Sarepta Therapeutics Inc. (SRPT) is a development stage biopharmaceutical company engaged in discovering and developing RNA-based therapeutics for treating rare and infectious diseases. The company uses its proprietary RNA-based technology to develop its candidates. It is currently investing major efforts into developing the lead candidate for Duchenne muscular dystrophy (DMD). Other programs include infectious disease treatments, viz. Marburg virus, Ebola virus, influenza etc., being primarily funded by the U.S. government. These funding include a Clinical Trial Agreement with National Institute of Allergy and Infectious Diseases (NIAID) of National Institutes of Health (NIH) for influenza trials, and several contracts with the U.S. Department of Defense (DOD) to fund the infectious diseases program.
The company has licensing agreement for DMD drug candidates with the University of Western Australia; SKIP-NMD collaboration for exon 53 targeting candidate development, with the Dubowitz Neuromuscular Center; and collaboration with Karolinska Institutet for developing RNA-based candidate for tuberculosis.
The companies competing with Sarepta for its different programs include Alnylam Pharmaceuticals Inc. (ALNY), GlaxoSmithKline plc. (GSK), Isis Pharmaceuticals Inc. (ISIS), Tekmira Pharmaceuticals Corp. (TKMR), BiondVax Pharmaceuticals Ltd. (OTC:BVAXF), Sanofi Aventis (SNY), and Santaris Pharma A/S.
The company's RNA platform is based on the phosphorodiamidate morpholino oligomers (PMO), synthetic structures that are shaped after the natural nucleic acid framework of RNA. These PMOs can be exploited to manipulate the molecules drug like properties. The advantages of the PMO technology include efficacy, stability, delivery, specificity and safety, not achieved by earlier antisense chemistries. The company's proprietary PMO based platforms include PMO-X for in vivo tissue targeting, potency and selectivity; PMOplus to enhance drug; and PPMOs enhancing cellular uptake.
The company currently has nine clinical programs ongoing, where four are for rare diseases, more specifically DMD, and the other five are for infectious diseases, which include Ebola virus, Marburg virus, influenza, tuberculosis (TB), and dengue.
The lead pipeline candidate of Sarepta is Eteplirsen (AVI 4658) in phase II of clinical trials for DMD, a rare neuromuscular disorder causing progressive muscle loss that eventually leads to disability and premature death. It is associated with error in gene encoding dystrophin instructions, and the therapies are designed to skip the exon of this gene to restore its function. Eteplirsen is designed to skip the exon 51, and it is also in preclinical testing for exons 45, 50 and 53.
Eteplirsen has been evaluated in three clinical trials in boys with DMD, and was found to be well-tolerated with no treatment related adverse effects. The studies showed that the patients treated with Eteplirsen showed evidence of production of dystrophin, which results in a disease modifying effect. Additionally, based on the 6-minute walk test (6MWT) Eteplirsen showed statistically significant difference when compared to the placebo/delayed treatment group. The phase II/b open label extension study, for assessing efficacy and long term safety, showed that after 48 weeks there was a dystrophin increase of 52% in 30 mg/kg groups and 43% in 50 mg/kg groups. On the contrary, there was no increase demonstrated in the placebo-treated group, thus showing the benefits of Eteplirsen.
The drug was given fast track status by FDA in 2007, however following the failure of a competitive drug Drisapersen of Prosensa (RNA) and GlaxoSmithKline, FDA now regards an NDA submission as premature. This result in pushing back the potential launch date of the drug and will also require the company to incur additional costs for future trials.
The infectious disease program is being undertaken with the funding from the U.S. government and is currently developing five candidates. These candidates include AVI-7537 in phase I for Ebola Virus; AVI-7288 in phase I for Marburg virus; AVI-7100 in phase I for Influenza; and two candidates in discovery for Dengue and TB. However, the AVI-7537 program was terminated by the Department of Defense last year, due to funding constraints.
Eteplirsen versus Drisapersen
Drisapersen, the GlaxoSmithKline and Prosensa, is/was the direct competitor of Eteplirsen for the treatment of DMD. Both the drugs are similar in there mechanism and targets, such that they use the exon skipping of exon 51, and they aim at producing functional dystrophin. The differences among the candidates, both synthetic molecules, lie in their chemical composition, where Eteplirsen is composed of RNA bound to PMO backbone, while Drisapersen is composed of RNA bound to 2-O-methyl (2-O-methyl phosphorothioate oligonucleotide) backbone. Additionally, there is also a difference of dosage administered, with Eteplirsen at 30 to 50 mg/kg per week and Drisapersen at 6 mg/kg per week, where the latter was kept at a low dosage due to safety concerns.
