Sarepta shares fall on FDA guidance on drug, but analysts divided

Tue Apr 16, 2013 9:32am EDT

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(Reuters) - Sarepta Therapeutics Inc's (SRPT.O) shares were set to open 11 percent lower on Tuesday after U.S. health regulators asked for more data to consider its rare disease drug for a faster approval track, but analysts were divided on whether this was a setback.

Sarepta's stock has nearly tripled in value since last September, when its drug, eteplirsen, showed promise in treating patients with Duchenne Muscular Dystrophy (DMD), a genetically transferred muscle-wasting disorder that affects mostly boys.

Some investors were expecting that the U.S. Food and Drug Administration would grant the drug a faster-than-usual pathway to approval, possibly including skipping a late-stage trial altogether, given that there is no existing treatment for the disease.

At least two brokerages downgraded Sarepta's stock, citing the possibility that the drug will take longer to reach the market.

"Although the FDA did not require any additional new studies at this time, we cannot rule out the possibility that the current study of twelve drug-treated patients remains too small for accelerated approval," Janney Capital Markets analyst Kimberly Lee said.

Leerink analyst Joseph Schwartz said that it is 75 percent likely that a competing drug, drisapersen, will hit the market by the first quarter of 2015, earlier than eteplirsen, which he said is likely to require a late-stage study to win U.S. approval.

Drisapersen is being developed by GlaxoSmithKline Plc (GSK.L) and privately held Dutch drugmaker Prosensa to treat DMD, but has shown some safety issues.

However, Piper Jaffray's Edward Tenthoff hiked his price target on Sarepta's stock by $15 to $50, saying the regulator's request boded well for eteplirsen's accelerated approval.

"We now believe that this request indicates an effort by the FDA to find a path to accelerated approval and an increased likelihood that Sarepta will be able to file (for marketing approval) for eteplirsen later this year," said Tenthoff, who backed his "overweight" rating on the stock.

Edward Nash of Cowen & Co said he was "confident that eteplirsen has a superior clinical profile when compared to the direct competitor drisapersen."

Janney downgraded Sarepta to "hold" from "neutral," while Leerink cut it to "market perform" from "outperform." Cowen backed its "outperform" rating on the stock saying its valuation never factored in an accelerated approval and only considered it as a potential upside.

The company's shares were trading down 11 percent at $34.92 before the bell on Tuesday.

(Reporting by Zeba Siddiqui in Bangalore)

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