Sarepta Halted As FDA Mulls Its Highly Anticipated Gene Therapy

A panel of Food and Drug Administration advisers will vote on Friday whether to approve the highly anticipated gene therapy from Sarepta Therapeutics (SRPT). SRPT's stock was halted before the meeting.

Sarepta develops gene therapy to treat Duchenne muscular Dystrophy. This disease is characterized by a loss of muscle mass and the absence dystrophin. Dystrophin also helps keep muscles intact. Sarepta’s gene therapy allows the body to produce a shortened version of this protein called microdystrophin.

Documents released on Wednesday indicate that the FDA could reject Sarepta’s theory. Sarepta believes that the presence of microdystrophin is likely to predict functional benefits. The advisors will decide on Friday whether microdystrophin is sufficient to allow for an accelerated approval later this month of SRP-9001.

The FDA does not bind itself to the panel's recommendations, but it does take into account the votes.

The SRPT shares have fallen this week, ahead of the election. Shares dropped 3.3% on Tuesday and almost 1% on Wednesday.

Stock Dives on Briefing Documents

Analysts said that the documents were interpreted negatively by all.

Uy Ear, an analyst at Mizuho Securities, noted that the panelists may have three main concerns. The presence of microdystrophin is not proof that gene therapy works, but a side effect.

The clinical studies do not provide clear evidence that gene therapy can benefit patients who are still able to walk. This accelerated approval could also lead patients to drop out of the ongoing Phase 3 trial called Embark.

Companies who want to gain an accelerated approval for a drug must prove its benefit in the final phase of the study. Sarepta is hoping Embark can do this for SRP-9001.

In a letter to clients, he stated that "for these reasons we believe it may be difficult for the advisory panel to make a positive recommendation."

He has a Buy rating on SRPT and a 160 Price Target.

FDA questions Microdystrophin levels

Some analysts have noted that briefing documents often appear to be doubtful about a drug’s abilities. In a note to clients, SVB Securities analyst Joseph Schwartz explained that advisory committees are there to "stress-test the approvalability of applications".

He said, "We knew that this would be the case with Sarepta (application)."

He said that the FDA had questioned the link between the microdystrophin level in muscles of patients and their functional benefit several times.

The documents "create a shaky background for the panel's meeting on Friday" and "call into question some Sarepta past statements regarding the existence of an extremely statistically significant relationship between microdystrophin and functional benefit," said he.

Schwartz has maintained his rating of outperform on the SRPT stock.

Brian Abrahams, an analyst at RBC Capital Markets, was more tolerant of the tone in the briefing documents. Peter Marks, Director of the FDA Center for Biologics Evaluation and Research, has supported the use of an accelerated approval path for gene-based product.

Abrahams wrote in a letter that a mixed advisory panel could still result in an accelerated review. Regardless, he said, "we continue to see good odds of approval with shares tracking at 200 or more, given SRP-9001’s $4 billion potential sales."

Analyst expects volatility for SRPT but maintains his Buy rating.