SRPT stock crashed on an unexpected roadblock for its gene therapy

In a surprise decision, the Food and Drug Administration said it will hold an advisory committee to discuss Sarepta Therapeutics‘ (SRPT) muscular dystrophy gene therapy, and SRPT stock tanked on Friday.


Just two weeks ago, Sarepta said the FDA would not ask a panel of independent experts to review the risks and benefits of the gene therapy for Duchenne muscular dystrophy. But the agency changed its mind during a late-cycle meeting, Sarepta said in a news release Thursday.

Sarepta is seeking an accelerated approval, meaning it still hasn’t completed two Phase 3 studies of the drug, SRPT-9001. But it believes the treatment works based on elevated levels of a key protein in patients. The outside experts will likely debate whether this protein signals a benefit to patients.

“While we now see more near-term stock volatility potential with upcoming regulatory events, we still see many avenues for SRPT-9001 to ultimately cross the line,” RBC Capital Markets analyst Brian Abrahams said in a note to clients.

On today’s stock market, SRPT shares crashed 18% to close at 122.69.

SRPT repository: Surrogate endpoint

Sarepta developed its gene therapy for patients with Duchenne muscular dystrophy. In this condition, the patient’s body does not make enough of the dystrophin protein, which is necessary for muscle function and strength. Sarepta’s drug codes for a shortened version of the dystrophin protein.

The company is betting on accelerated approval based on elevated levels of the shortened protein in the patient’s blood. This is known as a “surrogate endpoint”.

Mizuho Securities analyst Uy Ear says Sarepta does not believe there are any problems with the application. The company also does not believe the FDA has manufacturing concerns. Two out of three sites have already passed inspection with minimal problems.

This “suggests that one reason for this decision change may be because the agency is exploring the innovative use of surrogate endpoints, where appropriate, in the accelerated approval to advance cell and gene therapy for rare and life-changing degenerative diseases,” Ear said in a note.

He maintained his buy rating and price target of 160 on SRPT shares.

Streamlining approvals for gene therapy

It is promising that the meeting of the advisory committee will take place before May 29, the day the FDA will make a decision on whether to approve SRPT-9001.

UBS analyst Colin Bristow says the news from the advisory committee is not a “red flag”. Peter Marks, director of the FDA’s Center for Biologics Evaluation and Research, has publicly supported the use of surrogate endpoints to streamline accelerated approvals of cell and gene therapies.

But “given the announcement of the advisory committee decision, against a backdrop of (the FDA office) communicating how limited capacity is at any public appearance, we see a potential risk of (approval date) extension,” he said in a note. .

Nevertheless, he maintained his buy rating and price target of 158 on the SRPT share.

Follow Allison Gatlin on Twitter at @IBD_AGatlin.


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