Data from the Closest Competition, It Turns Out, Support Sarepta

Data from the Closest Competition, It Turns Out, Support Sarepta

Accelerated approval aside, the chatter regarding Sarepta Therapeutics (SRPT) in the past week has centered on the presentation of GlaxoSmithKline’s (GSK) Phase IIb data on its drisapersen candidate, the lead competitor to Sarepta’s eteplirsen candidate to treat Duchenne Muscular Dystrophy (DMD). The data are scheduled to be presented at the RNA and Oligonucleotide Therapeutics conference on Thursday, April 11. But on Tuesday afternoon, the stock took off with the release of the abstract for the upcoming presentation, which has initially confirmed what many suspected: that while drisapersen generates a clinical benefit, lower efficacy and the side effects of the drug suggest (from what data is available) that it will play second-string to eteplirsen. Like eteplirsen, drisapersen is intended to skip exon 51 of the dystrophin gene, thereby restoring the gene’s ability to code for a functional form of critical muscle fiber. With the same mechanism of action, drisapersen’s favorable results lend credence to eteplirsen as well. Tuesday’s news reaffirms our view that having a position in SRPT ahead of the possible accelerated approval filing with the FDA in late April makes sense given the significant upside that a favorable announcement would cause. We outlined our long-term strategy in early March, essentially suggesting that investors keep some powder dry in the case that eteplirsen does not move ahead under an accelerated approval process, creating an opportunity to average down on the position. Peak sales estimates of $600M – $1B suggest that for long-term investors, SRPT still has much room to run.

Eteplirsen appears to be the leader. Here’s the full GSK abstract, but the takeaway is that while both drugs have demonstrated a statistically significant benefit over placebo, drisapersen less so at a 48-week checkup, the safety issues that Glaxo previously reported can’t be ignored and SRPT appears to be the front-runner in the treatment of DMD when these drugs get to market. While comparing across clinical trials is not an exact measure, GSK reported that patients continuously treated with drisapersen demonstrated a mean improvement in 6-Minute Walk Distance of 35.84 meters at 48 weeks (not statistically significant). This compares to 89.4 meters at the same time period in Sarepta’s ongoing eteplirsen study. Another arm in the drisapersen trial utilized an intermittent dosing schedule, but these patients saw even less of an effect. Glaxo did not reveal dystrophin levels from muscle biopsy in the abstract, but the endpoint is listed in the National Clinical Trial registry. We’re not surprised at the lower efficacy at 48 weeks, as drisapersen has more side effects compared to eteplirsen and we assume GSK is managing dose around side effects, therefore, drisapersen is probably not at the optimal efficacious dose.

It’s key to focus on the side effect profile of drisapersen, as we believe this is where the competitive battle line will be drawn between this drug and eteplirsen. Drisapersen has elicited proteinuria in patients taking the drug (100% of patients in its Phase I/II), as well as elevated urinary α1-microglobulin levels, and above-normal cystatin C levels in some patients. GSK’s utilization of an intermittent dosing arm (10-week cycles of 9 doses at 6mg/kg over 6 wks, and 4 wks off drug) in the Phase IIb makes clear that the company was looking for an alternative to continuous long-term weekly dosing due to drisapersen’s dose-limiting toxicities. As we’ve previously discussed, the chemical makeup of drisapersen, a 2′-O-methyl antisense oligonucleotide, suggested early that toxicity may present an issue for patients on continuous long-term treatment.

Analyst price targets could rise on higher market share assumptions for eteplirsen. It now looks like eteplirsen, if efficacy and safety continue to hold up, will be the go-to drug of choice for DMD patients. At least one analyst report that we screened modeled 60% market penetration for eteplirsen, based on the GSK drug as primary competition, thus we expect that some sell-side models will be adjusted in the wake of these new data. Price targets are likely to rise as a result of the assumed increased market share for eteplirsen, and news flow along those lines could help lift shares in the near-term. It’s interesting to note that GlaxoSmithKline has a history of continuing development of therapies that are known to have less benefit than the competition, or are much later in development. For instance, Glaxo brought Cervarix, a vaccine for the human papillomavirus, to the market despite that it targets only half of the HPV types that Merck’s (MRK) Gardasil does. And, Cervarix was approved three years after Gardasil. Further, Rotateq, also developed by Merck, was approved in 2006 as the first vaccine for the rotavirus in the U.S. Glaxo brought its own vaccine, Rotarix, through FDA approval two years later, and studies have yet to prove any incremental benefit.

Sarepta’s key binary event, the decision by the company to file for an accelerated approval (or not), is expected later this month, and as we’ve outlined before, it makes sense to be involved in SRPT ahead of that decision, with reserves set aside to add following the decision if a longer-term regulatory path is chosen. In the mean-time, SRPT has broken out of an uptrending channel, and there’s little in terms of resistance between $39.85 (Tuesday’s close) and $45.00. The stock is approaching overbought territory, but as the drisapersen news broke late in the trading session on Tuesday, buyers may continue to enter the name on Wednesday. You can read PropThink’s full, previous report here.