Yesterday, leading rare disease player Sarepta Therapeutics (SRPT) received a CRL (complete response letter) from the FDA for its golodirsen NDA (new drug application). The company was seeking accelerated approval for golodirsen for the treatment of DMD (Duchenne muscular dystrophy) patients with mutations amenable to exon 53 skipping.
The CRL has highlighted concerns such as the investigational therapy’s renal toxicity and the elevated risk of infections at intravenous ports, as seen in preclinical models. Following the news, the stock was trading at $99.48, 17.31% lower than its previous day’s close.
What does this mean for investors?
The response was a big blow considering that golodirsen was expected to expand the company’s addressable market size by 8% of the DMD patient population. Sarepta’s FDA approved Exondys 51 targets around 13% of the total patient population.
Sarepta Therapeutics will need to address these safety concerns before resubmitting an NDA for golodirsen. In the best-case scenario, the company may manage to address the FDA’s concerns in a Type A meeting. This development would result in the smallest delay in the drug’s review process. The FDA, however, may approve the drug with a black-box warning, which could seriously affect its uptake.
In the worst-case scenario, the FDA may require the company to conduct additional trials to prove the safety of golodirsen. This could definitely jeopardize the timeline for the drug’s commercial launch. Sarepta Therapeutics will need to resubmit the NDA seeking approval for golodirsen. If the FDA remains unsatisfied with the new application, it can also issue a refusal to file.
All these probable scenarios imply increased uncertainty about the company’s future revenue trajectory and subsequent profitability.
What are the upsides for Sarepta?
In the second quarter, Sarepta Therapeutics reported revenue of $94.67 million, a YoY (year-over-year) increase of 28.75%. Its revenue was $3.62 million higher than the consensus estimate. Exondys 51 remains a solid revenue driver for the company. To learn more, read Exondys 51 Growth Bodes Well for Sarepta’s Top Line.
Sarepta Therapeutics is also gearing up to submit an NDA for its investigational therapy casimersen for DMD patients with mutations amenable to exon 45 skipping. The drug will target an additional 8% of the DMD patient population. It expects the FDA’s approval in the first half of 2020. Investors can be more confident about casimersen, as there have been no accounts of renal toxicity for this therapy in any of the clinical trials.
Sarepta Therapeutics’ valuation
Sarepta Therapeutics is currently trading at a price-to-sales multiple of 25.34x. The multiple is significantly higher than those of other rare disease players such as Alexion Pharmaceuticals, BioMarin Pharmaceutical, and Vertex Pharmaceuticals.
The 23 analysts tracking Sarepta Therapeutics have an average target price of $194.33 on its stock. This target indicates a potential downside of 94.99% in the next 12 months based on its current price.
Many analysts consider the recent drop in the company’s share price to be a good buying opportunity.