Sarepta Therapeutics (NASDAQ: SRPT) recently held an impromptu conference call to discuss updated data for an experimental gene therapy that has the medical community on its toes. In a nutshell, it looks like this biotech is on the right track in its quest to cure boys born with Duchenne muscular dystrophy (DMD).
Does that make this stock a buy now? There are plenty of ins and outs to consider. Here's what you should know before making a move.
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Hard not to share
Sarepta doesn't want to keep updating investors with results from a four-patient phase 1 trial with its gene therapy candidate, called AAVrh74.MHCK7.Micro-dystrophin at the same time it conducts an ongoing placebo-controlled study. When you think you've accomplished something remarkable, though, it's hard to keep it a secret.
Boys born with DMD are usually wheelchair-bound by the age of 12 because their muscles lack functional dystrophin, a protein that forms a protective barrier around healthy muscle tissue. Sarepta's experimental therapy inserts genes for producing micro-dystrophin into the muscle cells of DMD patients, and it appears to work as intended.
Without dystrophin in between muscle fibers, every movement results in damage. Muscles that have been damaged leak creatine kinase into the bloodstream, and at 270 days, micro-dystrophin improved this biomarker for all four boys treated. There were a few spikes caused by parents' inability to keep their boys, ages 4 through 7, from moving around long enough to get a good reading. Once they settled down, though, circulating creatine kinase dropped to nearly normal levels.
Stronger than expected
Biomarkers like creatine kinase levels aren't nearly as important as outcomes, and micro-dystrophin has produced some terrific results from the four boys treated so far. The North Star ambulatory assessment (NSAA) test asks boys to try 17 different activities that shouldn't be a problem for a healthy 4-year-old, such as walking and getting up off the floor. DMD patients receive two points for doing an activity well, one point if they're close, and zero if they just can't do it.
Historically, DMD patients tend to gain about 1.3 points per year from the time of diagnosis until around age 7. One patient hadn't progressed very far when he began treatment, but his NSAA scores still improved by two points to 28 out of a possible 34 after nine months.
The other three patients were far less mobile when they started, and all three achieved eight-point improvements from their baseline scores 270 days after a single infusion of Sarepta's micro-dystrophin-producing gene therapy.
Other reasons to buy
Sarepta's recent successes haven't been limited to its micro-dystrophin program. Annual sales of Exondys 51, the first DMD therapy to earn approval, rose 95% last year to $301 million. Without any competition, revenue will probably surge again in 2019.
Exondys 51 could get a sidekick called golodirsen that treats a different subgroup of DMD patients than Sarepta's first drug. The FDA is expected to hand down an approval decision on or before Aug. 19, 2019.
In February, Sarepta acquired five gene therapy candidates for just $165 million after one of them, MYO-101, produced some eyebrow-raising results. This new gene therapy candidate looks like it can make a big difference for patients with Limb-Girdle muscular dystrophy. Two months after receiving a single treatment, muscles from all three patients were producing the protein they couldn't make on their own.
Reasons to remain wary
The company's micro-dystrophin program looks great so far, but we've only seen results from four children. Sarepta has been enrolling about a patient per week into a 24-patient placebo-controlled trial that's most of the way full. That means we probably won't see results until early next year.
If Sarepta's micro-dystrophin program hits a snag it can't get past, shareholders will face some swift losses. The company's recent market cap is $8.4 billion, which is a lot for a company that lost $361.9 million last year.
A buy now?
Sales expectations for Exondys 51 range from $1 billion to $2 billion annually at its peak, depending on who you ask. If approved, golodirsen will probably perform nearly as well because it's aimed at a slightly smaller population.
Sarepta lost a lot of money last year, but growing sales of Exondys 51 and a possible launch of golodirsen could allow the company to begin producing significant profits in 2020 and beyond. If micro-dystrophin continues to impress, Sarepta shares will continue to beat the market without a problem.
If Sarepta's experimental DMD therapy somehow flops, though, the company can still rely on continuing sales of its lifelong treatments. With a nice cushion to soften any potential fall, this gene therapy stock looks like a buy now.
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