Sarepta Therapeutics - Pressure Mounting For Accelerated FDA Approval For Eteplirsen

| About: Sarepta Therapeutics, (SRPT)
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Sarepta Therapeutics (NASDAQ:SRPT), formerly known as AVI BioPharma, is closing in on a significant medical breakthrough for the largest segment of Duchenne Muscular Dystrophy sufferers. Duchenne Muscular Dystrophy is an affliction that results in muscle degeneration and certain early death. It affects mostly boys with most sufferers wheelchair dependent by age 12 and a life expectancy of 25 years. There is no known cure for Duchenne Muscular Dystrophy.

Sarepta is developing Eteplirsen, an antisense oligonucleotide, that is designed to cause the skipping of exon 51 of the dystrophin gene in boys with Duchenne Muscular Dystrophy. About 13% of boys with Duchenne Muscular Dystrophy have a mutation on the exon 51 of the dystrophin gene that causes this important muscle protein to go missing.

Sarepta's stock has been on a tear the last five weeks going from around $4 per share on July 23rd and closing at $15.82 August 31. The catalyst for this move was Sarepta's release of 36-week data of their current phase IIb extension study that, according to Sarepta's CEO Chris Garabedian, showed "statistically significant clinical benefit" in the 6 minute walk test - which is a "clinical meaningful outcome measure" for Duchenne Muscular Dystrophy.

I won't be going into detail on the data - you can read about that in Sarepta's 36-week clinical results call here. However, I will add that the lead investigator for the trial is Dr. Jerry Mendell, who is the director of the Centers for Gene Therapy and Muscular Dystrophy at Nationwide Children's Hospital in Columbus, OH. Dr. Mendell stated Sarepta's drug had "an unprecedented treatment effect" on participants in its latest trial.

Sarepta plans to release the full 48-week trial results for the above referenced study in October. If the results are positive as expected, Sarepta will go for accelerated FDA approval. On July, 9, 2012, President Obama signed into law The Food and Drug Administration Safety and Innovation Act (FDASIA), S. 3187, bipartisan legislation that will spur the development of lifesaving treatments for 30 million Americans suffering from rare diseases. There is also the Creating Hope Act - "The Creating Hope Act will expand the priority review voucher program as incentive for pharmaceutical companies to formulate more pediatric drugs." In short, these vouchers can be worth in the hundreds of millions and are fully transferable to other companies (like a European or ROW partner for Sarepta). The timing couldn't be better for Sarepta to go for accelerated approval for Eteplirsen.

Adding to this excitement is the parents of some of the trial participants that have gone public with the remarkable improvements they are witnessing in their sons. This isn't data crunching and statistical "p" values - this is real life amazing results. Here is the heart-breaking story of two Vermont brothers - one who is getting Eteplirsen and the other who didn't qualify for the study because he is wheelchair dependent. Here is the story of a Missouri boy in the study that is showing remarkable improvements as well. The pressure will mount as more stories like this emerge.

In fact the news has been so positive for Eteplirsen that Sarepta has received numerous calls from families of afflicted children requesting the medication outside of trial for compassionate use. In this open letter from Sarepta's CEO Chris Garabedian, he sympathizes with those families, explains the process, and reiterates the company's commitment to get the drug to market as quickly as possible.

In terms of competition, so far Sarepta appears to have the best in class in terms of efficacy and safety. GSK/Prosensa is also developing an exon 51 gene skipping therapy (PRO051) and has a clinical trial going on in Europe. In terms of safety for PRO051 while no serious adverse events were reported, one concern would be that all of the patients in the phase 1-2a study showed protein in their urine (Proteinuria). "Proteinuria, defined as a protein level above the upper limit of the normal range of 0.15 g per liter, was observed in all 12 patients." That warrants further monitoring. Sarepta's safety profile is very clean and no adverse events were reported - nor was there any proteinuria which could portend kidney/renal toxicity issues.

Another issue that has come up is Intellectual Property. Sarepta challenged Prosensa's Exon Skipping IP in Europe and had some claims invalidated, but part of Prosensa's patent portfolio remained intact - this has not been challenged in European Court. Here in the United States, Sarepta's Exon Skipping IP is very strong and "includes exclusive rights to Dr. Ryszard Kole's general RNA splice altering patents gained though AVI's acquisition of Ercole Biotech" - Kole's IP is important and should be referenced in any of Prosensa's prior art submissions - I have not been able to confirm if they were referenced by Prosensa at the time of this writing.

So what is Sarepta worth? Currently, the market cap of Sarepta is approximately $358M. This is with 23M shares outstanding at $15.82 per share and $24.5M of cash as of the Q2 CC on August 10th. I believe, even with this latest run, the share price of Sarepta is still very undervalued. The cost of Eteplirsen is expected to be in the $250,000 to $400,000 per year range. Greg Wade a pharmaceutical analyst at Wedbush gives Sarepta a $26 per share target and estimates peak sales "conservatively" at $600M per year in just the United States. Sarepta also has many other programs, including anti-bacterials, flu, hemorrhagic viruses, and other exon skipping therapies. A $1B market cap would not be out of line for Sarepta - that puts it in the $40 - $50 price per share range and certainly seems appropriate given just the prospects for Eteplirsen alone.

Disclosure: I am 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.

Additional disclosure: This article is informational, not a substitute for your own extensive due diligence, and does not qualify as investment advice.