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Sarepta (SRPT) Q4 Earnings Lag Estimates, Exondys 51 Sales Up

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Sarepta Therapeutics, Inc. SRPT incurred an adjusted loss of 85 cents per share in the fourth quarter of 2018, wider than the year-ago loss of 21 cents per share as well as the Zacks Consensus Estimate of a loss of 66 cents. The widening year-over-year loss can be primarily attributed to a significant rise in operating expenses.

Notably, the adjusted figure excluded one-time items, depreciation & amortization expenses, interest expenses, and income tax benefit. Including all these items, the company incurred a loss of $2.05 per share compared with a loss of 37 cents in the year-ago quarter.

Meanwhile, Sarepta’s Exondys 51 — the first Duchenne muscular dystrophy (“DMD”) treatment to gain approval in the United States — continued with its strong performance. Sarepta recorded total revenues of $84.4 million, up 7.5% sequentially, entirely from the sale of Exondys 51. The demand for the drug has increased during the quarter. However, the top line marginally missed the Zacks Consensus Estimate of $84.91 million. In the prior-year quarter, Sarepta had earned revenues of $57.3 million.

Consequently, shares of Sarepta were down 2.3% in after-hours trading. However, Sarepta has rallied 144.2% in a year’s time.

Duchenne muscular dystrophy (“DMD”) is a rare muscular degenerative disease that mostly affects boys and can be fatal before patients turn 30.

Operating Expenses

Adjusted research and development (R&D) expenses totaled $77 million in the fourth quarter, up 87.8% year over year. The upside was driven by increased patient enrollment in late-stage golodirsen study and ramp-up of manufacturing activities for pipeline candidates, including gene therapies, and higher costs due to pipeline expansion. The metric was partially offset by lower cost related to clinical studies evaluating Exondus 52.

Selling, general & administrative (SG&A) expenses were $52.9 million, up 101.9% year over year. Higher costs related to the global commercial expansion of its products and increased personnel expenses led to the uptick.

Cost of sales was also higher, reflecting higher inventory costs due to rising demand for Exondys 51 and royalty payments to BioMarin BMRN, per the terms of the 2017 settlement and license agreements related to the latter’s exon-skipping technology used in DMD therapies.

Full-Year Results

Sarepta recorded 2018 sales of $30.1 million, up 94.7% year over year, solely from the sale of Exondys 51. The company incurred adjusted loss of $2.14 per share, wider than the year-ago loss of $1.34 per share. The year-over-year loss despite solid sales growth was due to rising costs to support global expansion for Exondys 51 and development of golodirsen, and gene therapies as well as higher royalty payments to BioMarin.

Exon-Skipping Pipeline Update

Sarepta is building its DMD pipeline, which will enhance its approved drug portfolio. The pipeline candidates, on approval, will be eligible to treat a larger patient population than Exondys 51. Currently, the company has about eight exon-skipping pipeline candidates, which can treat 75-80% of DMD patients. Sarepta is also developing gene therapies for treating DMD.

Earlier this month, the FDA granted priority review to the new drug application (“NDA”) seeking accelerated approval for golodirsen. A decision is expected by mid-August. This apart, Sarepta is planning to submit a new drug application for its second DMD candidate, casimersen, by mid-2019, if study data confirms preclinical dystrophin expression.

An approval to golodirsen NDA is likely to boost Sarepta’s top line as the drug will increase the eligible patient population by 8%. The company is planning to have three approved exon-skipping drugs – including Exondys 51, golodirsen and casimersen – in its portfolio by the first quarter of 2020, following which it expects the eligible patient population to double.

New Gene Therapy Update

Concurrent with press release, Sarepta announced positive preliminary results from an early stage study evaluating gene therapy, MY-101, for treating Limb-girdle muscular dystrophy (LGMD). Data showed robust protein expression in muscles, which was significantly higher than the pre-defined threshold value. Moreover, Sarepta exercised its option to acquire Myonexus Therapeutics for a purchase consideration of $165 million that will add the latter’s five LGMD candidates to its pipeline. It is important to note that MYO-101 was also developed by Myonexus.

In October, Sarepta signed a license agreement with French gene therapy company — Lysogene — to develop the latter’s central nervous system (“CNS”) targeting candidate, LYS-SAF302. The candidate, an AAV-mediated gene therapy, is being evaluated in a phase II/III study, AAVance, for the treatment of Mucopolysaccharidosis type IIIA (MPS IIIA). First patient in the study was dosed earlier this month.

Zacks Rank & Key Picks

Sarepta currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the healthcare sector include Celgene Corporation CELG and Genomic Health, Inc. GHDX. While Celgene sports a Zacks Rank #1 (Strong Buy), Genomic Health carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Celgene’s earnings estimates have been revised 5.3% upward for 2019 and 9.2% for 2020 over the past 60 days. The stock has rallied almost 42% so far this year.

Genomic Health’s earnings estimates have moved north 17.9% for 2019 and 13.9% for 2020 over the past 60 days. The stock has gained 18.9% so far this year.

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