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Will Sarepta's (SRPT) Overdependence on Exondys 51 Hurt?

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Zacks Equity Research
·4 min read
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On Jan 20, we issued an updated research report on Sarepta Therapeutics SRPT. The company’s two marketed drugs — Exondys 51 and Vyondys 53 — are indicated for the treatment of Duchenne muscular dystrophy (“DMD”).

Sarepta’s stock has declined 18.3% in the past year against 13.9% increase of the industry.

Coronavirus Impacts Sales

Sarepta received accelerated approval for Exondys 51 in 2016 for treating patients who have a confirmed mutation of the DMD gene susceptible to exon 51 skipping in the United States. The drug is a major revenue generator for the company. The company received approval for its second drug, Vyondys 53, in 2019.

Sales of the drugs, especially Exondys 51, witnessed growth in 2020 with sales increasing almost 19% in the first nine months of 2020 compared with the year-ago period.  However, due to uncertainties related to the COVID-19 pandemic, the company withdrew its guidance for 2020. We note that physician-administered drugs like Exondys 51 and Vyondys 53 have suffered the most. The rising number of coronavirus cases in the United States in the last two months may have impacted sales negatively in the fourth quarter.

Pipeline Update

Apart from its marketed drugs, Sarepta has several candidates in its pipeline. Among them casimersen is in most advanced stage of development. The company has completed clinical studies and filed a new drug application seeking approval for the candidate as treatment for patients with exon 43 skipping DMD. A decision is expected by Feb 25, 2020 from the FDA.

The company is also developing gene therapies for treating DMD and other nervous disorders. The gene therapies have shown promising results in the past in treating DMD patients by restoring dystrophin production in muscles throughout the body by delivering microdystrophin via adeno-associated virus. Sarepta is evaluating its most advanced gene therapy, SRP-9001, in a phase I/II study in DMD patients. Although part 1 of the study met the primary biological endpoint of micro-dystrophin protein expression after 12 weeks of treatment, it failed to achieve statistical significance for the primary functional endpoint. The stock crashed significantly following the news.

Meanwhile, the company plans to start a pivotal study on its other gene therapy candidate, SRP-9003 in 2021 to evaluate it in patients with limb-girdle muscular dystrophy type 2E. The company is also planning to expand its gene therapy programs into additional indications — Rett Syndrome, cardiomyopathy, Emery-Dreifuss muscular dystrophy type 1 and multiple sclerosis. It is also collaborating with other companies and academic institutions to boost its pipeline or manufacturing capacity for gene therapy.

Conclusion

Sarepta has a strong commercial portfolio bringing significant revenues every quarter. Although COVID-19 has marred performance in 2020, approval and launch of new drugs are likely to bring additional future revenues. We note that Sarepta derives majority of its revenues from Exondys 51 and lower-than-expected sales of the drug would significantly hamper the company’s stock.

Moreover, several other companies like Pfizer PFE, Solid Biosciences, Catabasis, Eli Lilly LLY and Moderna Therapeutics MRNA are developing therapies targeting the muscular dystrophy market. Several of them have started clinical studies on their gene therapy candidates for DMD and CNS disorders. Successful development of these candidates will increase competition for Sarepta going forward, hurting its future sales.

Sarepta Therapeutics, Inc. Price

Sarepta Therapeutics, Inc. Price
Sarepta Therapeutics, Inc. Price

Sarepta Therapeutics, Inc. price | Sarepta Therapeutics, Inc. Quote

Zacks Rank

Sarepta currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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