (NASDAQ:SRPT), a clinical-stage biotechnology company primarily focused on developing therapies to treat Duchenne muscular dystrophy, or DMD, tumbled 15% in December according to data from S&P Capital IQ, after investors weighed a series of possible shareholder lawsuits against the company, as well as the BioMarin Pharmaceutical (NASDAQ:BMRN) acquisition of rival Prosensa (UNKNOWN:RNA.DL).

So what: Even though there was very little company-specific news to speak of last month, the dominant stories on the feed for Sarepta investors concerned a handful of prospective shareholder lawsuits against the company for alleged breach of fiduciary responsibilities. It's no surprise that Sarepta's shares had been volatile during the year, with sales of DMD drug eteplirsen essentially equating to most of its market value, but delays in filing a new drug application for eteplirsen, as well as perceived miscommunication between the company and the Food and Drug Administration, have led to the threat of legal action against Sarepta. These lawsuits, aside from being a distraction, can also get costly and could cause Sarepta to seek to raise capital.

Also, Sarepta shareholders have had time to think about BioMarin's purchase of Prosensa and they're left wondering what the heck just happened. Prosensa wound up being scooped up for a 55% premium to its prior-day closing price despite the fact that drisapersen, its DMD drug hopeful, failed to meet its primary endpoint in late-stage studies despite performing well in mid-stage trials. Upon deeper analysis, drisapersen studies did allude to positive results in the early stages of the disease, but there are no guarantees that the drug will ever find its way to pharmacy shelves. I believe Sarepta shareholders have to be disappointed that it wasn't their company being purchased instead considering eteplirsen appears to have a much better shot at gaining FDA approval than drisapersen. 

Now what: If we've learned anything by now it's that Sarepta is going to live or die by eteplirsen. On one hand, I have been extremely disappointed by the back and forth miscommunications and misinterpretations between Saretpa's management and the FDA. The two of them not being on the same page has cost the company quite a bit of market value, and it's delayed the potential approval of a game-changing drug that DMD patients need sooner rather than later.

Source: Sarepta Therapeutics. 

Then again, the limited data pool we have so far shows a remarkable improvement for eteplirsen-treated DMD patients. Through 144 weeks, eteplirsen-treated patients have seen the distance of their six-minute walk test decline by 33.2 meters, a 75.1-meter improvement over the control group which would be expected to see a 108.3-meter walking distance decline over 144 weeks. . Similarly, those in the control group through the first 24 weeks who then were switched over to eteplirsen have demonstrated a minimal decline since week 36.

The data shows promise for eteplirsen, but management's miscues and its reliance on one drug to drive most of its current market value make owning this stock a potentially scary proposition.