Drisapersen failed in the phase III trial, due to the drugs inability to achieve statistical significance over placebo in the 6-minute walking distance (6MWD) at mean 10.33 m. Another negative point for Drisapersen is the adverse events including injection site reactions (78%) and renal adverse events (46%), whereas Eteplirsen has shown no treatment related side effects.
Hence, it is safe to say the failure of Drisapersen in no way effects the future success of Eteplirsen, and it may in fact be a positive for Sarepta. Also that Eteplirsen is superior in mechanism, results, and its safety profile, and even if Drisapersen somehow gets back in the arena, the former will still be superior.
The company has a year to date performance of -22.8%, attributed largely to the 64% (November 12) plunge on FDA's verdict that an NDA based on Eteplirsen phase II/ b results is too early. The shares however did recover slightly from this fall, but are yet to return to their earlier level. One thing to note here is that Sarepta's shares have historically shown sharp reactions to news, as noticed in the 200% increase last year, on positive data from Eteplirsen phase II/b results.
The company has a mean price target of $26.54, with a high target of $57 and a low of $10. The mean recommendation currently is a hold. However, the analysts covering the company have a consensus rating of Neutral, and a consensus price target of $39.54. The company was recently upgraded to Neutral from Underweight, by Piper Jaffray, while the price target remained $20.
The company will be presenting at the 32nd Piper Jaffray Annual Healthcare Conference on January 15, 2014. The event holds importance for investors as they will be presenting a company overview and will help to better assess the prospects of the company. Positive news relayed in the conference is expected to boost share prices.
The dosing in the confirmatory study of Eteplirsen is expected to begin in the second quarter of 2014. News of the initiation of dosing in my opinion will cause a rally in the shares. However, the company is yet to provide an update on the confirmatory study design. Additionally, they will be announcing the 120-week data on the phase II/b trial, based on the 6MW data, is expected in the first quarter of 2014.
The phase III data for the Drisapersen is currently being evaluated and GSK expects outcome of this evaluation in early 2014. This event will impact the share prices of the company as was last seen on the failure of Drisapersen.
Fundamentals and Potential Risks
The company generates revenue from its license fees, grants and contracts, and in third quarter reported $0.41 million. However, the loss reported was $42 million, thus bringing the total deficit since inception to $534.4 million as of September 30. Additionally, the company as of September 30th has cash and equivalents of $281.4 million, which is expected to suffice for the next twelve months. However, the initiation of confirmatory trial for Eteplirsen will use up the company's resources quicker than expected, and they will have to turn towards an offering in a year or so.
The company's infectious diseases program is being funded by the U.S. government, and in case it decides to delay or disrupt the funding, the company will have to delay the trials. Additionally, the government funded candidates if or when approved, will be subject to price negotiations from the government, which will potentially limit the profit margin of the company.
Currently, no DMD product has reached the market and two other drugs that were being evaluated for DMD have already failed their trials. This does have a negative effect on the DMD candidates and puts the Eteplirsen trials at risk. This will further result in the FDA scrutinizing the trials more closely, and may even request additional data, which will not only delay the potential launch but also increase the expenses.
The company is a lucrative investment with major long term potential on the prospective approval of Eteplirsen. The candidate is currently the only treatment being developed for DMD, after the failure of Drisapersen. This proves as an opportunity for the company as it will have the market to itself; however a final verdict on the fate of Drisapersen is yet to be announced. In case the final data, to be announced next year, shows some benefit or FDA allows another trial, this will impact the shares of Sarepta. Additionally, the failure has led the FDA to turn more skeptic towards the DMD data and the endpoint of functional dystrophin being used in the trials. However, the results demonstrated by Sarepta to date have shown benefits as well as no adverse events. Thus there is high probability that it will continue the positive results in the phase III trial.
The company has a few catalysts approaching and it is expected to rally in the foreseeable future. However, the shares have a history of reacting sharply to news, whether positive or negative, thus the positions must be covered. Overall, I believe the company has potential and once Eteplirsen is approved it will have blockbuster potential and turn the company around.