What: Shares of Sarepta Therapeutics (NASDAQ: SRPT) dipped as much as 50% on the news that the FDA won't accept the company's drug eteplirsen, for the NDA that was filed. The company is in development of a drug known as eteplirsen to treat boys for a rare disease known as duchenne muscular dystrophy (DMD). The FDA claimed that "the NDA filing was premature" , and that "dystrophin" may not be a good biomarker for DMD patients.
So What: According to Sarepta Therapeutics' press release the FDA will need more clinical data to confirm that dystrophin should be used as a biomarker to determine efficacy for DMD. It seems the FDA doubts the Exon skipping RNA technology, in light of recent failures with this type of technology. One such recent failure occurred when, Prosensa Holdings N.V. (NASDAQ: RNA) and Glaxosmithkline (NYSE: GSK) , declared that their drug drisapersen had failed its phase 3 study in patients with duchenne muscular dystrophy. The trial failed, because drisapersen failed to meet its primary endpoint -- There was no significant improvement on the 6 Minute Walking Distance Test (6MWD) test compared to placebo. Also FDA got a hold of Natural History Data for DMD, which also may have swayed their decision in the opposite direction.
Now What: Well now it seems that Sarepta will have to run a confirmatory phase 3 trial, and achieve a positive primary endpoint -- before it can file another NDA to the FDA. Another phase 3 trial could take 2 years or more, and during that time the company will have to dilute shareholders more just to stay afloat. It will take a long time to enroll all the patients in a phase 3 study, and trial data will be sparse along the way. This dip though presents a buying opportunity for long term Sarepta investors, because the fundamental story hasn't changed. The only thing that has changed is the amount of time needed to seek approval for eteplirsen, once the confirmatory phase 3 trial has been completed. The downside risk though is that the FDA may change stances in the coming years, on what the primary endpoint should be to determine efficacy in the DMD patient population.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.