Is Sarepta Winning?

| About: Sarepta Therapeutics, (SRPT)

The failure of drisapersen in a Phase 3 trial for DMD (Duchenne muscular dystrophy) was a disappointment. Prosensa (NASDAQ:RNA) and GlaxoSmithKline's (NYSE:GSK) exon-skipping drug has failed to produce statistically significant differences in tests of walking distance or motor function between trial participants treated with the drug and those treated with a placebo. The large scale trial involved 186 patients.

That leaves Sarepta Therapeutics (NASDAQ:SRPT) the only game in town for now.

Sarepta has come out with an update on its drug eteplirsen. Participants demonstrated continued stability in a 6MWT (6-minute walk test), with a decline in walking ability of less than 5 percent at 96 weeks of therapy.

Eteplirsen's prospects were considerably enhanced with the high-profile Phase 3 blowup of its rival's therapy.

Drisapersen vs. Eteplirsen

Now, that a big trial has failed, some analysts question the validity of the whole exon-skipping concept, since both companies are using the same basic idea.

But there are differences between the two drugs in chemical composition, dosing and delivery method.

Drisapersen is delivered in a lower dose than Eteplirsen: once a week at 6 milligram per kilogram. It is also injected, not infused. It is assumed that the dose cannot be maximized because of heavy side effects affecting the kidney.

Eteplirsen shows no such side effects, therefore larger dose of the drug could be applied and it is delivered by IV infusion. Treatment group 1, comprised of 4 kids, gets 50.0 milligram per kilogram per week. The dosing continues for 24 weeks via a 60-minute IV infusion. Treatment group 2, also 4 kids, gets 30.0 milligram per kilogram once-a-week x 24 weeks via a 60-minute IV infusion.

Exon skipping causes cells to "skip" (leave out) certain sections of the genetic code called exons during the protein production process. Leaving out these sections allows for the creation of shorter-than-normal, but partially functional, dystrophin, the muscle protein missing in DMD.

Both drisapersen and eteplirsen target exon 51 using a molecule called an AON (antisense oligonucleotide). It's been estimated that 13 percent of boys with DMD may benefit from skipping exon 51.

Both companies are using synthetic molecules composed of a short segment of RNA but with different chemical composition.

Until now Prosensa/ GSK was thought to be ahead because it was running far bigger and better-designed trials.

Sarepta's eteplirsen has shown a 6MWT benefit in a Phase 2 trial, and shown benefits of dystrophin production that Prosensa's drisapersen had struggled to match. But Sarepta has done this in a small trial of just 12 patients.

The lead inventor of drisapersen is Judith van Deutekom from Leiden (Netherlands) University Medical Center who developed the exon skipping concept related to the dystrophin gene. She later moved to Prosensa, where she is now vice president of drug discovery.

The inventor of eteplirsen is Stephen Wilton at the University of Western Australia in Perth who developed a technique for blocking specific exons of genes. Wilton has since worked with Sarepta Therapeutics on development strategy.

Also participated in the research were a team of scientists from several European countries and the U.S., led by UK scientist Prof. Francesco Muntoni, whose paper in the medical journal Lancet in 2011 announced that a drug known as an 'antisense oligonucleotide', could be used safely to restore dystrophin production in a subset of DMD boys.

Different antisense oligonucleotides are required to skip different exons and so a panel of such drugs is required to ensure as many boys as possible can be treated. In theory, this approach could work for at least 70 percent of DMD sufferers.

What next for Sarepta

In April the FDA has said it will consider accepting an application for accelerated approval for eteplirsen after it reviews additional data on Sarepta's dystrophin methodology and data on verifying the dystrophin quantification.

In July Sarepta announced that the company will submit a new drug application in the first half of 2014, based on a July 23 meeting with the agency. Sarepta does not yet know whether eteplirsen will be eligible for the FDA's accelerated approval program.

A Phase 3 confirmatory trial is planned for early 2014.

The trial will be 48 weeks long with the six-minute walk test used as the primary endpoint.

The six-minute walk has been used in the other DMD trials, and it is generally accepted as the basis for approval in various neuromuscular conditions.

The company is planning to enroll about 60 patients in the eteplirsen treatment arm and set up a control arm that will consists of untreated DMD patients with the same inclusion criteria, but that are amenable to other exon targets, exon 53, exon 45, exon 50, and exon 44.

