Sarepta stock reversed early losses Tuesday after the company said it would voluntarily stop all shipments of Elevidys in the U.S., complying with the Food and Drug Administration's request.
Doing so will give the company "the necessary time to respond to any requests for information" from the FDA, Sarepta Therapeutics said in a news release.
Sarepta is also working to update the label for Elevidys, a gene therapy that treats Duchenne muscular dystrophy, after two teenage patients died of acute liver failure. Notably, both were older patients who could no longer walk. The company earlier stopped selling Elevidys to nonambulatory patients. But the move Tuesday affects all patients.
Chief Executive Doug Ingram called the decision a "painful one." But RBC Capital Markets analyst Brian Abrahams said it was likely inevitable. Though Sarepta initially rebuked the FDA, hospitals had already started pausing use of the gene therapy.
"Elevidys pause in ambulatory pts is a necessary concession to the FDA, but even if it returns to market, the damage – to its potential uptake, the future of gene therapies overall, and SRPT's relationship with the Agency – may already be done," Abrahams said in a client note.
Sarepta stock managed to reverse early losses and climbed 2.2% to close at 13.61. Shares are now trading at a nine-year low.
Sarepta Stock Faces Added Scrutiny
Initially, Sarepta refused to stop selling Elevidys. The FDA's request came after media reports of a third death among recipients of one of Sarepta's gene therapies. But this patient, a 51-year-old man, died after treatment with Sarepta's experimental treatment for limb-girdle muscular dystrophy.
Sarepta argued that the FDA knew of the patient's serious condition on June 20 and his death on July 3. The agency's request to pull Elevidys sales didn't come until July 18 after Wall Street learned of his death. Though the patient didn't receive Elevidys, all of Sarepta's gene therapies use the same delivery system.
Ingram, the CEO, noted the need to work peaceably with the FDA.
"It is important for the patients we serve that Sarepta maintains a productive and positive working relationship with FDA, and it became obvious that maintaining that productive working relationship required this temporary suspension while we address any questions that FDA may have and complete the Elevidys label supplement process," he said.
But analysts say the conflict with the FDA won't end well with Sarepta.
The company already paused development of SRP-9004, the gene therapy tied to the third death. But the FDA also placed on hold another gene therapy for limb-girdle muscular dystrophy called SRP-9003. Sarepta had already wrapped testing on that one and was planning to soon ask for approval.
"We view this reversal as too little too late and still expect formal action from the FDA could still follow," Needham analyst Gil Blum said in a report.
He rates Sarepta stock an underperform.
Updated Plans For Elevidys
Sarepta hopes to run a six-month study in 25 nonambulatory patients to determine whether using an immunosuppressant called sirolimus could prevent acute liver injury or failure, Blum said. He says it's unclear whether this study will get the green light from the FDA.
Oppenheimer analyst Andreas Argyrides says Elevidys could ultimately stay on the market under a Risk Evaluation and Mitigation Strategy, or REMS, program. These are safety programs for certain drugs to help manage the potential for serious risks.
He expects the label update, which includes a warning against the risk of acute liver injury or failure, to take 45 days.
In the meantime, Sarepta will likely look for additional cuts to meet its convertible debt obligation along with $300 million owed to Arrowhead Pharmaceuticals by year-end.
"We look to clarity in September, acknowledging in the meantime that the series of developments over the past week has impaired investors' confidence in management to deliver as communicated," Argyrides said in a client note. "Perhaps today's olive branch is the start of making amends."
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