Sarepta Soars As Pfizer's DMD Prospects Languish

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About: Sarepta Therapeutics, Inc. (SRPT), Includes: PFE
by: Trent Welsh
Summary

Pfizer's recent PPMD conference revealed very concerning safety issues with its gene therapy candidate for DMD.

Pfizer's candidate might be headed down Solid Biosciences' path to disaster.

The only "sure" bet in the DMD space is Sarepta, who currently owns the space while continuing to build a moat.

Sarepta is a strong buy, especially after the pullback from recent highs and a possible golodirsen approval happening any time now through August 19th.

Pfizer Inc.'s (NYSE:PFE) latest Duchenne Muscular Dystrophy data reveal at June's Parent Project Muscular Dystrophy Conference resulted in some safety issues for its lead DMD candidate PF-06939926. Pfizer's candidate shares some similar traits to Solid Biosciences Inc.'s (SLDB) lead DMD candidate, which might be bad news for Pfizer's long-term DMD prospects. Sarepta Therapeutics, Inc. (SRPT) is the only "sure bet" currently in the DMD space with gene therapy data that is on par or better than the competition, has more transparent results, has no significant safety concerns associated with it, and which is already year(s) ahead of most of the competition. Sarepta continues to be a strong buy especially after the most recent pullback from recent highs.

Pfizer currently views DMD as a potential area of breakthrough treatment for the company as a possible sustaining growth initiative beyond 2022 in the treatment of rare diseases.

Slide from Pfizer's Q1/2019 Earnings Slides

Pfizer's most recent data release for Duchenne Muscular Dystrophy came from 6 DMD boys who each received one IV dose of PF-06939926. Each subject had an immune response with one child getting admitted to a pediatric ICU for 11 days for hemodialysis. This safety concern means that Pfizer should have to incorporate some additional FDA approved safety features into any future trials for PF-06939926, which could easily set back the candidate's advancement another 3-6 months or so even after it is already a year behind Sarepta's lead gene therapy candidate SRP-9001 whose data was reported back in June of 2018.

At the heart of the safety concern is the vector that companies are using to deliver their transgene to target cells with minimal immune response. Sarepta used AAVrh74 for its vector, which resulted in no serious adverse events in the company's studies to date. Solid Biosciences used vector AAV9 in its IGNITE DMD trial for its candidate SGT-001, which resulted in significant safety issues, including official adverse events like 1. A transient increase in bilirubin higher than 2x the upper limit of normal, 2. A transient decline in platelet count, and in the same patient 3. A gastrointestinal infection that was later determined not to be due to SGT-001. Solid's data results, along with the adverse events, resulted in a significant loss in value for the company's stock which has yet to recover in any meaningful way.

Chart Data by YCharts

Pfizer used the exact same AAV9 vector as Solid Biosciences, which raises some red flags for the future of the candidate as safety issues seem to be a recurring theme for that vector. The reason this is so important for gene therapy candidates is that subjects currently can only take one gene therapy candidate in their lifetime as the science stands today. This creates a potential winner takes all scenario where parents and insurers are almost ethically required to pick the best product for kids suffering from this debilitating and ultimately fatal condition.

Not only was Sarepta's initial data far superior from a safety perspective than either Solid's or Pfizer's data, it was also far more transparent. Sarepta released Western Blot info with its data reveal which is the current accepted standard for dystrophin quantification and is the only measure that is in every study protocol. Pfizer failed to release its Western Blot data in its latest release, amongst other key data, as it instead chose to be far less transparent than Sarepta was in June of 2018.

Sarepta currently has the only commercially approved DMD drug on the market with its Exondys 51 projected to bring in ~$400m in revenues for the company over the course of 2019 while only treating ~13% of the DMD market. It has two follow-on candidates set for near-term approval including golodirsen (~8% of the DMD community) with a scheduled PDUFA date of August 19th and casimersen (~8% of the DMD community) with a possible approval coming by Q1 of 2020.

Sarepta's lead DMD gene therapy candidate SRP-9001 initiated dosing for its second clinical trial, which will be placebo controlled, in December 2018 for 24 subjects, putting it far ahead of both Solid Biosciences and Pfizer, especially with its currently spotless safety profile. Sarepta also has been heavily investing in its commercialization infrastructure as it is on track to initiate a pivotal commercial supply study by the end of 2019. After Sarepta's latest $375m capital raise, propping its cash hoard to over $1B again, it should have plenty of money for its near-term commercialization initiatives along with continuing to expand its current pipeline of candidates from ~25 to its goal of 40 total candidates over the next few years.

Sarepta has had a small pullback from Pfizer's recent data release making it a nice current buying opportunity for investors as it continues to solidify its dominance in DMD with a potential golodirsen approval coming at any time now or in August.

Chart Data by YCharts

Pfizer has experienced failure in DMD before with its previous candidate domagrozumab (PF-06252616) being axed in August of 2018. After the company's latest data release, it wouldn't be hard to argue that Pfizer might be better off jettisoning its new lead DMD candidate as well. Pfizer is now significantly behind Sarepta in getting a possible candidate to market, and its safety concerns might make commercializing any successful drug mute in a winner takes all scenario. Pfizer reading the writing on the wall and dropping its newest lead DMD candidate should be another big catalyst for Sarepta's stock if and when it happens, as Sarepta's DMD competition continues to flounder.

I continue to hold an overly large position of Sarepta in my portfolio of stocks as I figured Pfizer's recent DMD data release was more likely to be a positive judgement day for Sarepta as a lingering overhang was finally mitigated. Sarepta has now grown into my largest individual stock holding, after Pfizer's latest data release, and I have no reason to sell a share anytime soon. Best of luck to all.

Disclosure: I am/we are long SRPT. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.