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ALLISON GATLIN

Sarepta Stock Catapults Higher After Eking Out A Narrow Win In Its Gene Therapy Battle

Shares of SRPT stock launched higher Monday after Food and Drug Administration advisors voted late Friday in support of a highly anticipated gene therapy from Sarepta Therapeutics.

On today's stock market, SRPT stock soared 30.8% to 157.19.

Sarepta is testing the gene therapy in patients with Duchenne muscular dystrophy, a muscle-wasting disease marked by the absence of the dystrophin protein. Dystrophin is necessary to keep the muscles intact. Sarepta's drug helps the body make a shortened form of that protein, called microdystrophin. The company is banking on the presence of microdystrophin to win an accelerated approval.

Eight panelists agreed Friday, saying microdystrophin in patients' muscles does suggest patients will have a functional benefit from the gene therapy. Six disagreed — in essence saying Sarepta's theory doesn't pan out. The FDA doesn't always follow the panel's recommendation, but it does consider the vote.

In earlier commentary, panelists offered split views on the matter. Dr. Raymond Roos, a neurologist, said younger patients seem to benefit, though it would be helpful to know their genetics. But another neurologist, Dr. Steven Pavlakis, says Sarepta didn't provide statistical evidence that the drug works.

Christopher "Buddy" Cassidy, a panelist with Duchenne, referenced videos from parents of children enrolled in Sarepta's study. Some showed patients standing, jumping, running and climbing.

"We, as Duchenne patients — in terms of natural history, in terms of lived experience — don't get better. We don't improve," he said. The activity exhibited by patients in parent-captured videos "is nothing short of miraculous," Cassidy added.

SRPT Stock: Deck Stacked Against It

Sarepta had the deck stacked against it heading into the advisory committee meeting, SVB Securities analyst Joseph Schwartz said in a note to clients. The FDA's briefing documents skewed negatively and the roster of panelists included people analysts believed more likely to vote against Sarepta's drug.

"However, the panelists appeared to be swayed by the testimonials made during the open public hearing, as well as the accelerated approval framework and not letting 'perfection be the enemy of good,' " Schwartz said.

He has an outperform rating and 175 price target on SRPT stock.

Mizuho analyst Uy Ear says the nonclinical and clinical data presented didn't sway two of the neurologists. But Dr. Anthony Amato and Dr. Pavlakis "trusted the testimonials of their colleagues who are clinical trial investigators for SRP-9001 and leading experts in the field," Ear said in a note.

"Dr. Amato also found the videos demonstrating SRP-9001's profound treatment effect as compelling evidence, noting that he had not seen this magnitude effect in his 30 years of treating DMD patients," Ear went on to say.

FDA Decision Due This Month

The FDA will make its approval decision on Sarepta's gene therapy on or before May 29.

The decision could have far-reaching implications for other gene therapies, says Schwartz, the SVB analyst. Accelerated approval for Sarepta's gene therapy could slow enrollment in other studies of gene therapies to treat Duchenne muscular dystrophy. That's because "time is muscle," meaning the more time patients are left untreated, the more muscle function they lose irreversibly.

"As a mitigant to this risk, the magnitude of enrollment impact will depend on the adoption velocity for Sarepta, which could be challenged by uncertainties on the company's ability to consistently manufacture the product at scale in the face of what will presumable be appropriately stringent release criteria," he said.

Panelists were also concerned patients enrolled in Sarepta's confirmatory study, known as Embark, could drop out in the hopes of seeking the approved gene therapy. But Embark will wrap in September with the results expected by year-end.

"Dr. (Tabassum) Ahsan was 'very much on the edge,' but her comfort in Embark to complete in September 2023 and that only a small cohort of patients will likely have received commercial products before the Embark data readout tipped her to a favorable vote," Ear said.

Ear has a buy rating and 160 price target on SRPT stock.

Follow Allison Gatlin on Twitter at @IBD_AGatlin.

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