Sarepta Investors See GSK’s Drisapersen Receiving Breakthrough Status Print E-mail
By Brian Wilson - Lead Contributor   
Friday, 28 June 2013 09:16
Sarepta Therapeutics (NASDAQ: SRPT) is a company that focuses on RNA therapeutics, and is currently focusing on the use of their platform to develop drugs that induce exon skipping, which alters the RNA transcription in muscular dystrophy patients and produces functional versions of a protein known as dystrophin. SRPT continues to see elevated levels of bearish speculation ahead of another post-Phase II meeting with the FDA, which will determine whether or not the company’s Duchenne Muscular Dystrophy (DMD) drug eteplirsen will be eligible for accelerated approval based on the data that was produced from the 12-patient Phase II trial that initially sent Sarepta stock soaring to new highs in October 2012.

If eteplirsen receives accelerated approval, eteplirsen could realistically be on the market in Q4 2014 with incomplete data from Phase III trials. Without it, investors generally expect a 1-1.5 year delay that could discourage investment in the company until Phase III data. The accelerated approval application would probably be submitted in early 2014.

Although the stock itself is on a steady uptrend, total short interest has remained close to 10 M shares –or about 33% of float. Options activity also implies heavy speculation (especially on the bearish, or put side) ahead of the next meeting with the FDA. Note that this meeting is scheduled to occur near the end of July 2013.

This bearish sentiment grew yesterday after the only other competing DMD drug, GSK’s Prosensa (drisapersen) received breakthrough drug status from the FDA. Investors seemed nervous that Prosensa might take market share away from eteplirsen due to a virtually identical mechanism of action, although these fears are overblown. Note that both drugs induce exon 51 skipping to create semi-functional dystrophin proteins, although drisapersen’s toxicity profile is far less favorable.

The initial bearish reaction in SRPT stock to the drisapersen update has been reversed, as Sarepta investors make the argument that this may actually bode well for eteplirsen’s chances at being eligible for accelerated approval.

Although Sarepta has become expensive at this point, the short interest (as mentioned) is extremely high and presents some downside protection in the event that eteplirsen cannot receive accelerated approval.




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