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By Ahmed Ishtiaq

There is a lot going on with Sarepta Therapeutics (SRPT) these days. The stock returned an eye-whopping 600% since January. In July, I suggested that Sarepta has great business prospects, and the treatment being developed by the company could be a massive success. Although the treatment is still not completely done with the trial stages, the preliminary results are astonishing.

Sarepta surged almost 120% this week after the company announced its experimental drug Eteplirsen met the key goal of the mid-stage study. The company develops first in class RNA-based remedies to save and improve the lives of people affected by severe and life threatening diseases. The recent study suggested that the drug for Duchenne muscular dystrophy helped patients walk better. It is also claimed that the drug can restore a key protein lacking in some of those with the disease.

The Study:

The study was conducted on twelve boys. Their age and medical conditions were suitable for the deletion of the dystrophin gene. The deletion of the genes was important to validate eligibility for treatment with an exon-51 skipping drug. The study calculated how far the participants were able to walk in six minutes. Those who were administered the higher dose walked 21 meters farther after 48 weeks of treatment than at the start of the trial. The participants in the placebo group walked 68 fewer meters at the end than at the start, a decline of about 17 percent. The result paved the way for the company to meet the FDA to discuss and agree for a phase III registration trial.

Potential Pitfalls:

Although the drug has an effective and safe profile, there still remain some potential pitfalls for the company. The first argument is the number of boys in the study. The study had only 12 patients, with just four getting the high dose and four receiving the placebo. The data has not yet been evaluated by experts. In addition, it is not clear if safety issues would arise with longer treatment. Moreover, Eteplirsen would be suitable for only 13 percent to 15 percent of Duchenne patients, those with a specific genetic mutation.

Another possible reason for doubt is that two of the participants on a lower dose of the drug quickly lost the ability to walk, although dystrophin increased in their muscles considerably.

Manufacturing could also be an issue for the company. The FDA cannot approve a drug unless manufacturing at commercial scale is in place. The company is working on ramping up its manufacturing capacity, but this procedure is time consuming. If there are holdups in manufacturing scale up, approval may be delayed.

Potential Market:

According to CureDuchenn, a nonprofit organization dedicated to finding a cure for Duchenne, there are more than 300,000 boys worldwide affected by the disease. In America alone, the disease affects more than 15,000 boys. At the moment, there is no cure available for the disease. The treatments available try to control the progress of the disease and improve the quality of life. The only recommended treatment to slow the decline in muscle strength is steroids. However, there are a lot of potential side-effects, which ought to be carefully managed.

While steroids can slow progression of the disease, they have undesirable side effects. Eteplirsen, on the other hand, has no known side effects so far. The drug is vying with a similar drug being developed by GlaxoSmithKline (GSK) to become the first treatment that works by directly fighting the cause of the disease. The market for the drug is massive, and if the drug is approved, the firm will be able to generate substantial revenues. That will put the company in direct competition with an industry giant such as GlaxoSmithKline.

Summary:

Eteplirsen has an effective and safe profile. If approved, the drug will have a substantial market share. After taking into account the pros and cons of the recent activity, I believe the stock is still an attractive long term investment candidate. The market showed an emotional reaction this week, and the stock may pull back a little in the short run. However, in the long run, I expect the stock to keep going up. On the basis of the trial results, the firm may present the drug for early approval.

I believe there will be pressure on the FDA from the patient groups and parents to make the drug available for all the boys. At the moment, there is not a single drug present in the market with such effective profile. Although, above mentioned negatives remain, I believe the positives outweigh the negatives and the drug can get a go ahead from the FDA.

The company is also applying the drug and its technology to other mutations causing the disorder. Chief Executive Officer Chris Garabedian said

If we can get this drug approved, we believe there is a streamlined path toward applying the technology to more Duchenne patients.

If the company is successful, the drug will enter the "orphan" drug category of very expensive treatments for rare diseases. I think investors should watch Sarepta for big moves.

Source: What Is Going On With Sarepta Therapeutics?