Why Sarepta’s PDUFA Delay Is a Good Thing

Sarepta Therapeutics Inc. (NASDAQ: SRPT) shares saw a handy gain on Wednesday following an analyst upgrade. Janney Montgomery Scott has a Neutral rating on Sarepta but increased its fair value estimate to $18 from $10, based on a Prescription Drug User Fee Act (PDUFA) delay for Sarepta’s eteplirsen in the treatment of Duchenne muscular dystrophy (DMD).

The firm thinks the eteplirsen delay has more to do with FDA being conciliatory despite the limitations of the dataset, and it wants to provide something to patients, but with significant commitments from the sponsor.

Currently, Sarepta is developing multiple, steric-blocking, antisense oligonucleotides, designed to restore protein production in a rare and fatal genetic disorder, DMD. The incidence of DMD is 13 to 35 per 100,000 yearly or about one in 3,500 live male births globally. The estimated prevalence in the United States is 18,000, with an additional 15,000 cases in European Union.

Janney estimates that the treatment-amenable patient population (ambulant and non-ambulant) for the company’s first eight therapies to be about 7,000 patients in the United States. Furthermore, based on current pricing trends for therapies targeting rare disease, the annual cost of treatment is likely to be $375,000, based on the firm’s analysis, which could generate $1.2 billion to $1.4 billion annually in the United States at roughly 80% gross margin.
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According to Janney’s report:

If accelerated approval (AA) is granted, label would be the key: Odds of AA are now 45% (from 15%), in our view. However, we are not all sanguine about the potential label. Could the agency restrict it to ambulant boys over seven years of age, or does the agency wait to additional data from the two smaller studies (non-ambulant older boys and ambulant boys < seven years of age) to provide a more comprehensive label? Additionally, we have no visibility into the enrollment status of the PROMOVI study and think Sarepta would have to start enrolling the randomized exon 45/53study prior to AA. Hence, timing of any potential regulatory decision is unclear.

Shares of Sarepta were trading up more than 16% at $21.43 midday Wednesday, with a consensus analyst price target of $17.92 and a 52-week trading range of $8.00 to $41.97.