Shares of Sarepta Therapeutics shed more than half their value Tuesday after federal regulators told the company its potential Duchenne muscular dystrophy treatment wasn't ready for an application for approval.
THE SPARK: The Food and Drug Administration considers an application for the drug, eteplirsen, to be premature, according to the the Cambridge, Mass., drug developer.
Regulators cited recent developments that include results from a competitor's study, Sarepta said.
In September, British drug maker GlaxoSmithKline PLC and Dutch biotech Prosensa Holding N.V. said their potential treatment, drisapersen, failed in a late-stage study to produce a significant difference in patients taking the drug compared with those who had a fake version.
Sarepta also said Tuesday that its third-quarter loss narrowed to $42 million, or $1.24 per share, from $49.5 million, or $2.17 per share, last year.
THE BIG PICTURE: Sarepta had said in July that it planned to file for marketing approval for eteplirsen in the first half of next year.
Duchenne muscular dystrophy is a rare and fatal genetic disease that causes increasing muscle weakness and affects one of every 3,500 boys born worldwide.
THE ANALYSIS: Sarepta's application now could be delayed by at least two years, said WBB Securities President Steve Brozak.
He said a study of the drug that involved only 12 patients was too small to count on for an expedited approval, and the company needs to figure out a trial system that would best measure its effectiveness. Brozak said eteplirsen is the company's core drug and platform.
"This, unfortunately, is a reality check," said the analyst, who has had a "sell" rating on the shares.
He also said the company's earnings performance was inconsequential compared to the drug news.
SHARE ACTION: Sarepta Therapeutics Inc. fell 60 percent, or $21.92, to $14.64 in late morning trading. The shares had advanced 42 percent so far this year, as of Monday, after closing 2012 at $25.80.