SRPT Chart

What: Shares of Sarepta Therapeutics (NASDAQ:SRPT), a clinical-stage biopharmaceutical company focused on using RNA-interference to effect positive biologic change on rare and infectious diseases, exploded higher by 110% in May, based on data from S&P Capital IQ, after the company updated the status of lead drug eteplirsen for Duchenne muscular dystrophy.

So what: According to Sarepta's May 19 press release after the market closed, and following its pre-new drug application meeting with the FDA over eteplirsen, it was able to file two components of the NDA submission before the end of May, and it plans to file the last submission of its NDA by midyear. In other words, this submission allows Sarepta to get the ball rolling while it's running a concurrent later-stage trial for eteplirsen.

The timing is also interesting as longtime CEO Chris Garabedian, who'd had multiple miscommunications with the FDA over the past couple of months, stepped down just weeks before this rolling submission was announced.

Now what: The NDA filing for eteplirsen is critical for Sarepta Therapeutics because the bulk of its value is built around its exon-skipping platform. Sarepta's eight exon-skipping therapies in preclinical and clinical trials would cover 60%-80% of all DMD patients if are were successful in clinical studies -- and currently there is no approved DMD therapy on the market. The quicker eteplirsen can potentially make it to market, the better, because Sarepta is eventually going to need additional financing to fund new exon-skipping studies.

More importantly, investors need to determine whether or not the FDA will accept increased dystrophin production as a viable endpoint and proof that Sarepta's exon-skipping technology works. A failure of eteplirsen to be approved could be devastating to Sarepta's pipeline with only early stage infectious disease studies left over if its exon-skipping development platform doesn't pan out.

Source: Sarepta Therapeutics. 

For what it's worth, eteplirsen has shown a statistically significant benefit in the intent-to-treat group in a small phase 2b extension trial that's now well into its third year. In fact, we should be getting a 192-week update in about a month. While eteplirsen hasn't exactly cured DMD, it's provided a measurable benefit in the six-minute walk test in patients that were diagnosed many years prior to beginning the trial. In short, eteplisen's efficacy case looks strong. But always keep in mind that predicting what the FDA will do is an inexact science, and no one can ever know how they'll rule with any certainty.

My opinion remains the same: cautious optimism. A lot is riding on Sarepta's exon-skipping platform, but I remain worried that there could be a setback or worse yet, a complete response letter, in its future. My suggestion is to sit out this initial PDUFA decision since you could benefit from more than a half-dozen other exon-skipping studies down the road, as well as the potential for a collaborative partnership or even buyout.