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Sarepta shares surge on drug breakthrough

by Ben Fidler | Published July 25, 2012 at 9:22 AM

Sarepta Therapeutics Inc. may have just put itself on Big Pharma's radar.

Sarepta, formerly known as AVI Biopharma Inc., saw its stock skyrocket more than 150% in early trading after releasing positive Phase 2b data on eteplirsen, a midstage compound that treats Duchenne muscular dystrophy, or DMD, a condition that currently has no approved cure.

DMD is a rare and devastating genetic, degenerative muscle disease that affects roughly one in every 3,500 male infants and about 300,000 boys worldwide. The disease is caused by a defective gene for dystrophin, a protein in the muscles, and is characterized by muscle weakness that quickly and progressively worsens.

Most children who have the disorder don't survive beyond their 20s.

The condition almost exclusively affects males because of the way it is inherited.

Eteplirsen, Sarepta's lead drug candidate, works by fixing the underlying cause of DMD: enabling the production of a smaller, but functional, form of dystrophin.

By synthesizing the protein, the drug is supposed to stabilize or significantly slow the disease.

Sarepta's release on Tuesday offered the first evidence that the drug may have a significant, positive effect on patients.

In a clinical trial, patients taking eteplirsen for 36 weeks and a group taking a placebo and a delayed form of treatment took a six-minute walking test. Those taking eteplirsen saw their walking ability decline by just 8.7 meters, compared to a decline of 78 meters from the placebo group.

The tests also showed no safety issues. Sarepta had released data after 24 weeks that showed much more mixed results; while the tests proved that the drug was causing dystrophin to be produced, patients weren't seeing a significant increase in their walking ability.

The company's stock tumbled from $9.24 per share to $6.66 per share when it released that data on April 2.

"Investors have been waiting to see if eteplirsen would produce a statistically significant, clinically meaningful benefit," said Christopher Marai, an analyst at Wedbush Securities Inc. following Sarepta.

Indeed, this time around, Wall Street cheered, sending Sarepta's stock from Monday's close of $3.46 to an $8.52 close on Tuesday. Investors are likely piqued not only by the idea that eteplirsen may have a quick path to Food and Drug Administration approval -- President Obama just two weeks ago signed into law legislation speeding the approval process for drugs treating patients with rare diseases -- but that Sarepta may catch the eye of Big Pharma if the positive trends continue over the rest of the study, set to conclude after 48 weeks.

Even so, however, a second analyst, who requested anonymity, doesn't necessarily expect Sarepta to move toward an acquisition or even a partnership to aid in the drug's potential launch, even though it could bring in $300 million in U.S. sales alone and could easily slide into a pharmaceutical giant's portfolio. Partnerships between biotechs and pharmaceutical companies on drug development can often lead to M&A transactions.

"[Sarepta's] product could be very attractive to partners right now, given this data, and it's certainly going to have some value in a partner or acquirer's eye," the analyst said. "The company has, however, given no indication that they are looking to be acquired or would need to partner the product to commercialize it."

In addition to its DMD program, Bothell, Wash.-based Sarepta is also creating treatments for lethal infectious diseases such as the Ebola and Marburg hemorrhagic fever viruses under research contracts and grants with the U.S. government. Sarepta may receive an additional $161.5 million in funding from the government contracts, according to regulatory filings.

Sarepta posted $2.32 million in net losses on $46.99 million in revenue in 2011.

Sarepta's largest shareholders as of April 16 were affiliates of Meldrum Asset Management LLC (7.9%) and BlackRock Inc. (6.3%), according to a proxy filed with the Securities and Exchange Commission.

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Ben Fidler

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