Sarepta Therapeutics (SRPT) traded as high as $20.79 on Thursday morning following comments from the director of the FDA’s Center for Drug Evaluation and Research (CDER), Janet Woodcock, at a public policy forum relating to Duchenne Muscular Dystrophy (DMD). Woodcock seems to be signaling that the FDA is still evaluating the benefit/risk of approving DMD treatments like Sarepta’s eteplirsen and Prosensa’s (RNA) drisapersen. The commentary flies in the face of the agency’s previous indication to SRPT that existing data were not enough to support filing for approval of eteplirsen.
Recall that on November 12 SRPT plummeted when the company revealed that the FDA wanted a phase 3 trial of eteplirsen before SRPT submits a New Drug Application. Investors had high hopes that the drug would be approved based on results from an ongoing, small phase 2 trial. On the 12th, we again took a position in SRPT as the stock broke below $15 and made a new low of $12.22. While we didn’t time the bottom well, our thesis – that the market had overreacted and new investors coming to the table would soon allot more value to this orphan drug developer – panned out fairly quickly. Our position is 35% in the month since.
While we missed the live stream of Woodcock’s presentation at the Duchenne Policy Forum this morning, the market is clearly taking her comments as evidence that the FDA may still prove flexible on the eteplirsen approval path.
Frankly, we’re not sure what to make of Woodcock’s commentary given Sarepta’s interactions with the agency last month, but it may be a matter of differing opinions between reviewers and top officials at the FDA. It was the same commentary from MD advocacy groups and FDA officials that contributed to the overzealous move higher then eventual downfall in SRPT the first time around, thus we’re hesitant to put much weight in this latest development. In addition, this may be the last-minute strength that allows some funds to sell at a loss (a major one for those involved in the $30-range) for tax purposes before year-end, and traders who bought the stock in the low-teens last month will likely be taking profits. We’re taking some profit off the table ourselves given the potential for this to be a false-positive for SRPT (reviewers are, in our view, more likely to continue defying Woodcock’s comments) and the long time frame for Sarepta if they do need to run a phase, the current operating assumption.
In connection with SRPT, PropThink has taken a long position.
