SRPT Stock crashed into 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 Therapeutica(SRPT) gene therapy for muscular dystrophy, and SRPT supply tanked Friday.


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

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

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

In the current stock market, the SRPT share crashed 18% and closed at 122.69.

SRPT stock: 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 necessary for muscle function and strength. Sarepta’s drug encodes a shortened version of that dystrophin protein.

The company is counting on accelerated approval based on increased levels of that truncated protein in patients’ blood. This is known as a “surrogate endpoint.”

Mizuho Securities analyst Uy Ear says Sarepta doesn’t believe there are any issues with its application. Nor does the company think the FDA has manufacturing problems. Two of the three locations have already passed the inspection with minimal problems.

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

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

Streamline gene therapy approvals

Promisingly, the advisory committee meeting will take place before May 29, the day the FDA must 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’s decision, against the backdrop of (the FDA office) communicating how limited capacity is in every public appearance, we see a potential risk of extending (date of approval),” he said in a note.

Still, he maintained his buy rating and price target of 158 for SRPT shares.

Follow Allison Gatlin on Twitter at @IBD_AGatlin.


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