The Sector Got Whacked on Friday

Sarepta Therapeutics (SRPT) on Thursday morning released its fourth quarter and full-year 2013 financial results. The company continues to await guidance from the FDA on the design of a phase 3 confirmatory trial for eteplirsen in Duchenne Muscular Dystrophy and expects a meeting in March to finalize the protocol. PropThink discussed in early January how we intended to participate in SRPT in 2014. Since then, the stock has climbed 65%, gains improved further considering the options strategy outlined in our recommendation, which reduced the SRPT cost basis considerably.

SRPT’s 2014 outlook is still in limbo, although we believe that investors are becoming increasingly comfortable with the FDA confirming that accelerated approval is a no-go, which means downside with that guidance won’t be as pronounced as we originally expected. To read the story, click here.

Longtime PropThink readers will recall our suggestion to buy QLT Inc. (QLTI) in November when the company announced it was reviewing “strategic alternatives” (the stock is up more than 25% since). We’re encouraged by preliminary results of QLTs Phase 1b LCA/RP extension study that showed an ongoing, clinically meaningful improvement in visual parameters for patients dosed with QLT091001 during a previous 7-day treatment course. QLTI is under the radar but a shareholder-centric board, the presence of a notable activist group, and the opportunity for a “strategic” exit should keep value-focused investors involved. In a column on Friday, PropThink outlined the near-term value-drivers for the stock, noting that the company’s largest shareholder will be looking to wind down its position – read why here.

Our latest piece of research went live on Tuesday, outlining why this one equity could be worth 2-3x where it trades today. PropThink Premium readers got early-bird delivery, but given this week’s disappointing price action, it’s certainly not too late to own the stock. Sign up for PropThink Premiumread the report, and then get an update from late in the week, here.

Cempra (CEMP) took a hit this Friday with the revelation that the phase 3 SOLITIARE-Oral trial will not have results until 2015, a significant delay but one that shouldn’t concern the long-term investor. PropThink’s latest update explained why solithromycin’s recent cardiovascular safety results are so meaningful for a late-stage antibiotic. The full report can be found here, for free.

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