Why Sarepta Therapeutics Shares Are Tumbling 19% Today

By Markets Fool.com

Image source: Sarepta Therapeutics.

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What: After the FDA issued final guidelines regarding the compassionate use of unapproved drugs on Wednesday, Sarepta Therapeutics shares are crashing 19% as of 11:15 a.m. ET.

So what: The FDA has been working on guidelines to formalize access of potentially life-saving drugs that have yet to win approval from the regulator for commercialization. Yesterday, the agency released final guidelines on the subject that streamline the process for doctors requesting these medicines for their patients.

The new guidelines are a win for patients stricken with debilitating diseases, however, investors appear to think that they're a big loss for clinical-stage companies like Sarepta Therapeutics. The guidelines require that patients are charged only the cost of manufacturing the drugs that are made available to them through this program.

That provision potentially derails a backdoor source of funding for Sarepta Therapeutics if the FDA rejects eteplirsen, its controversial therapy for Duchenne muscular dystrophy (DMD).

Recently, the FDA delayed a decision on early approval of eteplirsen following a negative recommendation for approval by a key advisory committee.

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Investors may have been holding out hope that if the delay is long, or the FDA eventually rejects early approval of eteplirsen, then compassionate use could provide a source of funding for future trials of eteplirsen required by the FDA.

Now what:Investors are connecting the dots between the FDA guidelines and Sarepta Therapeutics' future, but that's a risky proposition because there's no telling what the FDA will ultimately decide to do with eteplirsen.

Given the advisory committee's negative vote, eteplirsen's limited trial size, and questions regarding its efficacy, the odds favor a rejection. However,the FDA could still grant the drug a conditional OK and require confirmatory studies.

Regardless, this stock is far too risky for me to try to buy it, even on this drop. Sarepta Therapeutics has already taken investors on a scary roller-coaster ride over the past year, and there's no end in sight to shares' nausea-inducing volatility. I'm focusing on other investing opportunities that rely less on a very uncertain FDA outcome.

The article Why Sarepta Therapeutics Shares Are Tumbling 19% Today originally appeared on Fool.com.

Todd Campbell has no position in any stocks mentioned.Todd owns E.B. Capital Markets, LLC. E.B. Capital's clients may have positions in the companies mentioned.The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.