* Under new CEO, Sarepta focused on Duchenne muscular
* Strong mid-stage trial more than doubles company's value
* Investors hope for fast-track approval; some analysts
* Analysts expect company to relay FDA feedback in April
By Zeba Siddiqui
April 2 After three decades without bringing a
drug to market, Sarepta Therapeutics Inc stands on the
verge of a breakthrough with its treatment for a crippling
genetic disorder that affects one in every 3,500 newborn boys.
If U.S. regulators fast-track approval of its treatment for
Duchenne muscular dystrophy, as some investors are betting, it
would complete a remarkable turnaround for the company that
began life as AVI Biopharma in Corvallis, Oregon, 33 years ago.
Sarepta's stock has more than doubled in value since
October, when its drug, eteplirsen, yielded positive results in
a mid-stage trial. The company has a market capitalization of
Duchenne muscular dystrophy, or DMD, is classed as an orphan
disease -- a condition affecting fewer than 200,000 people. More
than a quarter of the 39 new medicines approved in the United
States last year were designated for such diseases.
It's an area that has grabbed the attention of drug
developers in search of a unique product that can command a high
price. There are no approved treatments for DMD.
"Sarepta has the product and development platform necessary
to join the ranks of other successful companies that target rare
diseases," William Blair & Co analysts said last month as they
launched coverage with an "outperform" rating on the stock.
The company also has renewed focus, analysts say --
something that Chief Executive Chris Garabedian says was missing
when he took over on Jan. 1, 2011.
"At that time, the company's potential was
under-appreciated, because we didn't have robust clinical data
in any disease area and our business lacked focus," he told
Garabedian, formerly vice-president of corporate strategy at
Celgene Corp, arrived at Sarepta - then AVI - following
a management shake-up led by private investor George Haywood and
Meldrum Asset Management. The name-change followed in July 2012.
"The change is night and day, frankly," Haywood, referring
to the company before and after the management changes, said by
Haywood, who holds a bachelor's degree in biology from
Harvard University, began investing in AVI in the early 2000s.
He was the biggest single shareholder by 2005; his most recent
filing, dated Dec. 31, 2011, discloses a 3.8 percent stake.
Meldrum Asset Management owned 4.9 pct as of Dec. 31, 2011.
"There are a lot of great technologies around, but some of
them don't develop because you don't have the right management
that can identify areas to focus on, like Chris identified DMD,"
Sarepta's Nasdaq-listed shares closed at $35.79 on Monday,
eight times the value of AVI's stock at the start of 2012 and up
139 percent since Oct. 2, the day before the company reported
that eteplirsen had significantly improved the walking ability
of patients in the trial.
Nine of the 10 brokerages tracked by Thomson Reuters
StarMine recommend buying Sarepta stock. Their mean price target
is $42; five of the analysts rate the company a "strong buy".
The one analyst who has a "sell" rating -- Steve Brozak of
WBB Securities -- pointed out that the mid-stage trial
responsible for the recent stock bump was conducted on just 12
Company officials met with the U.S. Food and Drug
Administration last month, and analysts said the company
probably asked that eteplirsen's approval be accelerated.
Its case is bolstered by support from such nonprofits as
Parent Project Muscular Dystrophy, CureDuchenne, Action Duchenne
and the Muscular Dystrophy Association.
DMD usually appears in infancy and leads to severe muscle
loss and eventual death.
It is caused by the body's inability to produce a key
protein called dystrophin, which helps in building muscles. To
date, the disease has been treated by using corticosteroids -- a
man-made replica of the cortisol hormone -- to slow progression.
This treatment, however, comes with side-effects such as
weight gain, growth retardation, glucose intolerance, said Dr.
Valerie Cwik, director of the Tucson, Arizona-based Muscular
The gene responsible for producing dystrophin contains a
series of 79 sections, called exons. When one or more of these
exons are absent, the entire chain is disrupted and the body is
unable to produce the muscle-building protein.
Eteplirsen is designed specifically for DMD patients whose
51st exon is absent. It helps the body to skip this particular
exon so that dystrophin can continue to be produced.
"Eteplirsen not only treats one of the underlying causes of
the disease, but also helps produce dystrophin and appears to be
very safe," said Cwik, who has treated DMD patients for 15
Christopher Marai, a San Francisco-based analyst at Wedbush
Securities, estimated the annual price of a course of eteplirsen
therapy at between $350,000 and $400,000.
"It's probably a $400 million to $600 million drug,
conservatively," he said in estimating the annual contribution
of eteplirsen sales to Sarepta's revenue.
Accelerated approval is not a foregone conclusion. The
company, headquartered these days in Cambridge, Massachusetts,
is expected to release details of the FDA's guidance this month.
Dr. Ravindra Singh, professor of RNA Biology & Molecular
Genetics at Iowa State University, said the study had shown that
the drug holds "great promise", but that its effectiveness in
larger studies has yet to be tested.
Improvement during the 12-patient study was measured by a
test called the six-minute walk that checked each patient's
cardiac, respiratory, circulatory and muscular capacity.
Jeffrey Spaeder, chief medical and scientific officer at
Quintiles, the largest U.S. pharmaceutical outsourcing services
firm, said smaller clinical studies for rare diseases were
sometimes accepted by the FDA as fewer patients are available.
Some analysts -- including Deutsche Bank, which began
coverage of Sarepta with a "buy" rating last month -- have said
they believe the company is unlikely to get accelerated
approval. Mid-2015 is more realistic, Deutsche analysts said.
"Sarepta is highly controversial because so much investor
attention is focused on accelerated approval," the analysts
wrote in a note. "Fundamentally, timing of approval does not
matter ... but we do expect volatility around this decision."
Liisa Bayko, director and senior analyst for biotechnology
equities research at JMP Securities, said Sarepta's stock would
probably fall if the FDA does not grant accelerated approval.
"But I think there are many investors who are willing to
invest in the company," she said. "There is a lot of support for
the technology in the investment community."