The reason for using these type of patients for the placebo arm is that no drugs are available yet for these mutations, so the company would not have an ethical dilemma of not treating patients with a drug that could help them.

The other criteria for measurement is going to be dystrophin increase. The FDA requested additional data will be supplied and discussed with the agency before the trial begins.

The other issue with the FDA is manufacturing control. The FDA wants to make sure that the quality obtained from the larger scale production of the drug is comparable to the one tested in the small scale production.

Sarepta is spending a lot of money on scaling up its manufacturing capacity and estimates that by the end of next year, it will be able to satisfy half of the market demand for eteplirsen in the U.S. This assumes a monopoly position and a rapid uptake of the approved drug, otherwise the situation is even better from the production standpoint.

Pre-clinical programs are continuing for the Exon-45, Exon-53 and Exon-50 mutations. Animal pre-clinical testing with Exon-45 has already started, and the Exon-53 pre-clinical animal testing will start in this quarter. At least two of those compounds will be submitted to the FDA by the end of next year.

New ideas

In the meantime new ideas are springing up for the treatment of DMD.

Summit plc, a UK company, listed on the London Stock Exchange, has a utrophin modulation program with the idea of developing pills to increase the production of a protein called utrophin. The approach originates from the research of Professor Kay Davies at Oxford University.

Utrophin is a protein that is naturally occurring and functionally similar to the missing dystrophin protein and may be able to replace it.

Utrophin is produced by the body during early muscle development in embryos but then switched off in mature muscle fibers.

If production could be maintained, utrophin has the potential to substitute the missing dystrophin and restore and maintain the healthy function of muscles. Increasing or upregulating utrophin would benefit all DMD patients, regardless of the specific genetic mutation, which is different from the current experimental drugs.

Summit's most advanced small molecule utrophin modulator, SMT C1100, is in clinical trials. SMT C1100 treatment increases and maintains production of utrophin RNA which in turn is converted to utrophin protein. This functional utrophin will continually protect the dystrophin deficient muscle fibers.

SMT C1100 was designated as orphan drug by both the FDA and the EMA.

Other approaches are also experimented with, such as gene therapy. A drug called ataluren from PTC Therapeutics (NASDAQ:PTCT) is in Phase 3 testing, although it has shown mixed results in earlier studies.

Pfizer (NYSE:PFE) has an antibody in Phase 1 that aims to increase muscle mass.

Investors' summary

DMD is a chronic disease which is going to require continuous treatment for a long time.

Dosing for a limited time and expecting lasting benefits is not likely to happen. The half-life of dystrophin is only weeks long, two to four weeks half-life generally. So, from the drugmakers's viewpoint, it will be a steady, ongoing business of supplying the drug to keep regenerating dystrophin at steady, stable levels.

Finances: In the second quarter Sarepta reported a non-GAAP operating loss of $14.6 million or $0.46 per share compared with an operating loss of $5 million or $0.22 per share in the second quarter of 2012. The increase in operating loss is a result of an $8.3 million decrease in government contract revenue and a $1.2 million increase in operating expenses.

Revenue for the second quarter of 2013 was $3 million, down from $11.2 million in the second quarter of 2012. The decrease was due to the August 2012 stop work order and subsequent termination of the Ebola portion of the Ebola-Marburg U.S. Government contract due to a lack of available government funding. These decreases were partially offset by revenue from the 2012 intramuscular administration contract with the U.S. Government for the Marburg virus.

Sarepta ended the second quarter with cash and cash equivalents of $164 million, which is a decrease of $11.2 million from the $175.2 million cash balance at the end of the first quarter of 2013.

Since the end of the second quarter, the company sold approximately 1 million shares and raised $37.9 million. This cash is an addition to the $164 million quarter ending cash referred to above.

Sarepta anticipates an acceleration of the cash burn in the second half of the year as the manufacturing capacity is built up for eteplirsen and the expenses rise in relation to the planned Phase 3 trial.

To answer the question posed in the title: "Is Sarepta winning?": for the sake of the kids and the investors the answer should be a hopeful "yes."

Although investors should remember what happened to Prosensa, which has dropped from a 52 weeks high of $34.55 to $5.65 very quickly and its IPO blew up as a result of the trial failure. At the same time Sarepta's share price peaked at $49.61.

Biotech is a treacherous business but the winnings sometimes can be spectacular if you are on the right side.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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