Sarepta Therapeutics

SRPT : NASDAQ : US$13.05
Target: US$20.00

Sarepta Therapeutics is a biopharmaceuticals company that is focused on the discovery and development of unique, first-inclass therapeutics for the treatment of life-threatening rare and infectious diseases. Lead product candidate eteplirsen, a phosphodiamidate (PMO) morpholino antisense oligomer for the treatment of Duchenne muscular dystrophy (DMD), is currently in Ph2 trials.
All amounts in US$ unless otherwise noted.

Investment recommendation
Reiterate BUY; lowering target to $20 on eteplirsen’s (Etep) now significantly delayed potential in Duchenne muscular dystrophy (DMD). We still predict eventual clinical success with broad uptake driven by good safety/efficacy but the recent update call leaves us with much uncertainty in etep’s path forward. While etep clinical data to date suggests to us good efficacy and best-in-class safety, timelines for further Phase 2/3 development and regulatory approval could be anyone’s guess. Our new $20 pNPV target assumes a postponed launch and lower chance of success.
Investment highlights
 Q3 EPS: $(1.24) compared to $(0.65) consensus, our $(0.59) estimate. Revenue of $4.2M compared to $4.4M consensus, our estimate of $8.1M.
 FDA reversal may have broad negative implications for all of DMD drug development, beyond exon-51 and SRPT. What we find most disturbing about FDA’s communication to SRPT is the issue the agency appears to have in the 11th hour with 6MWT and understanding of DMD natural history. Maybe these issues can be mitigated with a placebo arm, but this may hamstring drug development for smaller DMD populations, including all of SRPT’s and potentially RNA’s pipeline.
 Placebo arm would delay Ph3 data even without biopsies; a novel, unproven composite endpoint would vastly increase clinical risk.
Given FDA’s dismissive tone on dystrophin, no biopsy shouldn’t really bother the agency unless it reverts to its prior opinion that a 4th biopsy is important.
 We see SRPT shares as short-term dead money; but oversold as clarity is almost inevitable in the next 12 months. We think the next etep trial may be delayed much later than Q2/14 as some newfangled composite endpoint is extracted from meta-analysese of DMD natural history data. SRPT’s estimate of only a 2 year launch delay may be aggressive; we estimate 3+ yrs


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