Sarepta Therapeutics‘ (SRPT) gene therapy, Elevidys, is facing a challenging regulatory journey, according to analysts. The treatment for a muscle-wasting disease failed in its final-phase study, resulting in a more than 45% crash in SRPT stock after an overnight halt.
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Earlier this summer, Elevidys received accelerated approval for children ages 4 and 5 with Duchenne muscular dystrophy – a devastating disease that leads to progressive loss of walking ability in young boys. However, drugs that gain accelerated approval must demonstrate their benefit in a confirmatory study, which is where Sarepta failed.
Patients who received a one-time infusion of Elevidys a year ago showed a 2.6-point improvement on a 34-point scale measuring movement ability. On the other hand, placebo recipients only improved by 1.9 points. The results were not statistically significant and were primarily driven by patients aged 4 and 5, as noted by analyst Gil Blum from Needham. There was no significant change in scores for children ages 6 and 7.
Sarepta’s stock, SRPT, continued to plummet in morning trading, down 43.9% near 60.33 and reaching its lowest point in six years.
SRPT Stock: ‘Nothing Short Of Surprising’
“In typical Sarepta fashion, the most highly anticipated readout of 2023 has turned out to be nothing short of surprising,” stated analyst Joseph Schwartz from Leerink Partners in a report.
Although the results did not demonstrate statistical significance for the primary goal of the study, which was measuring movement ability on the 34-point scale, secondary measures showed more positive outcomes. Patients who received Elevidys displayed statistically significant improvements in standing and walking 10 meters faster.
In a news release, Sarepta stated that they have shared the results with the FDA, and the agency is open to expanding Elevidys to children ages 6 and 7.
Analysts do not anticipate the FDA to withdraw Elevidys from the market. However, they also do not expect the agency to approve the gene therapy for older boys with Duchenne muscular dystrophy.
“While the message on Sarepta’s conference call was overwhelmingly positive, we have to accept that these data are a major disappointment and complicate the regulatory path moving forward for Elevidys,” said Schwartz from Leerink.
He maintained his outperform rating on SRPT stock but lowered his price target from 185 to 130.
Elevidys Is Still Likely A Blockbuster
In Duchenne muscular dystrophy, patients do not produce enough of the dystrophin protein necessary to maintain muscle integrity. Instead of strengthening with age, the muscles progressively deteriorate in boys with this condition. Elevidys works by assisting the body in producing a shortened version of the protein, called microdystrophin.
Thus far, it seems that the benefits of Elevidys outweigh the risks for children ages 4 and 5, according to analyst Brian Abrahams from RBC Capital Markets. Schwarz from Leerink noted that the FDA has historically been flexible when considering treatments for Duchenne muscular dystrophy.
Abrahams predicts an 80% chance that Elevidys will remain on the market, resulting in $1 billion in annual sales. In the unlikely event that the FDA expands the gene therapy to older children, he estimates peak sales of $3.4 billion in the U.S., with a long-term tailwind of $2 billion in annual sales.
Although Abrahams reduced his price target on SRPT stock from 217 to 148, he maintained his outperform rating, stating that this “still represents meaningful upside to where the stock last traded.”
Follow Allison Gatlin on X, the platform formerly known as Twitter, at @IBD_AGatlin.
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