Usually, when biotech companies meet with the U.S. Food and Drug Administration (FDA), their stock goes one of two ways. In the case of Sarepta Therapeutics Inc. (NASDAQ: SRPT) shares nearly exploded. As a result, analysts are beginning to flock to Sarepta after the company made news surrounding a meeting with the FDA, not to mention the enormous boost that shares are getting from short covering.

The company announced that it held a pre-New Drug Application (NDA) meeting with the FDA regarding its lead product candidate, eteplirsen, for the treatment of Duchenne muscular dystrophy (DMD). Sarepta agreed with the agency to initiate a rolling NDA submission and will submit the nonclinical and CMC components of the NDA by the end of this week. As previously announced, Sarepta plans to submit the final component of the NDA by mid-year 2015.

Edward Kaye, M.D., Sarepta’s interim CEO and chief medical officer, said:

We will initiate a rolling NDA submission to facilitate the regulatory review of the NDA. The initiation of our NDA submission for eteplirsen marks a significant milestone for the Duchenne community and we look forward to completing the submission by the middle of the year and to continuing to work with the Agency towards the goal of providing treatments to patients as quickly as possible.

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Canaccord Genuity upgraded shares of Sarepta to a Buy rating from Hold on reduced near-term regulatory risk and potential upcoming catalysts following the company’s positive pre-NDA meeting with the FDA. The brokerage firm moved up the price target to $30 from $16.

Canaccord Genuity’s analyst, Adam Walsh, detailed in the report:

Looking forward, we see two potential catalysts to drive shares higher: 1) FDA acceptance of the NDA filing (60 days post-filing — est. late third quarter 2015); and 2) FDA announcement of Adcom to review the eteplirsen NDA. On the first, we fully expect FDA to accept the filing for review, given its blessing to submit the NDA. On the second, we believe an Adcom would allow for powerful testimony from DMD patients, parents, and advocacy groups in support of eteplirsen, which could sway committee members toward recommending approval. Thus, while we acknowledge that significant approval risks still remain, we would expect Sarepta shares to trend higher into an expected fourth quarter of 2015 Adcom.

A couple of other analysts weighed in on Sarepta as well:

• SunTrust upgraded shares to a Buy rating from Neutral and raised the price target to $33 from $14.
• RBC has a Sector Perform rating for Sarepta and lifted its price target to $20 from $15.

Sarepta saw its short interest jump to 13.7 million for the April 30 settlement date, from the previous level of 13.3 million. This latest level is the highest in the past 52 weeks. Undoubtedly, a portion of the stock’s reaction is investors covering the short interest. In fact, this has caused a massive short covering wave. In the 8 million shares that have traded before 11 a.m. Eastern on Wednesday, it would not be surprising if half were short sellers abandoning their positions.

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What is interesting about the short interest scramble is that the stock is well off the 52-week high and still at half of its 2013 peak. This leaves a dilemma for what the short sellers with real conviction have to think about Sarepta.

Shares of Sarepta were up nearly 48% to $24.24 Tuesday morning. The stock has a consensus analyst price target of $25.50 and a 52-week trading range of $11.33 to $35.45.

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