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Sarepta Therapeutics (Nasdaq: SRPT) is a company that I have been following quite closely after its monster rally on October 3rd 2012. I finally pulled the trigger and bought SRPT at an average cost of $26.80/share in early February of this year, which has provided almost 16% gains thus far.

Not only am I interested in the pipeline potential in muscular dystrophy, but I'm overall quite bullish on the RNA drug sector based on the science itself. RNA drugs will bring a whole new way to manipulate cell physiology, which leads to applications in many different indications.

While Sarepta attracts the most attention from its flagship drug eteplirsen these days, it's important to remember that the company also has valuable RNAi-based technology at its fingertips that will be able to take part in this new class of drugs.

Although I believe that Sarepta is very well suited for "buy and hold" investors looking at multi-year trades, an upcoming end-of-Phase II meeting with the FDA should get some short-term speculators interested on both sides of the SRPT trade.

This is because the bullish argument for Sarepta in the short term is based on the idea that the FDA will allow Sarepta to submit an early approval application for the breakthrough therapy eteplirsen for the treatment of Duchenne Muscular Dystrophy.

Many short-term bears think that eteplirsen will have to provide Phase III data before receiving FDA approval. This would delay the company's overall progress, delay gratification (in the form of eteplirsen revenues) and incur additional costs for EPS-negative Sarepta.

So it seems that both sides seem to agree that early approval would be a big deal for eteplirsen and Sarepta from an investing standpoint, but there is some disagreement on the outcome.

The end-of-Phase II meetings are expected to occur within the next few weeks (before the end of March 2013), and given its timing I think that Sarepta's related press release will be out in the first week of April.

If eteplirsen gets the nod from the FDA and has an application filed in the near future, SRPT will probably become a $40 stock based on the sales potential for eteplirsen and Sarepta's similar DMD drugs. Recall that SRPT was trading at this level right after the release of eteplirsen's Phase IIb data in 2012.

While there aren't many patients, orphan drugs for rare, deadly diseases have substantial pricing power and much more viability when it comes to reimbursement. This would be especially true for eteplirsen due to a complete lack of competition. From what we can tell, doctors will want their DMD patients on this therapy as soon as it's available.

Personally, I will be staying long SRPT due to my guess that eteplirsen has a better than even chance of getting FDA approval without a Phase III trial. Like I mentioned earlier, a premature approval for eteplirsen would mean that the drug would not have to go through the long enrollment process for a Phase III trial, and conduct the trial itself. This brings Sarepta a few years closer to potential earnings-positive territory, and gives them quicker revenue that can be used for pipeline development.

If the FDA doesn't offer an early route to approval for the drug, SRPT may drop in the short run but still offers a long-term RNA drug developer play that I would be comfortable holding.

Those who don't want major exposure to binary catalysts like the one we are about to see can simply reduce the size of their position, or exit now and come back later to avoid the uncertainty - although the FDA's increasing leniency towards drug developers in recent years leads me to believe that eteplirsen is coming to the market sooner rather than later.

Source: Big Move To Occur In Sarepta Therapeutics