Sarepta, Patients Win - But What Of Regulatory Oversight?

| About: Sarepta Therapeutics, (SRPT)

The end of the Sarepta Therapeutics (NASDAQ:SRPT) saga will see patients desperate for anything to delay the course of their Duchenne muscular dystrophy (DMD) have access to a product they want. The unfortunate by-product is that it will encourage many biotech executives to re-write their regulatory strategies with an eye towards politics as well as science.

In approving eteplirsen as Exondys 51, the US FDA appears to have acquiesced to pressure from families and even elected officials who pressed regulators to disregard the usual requirements for placebo controlled trials, even in disorders with small populations. The accelerated approval of course requires such a trial, but Sarepta will probably have to look overseas, since a large portion of the US DMD population will already be saturated.

Hail Mary

Sarepta shares have been depressed since an FDA advisory committee voted against Exondys in April, but surged 63% to $45.88 in morning trading today. Much of the sellside had written off its chances of approval – with good reason, as the FDA rarely disagrees with a negative adcom vote – so approval came as a surprise, and a huge spike in the share price was an obvious consequence.

As always, accelerated approval came with significant post-approval obligations. A two-year randomized controlled trial is chief among them, and will require funding a significant program through 2021. It is therefore fortunate for Sarepta that it received a rare pediatric disease priority review voucher, which it ought to be able to sell to help fund clinical operations – marketing is probably less of a problem since the DMD community is clearly already well aware of Exondys.

Recent priority review vouchers have gone for up to $350m (Alexion sits on Strensiq nest egg, October 26, 2015).

With today’s share surge – no doubt exacerbated by traders who held 33% of shares in short position needing to unwind – Sarepta might want to raise money anyway. It last sold $37.5m in shares in June, and had $134.7m in cash at June 30.

The clinical operations will need to confirm that Exondys indeed does more than improve biomarkers in patients, and actually changes patient outcomes. If it fails to do so, the FDA in theory can revoke approval – although this is a rare outcome at the FDA, the withdrawal of Avastin in breast cancer being a notable exception. And such a scenario would almost certainly stimulate the same campaign that led to the approval.

The FDA has long been criticized by the sector for being insensitive to patient interests, but in approving Exondys showed that it can be open to a sustained and emotional campaign. For the sake of patients and their families, it is to be hoped that it is the right choice, and that there are no safety surprises in years hence.

But, for the sake of regulatory integrity, it should also be hoped that science never gets trumped by politics in future approval debates.