Sarepta Therapeutics Inc. (NASDAQ:SRPT) is scheduled to have its FDA Advisory Committee Meeting [ADCOM] to review eteplirsen as a treatment for Duchenne muscular dystrophy [DMD] amenable to exon 51 skipping on April 25, a little over a month from now. According to newsletter writer Chen Lin, this is a huge binary event for the company. In this article, Lin lays out his investment thesis on the stock ahead of the meeting, and his hopes for eteplirsen's approval.
I have been an investor for Sarepta for many years and was able to navigate the wild swing quite successfully. Recently I sold at $40 twice and was able to send a strong warning about the negative briefing document to my subscribers before the recent collapse. I bought back my positions not long ago at around $10-13/share. This is what I think may happen in the next two months.
Why was I able to make so many correct calls? I have been an investor in Sarepta for years and have a deep understanding of its situation. Let's talk about a few commons myths or mistakes that investors made in the past few years.
Myth: FDA is a solid team that works together.
Fact: There are differences within the FDA, sometimes contentious. Last year, the FDA directors overwrote the objection to approve flibanserin despite of the negative opinions from the division reviewers. This is a perfect example. My understanding is that eteplirsen was disliked by the Peripheral and Central Nervous System [PCNS] division for a long time. The reviewers, headed by Dr. Ronald Farkas, disliked historical controls. You can find their point of views in many talks they gave in the past years. However, a new law has passed. The FDA Safety and Innovation Act [FDASIA] was passed in 2012 and FDA management has the responsibility to implement the new law. That is part of the reason Sarepta was allowed to file the new drug application [NDA].
Myth: FDA will do the "right thing" and reject the weak candidate based purely on science regardless of the "crying moms."
Fact: Lobbying does influence the FDA. In the recent approval of flibanserin, the women's group lobbying efforts reportedly played a key role in the approval process. You can Google the stories about the flibanserin approval and how lobbyists impacted it. In Sarepta's case, the lobby efforts were overwhelming. One hundred and nine members of Congress sent a letter to the FDA demanding the eteplirsen approval! My understanding is that other letters, authored by senators, are heading to the FDA soon as well.
Going forward for Sarepta, what do we expect? First, I see there is a good chance that we will receive another negative briefing document in early April. It is hard to imagine the FDA division will change much in a couple of months. My rough estimate is that we will have 70-80% chance of another negative briefing document, but we will have 70-80% chance of approval at the end. I believe eteplirsen has a much stronger case than flibanserin for two reasons: 1) it is life-and-death situation, and 2) it is only a conditional approval, but not a full approval as for flibanserin.
In terms of trading, since I strongly recommended my subscribers load up Sarepta from $10-13/share recently, I am actually advising everyone to trim some here close to $20. We have a good chance to see another negative briefing document and have another buying opportunity. As long as the FDA allows ADCOM to vote on the approval of eteplirsen, I believe we will have a very good chance to see the positive results. There is a possibility that the FDA division will tune down the negativity in the new briefing document (i.e., it is still negative, but less negative). It should be viewed as positive. I will have to read through the new briefing document first.
Sarepta is a heavily shorted stock. Even on a slightly positive briefing document, the shorts may be forced to cover. The trading will be wild depending on the briefing document.
Finally, I have been investing in Sarepta for many years. I have always been a believer of eteplirsen despite the doubts of the FDA. I supported the Jett Foundation and lobbied my congressmen. I am planning to travel to College Park to attend the ADCOM on 4/25. I wish to witness the history! I sincerely hope we will have the long-awaited good news for these DMD boys this summer!
1) Chen Lin: I own, or my family owns, shares of the following companies mentioned in this interview: Sarepta Therapeutics stocks and call options. I personally am, or my family is, paid by the following companies mentioned in this interview: None. My company has a financial relationship with the following companies mentioned in this interview: None. I was not paid by Streetwise Reports for this article. Comments and opinions expressed are my own comments and opinions. I determined and had final say over which companies would be included based on my research. I am responsible for the content of the interview.
3) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their families are prohibited from making purchases and/or sales of those securities in the open market or otherwise during the up-to-four-week interval from the time of the interview until after it publishes.
Disclosure: I/we 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. I have no business relationship with any company whose stock is mentioned in this article.