Sarepta Stock Soars as FDA Panel Recommends Muscular Dystrophy Drug Approval

Despite FDA staff criticism of Sarepta’s study data, the advisors voted 8 to 6 to recommend approval. Sarepta stock has gained 29% in premarket trading Monday.

FDA leaders must decide whether to grant an “accelerated” approval by May 29, although the agency isn’t bound by Friday’s advisory vote. FDA leaders have overruled their own staff’s skepticism in the past to allow treatments for dire diseases.

Sarepta shares stood locked at $120 all day, as FDA staffers voiced concerns about the evidence from the company’s three small clinical trials. From their written analyses and testimony, it was clear that the agency’s staff reviewers weren’t convinced by Sarepta’s evidence.

But earlier in the day, doctors and patients shared affecting anecdotes and videos they said were proof that Sarepta’s gene therapy works.

Wall Street research notes released during the day guessed correctly that the outside advisors seemed inclined to give patients something, rather than nothing. Both Brian Abrahams, of RBC Capital Markets, and Citigroup’s Neena Bitritto-Garg wrote that the panelists seemed to lean toward an approval recommendation.

Duchenne muscular dystrophy afflicts boys born with defects in the gene for making dystrophin, a crucial structural protein for muscle cells. From an early age, the boys’ muscles accumulate damage that typically leaves them in a wheelchair by their teens and dead before age 30.

Gene therapies hold promise for diseases caused by a single gene’s defects, using hollowed-out viruses to insert working copies of the gene in patients’ cells. Muscular dystrophy poses a challenge to this approach, however, because the natural gene for dystrophin is huge—three times as large as the carrying capacity of the virus capsules.

Sarepta and others have developed shortened versions of the dystrophin gene that generate “micro” proteins with enough function to at least stop a patient’s muscle decline.

The natural course of Duchenne muscular dystrophy is dire, and Sarepta’s currently-approved drugs only slow the decline for certain patients. Because finding subjects for large randomized trials is tough with rare illnesses, the FDA has special standards to speed up evaluation of treatments for such diseases.

For the kind of accelerated approval sought by Sarepta, the FDA allows indirect evidence that a treatment helps. Lab tests show that the SRP-9001 gene-therapy quickly led patients to produce the modified protein that is meant to strengthen their muscles.

But evidence that SRP-9001 actually stopped the muscle decline of Duchenne was less clear. In strength tests comparing treated patients with untreated people after a year, only one unblinded study found a statistically clear difference. A blinded study found no difference.

Sarepta’s researchers told the advisory panel that overall evidence nevertheless suggests that treatment stabilized patients’ muscle strength, especially in contrast to the typical decline.

The burden of proof for an accelerated approval is lower than the FDA’s usual standard. Sarepta need only show substantial evidence that its therapy is “reasonably likely to predict clinical benefit.”

An important factor for the risk-benefit decision on the treatment is that the SRP-9001 therapy raised few serious safety concerns. The hollowed-out virus it uses to deliver its genetic payload is already in use for another approved gene therapy. Side effects in the clinical trials were treatable and certainly less threatening than the untreated disease.

Another factor that may persuade FDA leaders to allow accelerated approval this month is a larger study that Sarepta is now conducting. Results are due before the end of 2023. The agency’s director of its Center for Biologics Evaluation and Research, Peter Marks, told the hearing that if the study’s data fails to support the therapy, the agency could pull the product.

Wall Street believes SRP-9001 offers Sarepta’s best shot at earning its first profit in the company’s 40-year history. Sarepta has three muscular dystrophy drugs on the market that brought in $930 million in revenue last year, but still left an annual loss of $700 million, or $7.12 a share.

UBS analyst Colin Bristow thinks an approved gene therapy could lift Sarepta’s revenue close to $2.6 billion in 2024, with profits of $11.45 a share. The gene therapy is a one-time treatment for a rare disease, so sales of SRP-9001 would peak the next year, generating profits in 2025 of $16.81 a share, Bristow believes. Sarepta sales and profits will taper thereafter, he estimates.

Discounting projected cash flows from the gene therapy and other Sarepta products, Bristow thinks the shares can rise by a third, to $160. UBS rates the stock as a Buy.

Write to Bill Alpert at william.alpert@barrons.com