Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares in Sarepta Therapeutics (NASDAQ:SRPT) jumped by over 10% today after a health care analyst at Baird upgraded it to buy from hold and suggested potential upside into the low $20's.
So What: It's been a painful year for Sarepta Therapeutics, a clinical stage biotech company that is working on a therapy to treat Duchenne Muscular Dystrophy, or DMD.
Shares were trading near $40 at this point last year; however, fears that Sarepta's DMD drug eteplirsen would struggle to win over regulators resulted in shares collapsing to as low as $12 this year.
Investors' concerns were fueled by a high profile, late stage trial failure for GlaxoSmithKline Plc and Prosensa's competing DMD drug, drisapersen, which works similarly to eteplirsen.
Drisapersen's failure to improve walking distance versus placebo in that phase 3 trial ultimately resulted in GlaxoSmithKline exiting its partnership and returning full rights to Prosensa, as well as Prosensa's eventual sale to BioMarin Pharmaceutical, late last year for $840 million.
Now, it appears that industry analysts, including those at Baird, may be warming up to the idea that the FDA could eventually give eterplirsen a green light.
Baird's enthusiasm appears to be at least somewhat tied to the recent FDA filing for approval by BioMarin for drisaperson. That filing comes after a review of trial data and an extension study suggested that drisapersen can delay DMD's progression for some patients.
Baird believes that drisapersen's FDA filing clears the way for a similar filing from Sarepta for eteplirsen as early as midyear. If so, Baird thinks Sarepta's share price could climb north of $20.
Now What: Although BioMarin's filing signals optimism that the FDA will look favorably on these DMD drugs, it's far from a certainty when Sarepta will file for eteplirsen's approval, or if the FDA will eventually approve it. For that reason, Sarepta remains a high risk stock that most investors should take a pass on, at least until we have more insight from the company on its plans.
Todd Campbell owns shares of BioMarin Pharmaceutical. Todd owns E.B. Capital Markets, LLC. E.B. Capital's clients may or may not have positions in the companies mentioned. The Motley Fool recommends BioMarin Pharmaceutical and GlaxoSmithKline. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.