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FDA Rejection of Sarepta's Golodirsen Should Have Been Expected

Sarepta Therapeutics (NASDAQ:SRPT) was just hit with a hefty dose of regulatory reality. Its new Duchenne muscular dystrophy drug golodirsen just received a complete response letter (CRL) from the Food and Drug Administration, which means it will have to go back to the drawing board and perhaps initiate a new pivotal trial if it has any chance of reaching the market.

The exact details of the CRL are confidential, but scant reports based on word from the company assert that there were two reasons for the rejection. The first is infusion port infection as the drug is administered through an access line to a vein, and the second is kidney toxicity in early animal studies.

If true, the stated reasons for the rejection are questionable. The rejection itself, though, contrary to Sarepta's description of "surprising," are unfortunately predictable and unsurprising. Not that investors should have expected rejection for these two reasons specifically, but rejection employing an excuse should have been expected. Here's why.

First, a little about the drug itself. Golodirsen works on the same principle that Exondys 51 (eteplirsen) does. The drug overlays itself on a portion of genetic code that causes errors in the dystrophin protein reading frame that results in muscular dystrophy. Exondys 51 accomplishes this at exon 51, and golodirsen at exon 53. Once golodirsen overlays itself over the faulty code, the rest of the dystrophin protein can be synthesized normally. That is the hope, at least.

Why is rejection based on kidney toxicity and infusion port infection questionable? Because just like Exondys 51, the endpoints for the golodirsen pivotal trial were indeed reached. The amount of dystrophin produced by patients on the drug did increase, showing that the drug accomplishes its stated objective. The trial however did not demonstrate improvement in muscle function, but neither did Exondys 51.

As for kidney toxicity, these side effects were from early animal studies and based on doses that were 10 times higher than the doses administered to human patients, according to Sarepta. No kidney toxicity was observed in the human pivotal clinical trial in question. Second, the potential for infusion port infection is not at all unique to golodirsen. All drugs administered in the same way suffer the same risks. In any case, it certainly seems like a minor issue when we are talking about a disease that proves fatal in most cases by the time a patient reaches their mid-20s.

The real reason for rejection much more likely has to do with the FDA being pressured into approving Exondys 51 back in 2016. A drug in the neighborhood of $300,000 with no solid proof of clinical benefit is almost never approved, and the FDA was pressured into approval from many different directions at the time. It ultimately led to resignations at the top of the agency, and Sarepta got only a conditional approval requiring future clinical data demonstrating clinical benefit to patients. That data is still pending.

A reasonable guess is that the FDA found itself in a quandary over golodirsen. It couldn't say explicitly that it was rejecting golodirsen based on lack of data proving clinical benefit, because then why was Exondys 51 conditionally approved? It also couldn't just approve golodirsen straight up because doing so would telegraph to biotech companies that the Exondys 51 approval was not a special case. Rather, golodirsen approval would have set a solid precedent that any extremely expensive drug for any terminal disease does not necessarily have to demonstrate clinical benefit to gain approval. Other biotech companies may then be tempted to pursue this unofficial pathway, and it could result in highly expensive drugs for terminal illnesses reaching market that lack efficacy. Such a situation would not be flattering for the FDA's reputation, and would not be good for insurance companies either.

Granted, the above is speculation. But if true, there are two important implications for Sarepta investors. First, Sarepta's reported attempts to persuade the FDA to approve the drug in tandem with a black box warning of kidney toxicity and infusion port infection will most likely fail. Second, any possible approval for golodirsen will likely hinge on data proving clinical benefit, still pending for Exondys 51, all the more so for golodirsen.

Practically, then, the situation for Sarepta has not changed all that much since last year. The future of the company still depends on clinical efficacy data for both drugs. If data does not prove clinical benefit, then the drugs will probably not succeed in the market, and the stock could tumble precipitously. If data proves positive though, shares could skyrocket to new highs and beyond. In the meantime, speculation is likely to keep the stock locked in a loose trading range, with high volatility likely as investors await the highly anticipated efficacy readouts.

Disclosure: No positions.

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This article first appeared on GuruFocus.