Sarepta Therapeutics Shareholders Just Hit The Jackpot

| About: Sarepta Therapeutics, (SRPT)

Several important data points were released in the past week. The stocks started the week with a mixed investor sentiment. While they started going down in the middle of the week, they ended in the positive territory. Industrials were the biggest winners, followed by financial stocks. Amidst this atmosphere, shareholders of Sarepta Therapeutics (NASDAQ:SRPT) just hit the jackpot.

Sarepta were among the top winners of the last week. The stock made an Arena (NASDAQ:ARNA) like move and gained 134% within the last 5 days. While not impressive as Arena Pharmaceutical's year to date return of 400%, its year to date performance of 88% is also eye whooping. On Tuesday, the company's announced that its xon-skipping compound eteplirsen achieved a significant clinical benefit after a 36-week PhaseIIb study in the treatment of Duchenne muscular dystrophy patients.


Sarepta Therapeutics is developing RNA-based therapies and working on developing drugs for infectious diseases. The firm changed its name from AVI BioPharma to Sarepta Therapeutics recently. Sarepta has a diverse pipeline of drugs. Company also develops treatments for life threatening genetic disorders.

Currently, the firm is working on developing a treatment for Duchenne muscular dystrophy [DMD]. It is a rare disorder that can cause severe muscle loss and early death. This disease is mostly observed in young boys. Approximately one out of 3500 boys around the world suffers from this disease. This disorder hits dystrophin, a protein that is vital for muscle fiber function. The disorder slowly spreads to the whole body causing a paralysis. Unfortunately, people suffering from DMD die before age 30. There is no cure available for the disorder at the moment.


Eteplirsen is the main drug on which Sarepta is focusing now. If the firm is successful, Eteplirsen will be able to tackle the main cause of DMD. The drug will be able to help facilitate the production dystrophin protein. This drug targets the specific genetic mutations and helps repair these mutations. On July 24, 2012, Sarepta announced that they had achieved significant clinical results for drug. Sarepta used six minute walk test (6MWT), to test the efficacy of the drug. The test yielded phenomenal results. These results were for 24 week trials.

The participants of the test were 12 boys of ages between 7 to 13 years. Company divided the participants in three groups, two for different doses of Eteplirsen and one for placebo. After 24 weeks of trial, participants showed significant improvement and produced dystrophin protein in their muscle fibers. Participants who took it for 12 weeks did not show a noteworthy increase in production of dystrophin in their muscles. This led the experts to believe that the duration of the treatment is an essential factor.

In the test, all participants showed a decline in walking distance. Four participants on 50mg/kg dose showed a decline of 8.7 meters. Participants on placebo for 24 weeks and then on 50mg/kg for next 12 weeks demonstrated a sizable decline of 78 meters between the tests. Participants on a 30mg/kg weekly dose for 24 weeks and then the higher dose for 12 weeks behaved almost like placebo group. The difference between those who took the highest dose for the longest time and the other two groups was 69.4 meters. These results show that Sarepta has a gem of a drug in development. These are exceptional results, if approved; the drug can change the fortunes of the company and the people suffering from disease. There was no adverse event during the trials. Sarepta will release further results in October.

Stock Performance:

Sarepta stock more than doubled after the announcement of the results of the trials. It is extremely rare for a pharmaceutical company to be able to post results with such efficacy and safety profiles. Another reason for such a hike in price may have been a notion that Sarepta can present the drug for approval after the phase two trials under the new FDA regulations. Stock closed at $3.46 on July 23. After the announcement of the results, the stock closed at $8.52 on July 24.

Insider Trades:

For any small cap company, it is essential to see how much belief management has in the company. Looking at the insider trades is a neat way to gauge management confidence. During the past year, there has been a lot insider trading at Sarepta. Almost all of the trades have been on the buying side. Management has been buying shares like crazy. Since April, CEO, Christopher Nishan Garabedian have bought more than 350,000 shares. There has only been one sale in the past year. The management has a strong belief that the company will be successful in developing the drug.


It is highly unusual for a drug to have such efficacy and safety profile as Eteplirsen. Surely, the test result is just the beginning. There are several steps ahead of the company. However, if approved, the drug will be a massive hit and a large breakthrough in its field. Sarepta can be the first company to develop a cure for such a disease. Having such a drug in the portfolio will make Sarepta a perfect target for Big Pharma.

Sarepta management also plans to meet FDA by the end of this year to clear path for the approval. I expect the company to present the drug for approval by the mid of next year. If approved, the drug will be the first to heal the sufferings of millions. It will also reward its shareholders. The stock was trading for as high as $50 in 2006. While, the risks are inherent, current catalysts and the market buzz about biopharma stocks can push the stock to that level.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.