August 20, 2019 / 11:54 AM / a month ago

Sarepta shares sink 17% after shock FDA rejection

Aug 20 (Reuters) - Shares of Sarepta Therapeutics Inc plummeted 17% on Tuesday after the U.S. health regulator, in a surprise move, declined to approve the drugmaker’s newest treatment for a muscle-wasting disorder that mainly affects young boys.

Wall Street analysts expressed disbelief at the decision and at least five cut their price targets for the company’s shares while stressing they still expected the company’s second drug for Duchenne muscular dystophy (DMD) to eventually be approved.

The U.S. Food and Drug Administration’s so-called complete response letter (CRL) on Sarepta’s new treatment, called Vyondys 53, cited risks of infection and kidney toxicity and is a blow to the company as it looks to solidify its leadership in treating DMD.

“We believe the setback can only be described as odd and we cannot help but feel there is more to the CRL than the issues cited,” William Blair analyst Tim Lugo wrote in a client note.

By Share of the company were trading down nearly 18% at $98.80 in trading before the bell. Wall Street brokerages’ median price target for the stock, however, is still $193, a 60.4% upside to current levels.

Exondys 51, the company’s first DMD treatment, was approved in 2016 against the advice of the FDA’s outside panel of experts and its own reviewers, who had questioned the drug’s effectiveness.

The FDA’s decision cited risks of infections and kidney toxicity seen in pre-clinical studies of Vyondys 53, which is also known as golodirsen.

The company said the doses used in those studies had been ten-fold higher than those used in clinical studies.

“Sarepta is being slapped on the wrist for the prior questionable accelerated approval of Exondys 51,” said SVB Leerink analyst Joseph Schwartz.

“The FDA may be holding Sarepta to a higher standard now, but we are optimistic that golodirsen can overcome this speedbump on its way to an eventual approval,” Schwartz added.

The past few weeks have been eventful for Sarepta.

The company’s shares plunged earlier this month after a notice from the FDA showed that a patient on its gene therapy for DMD had developed a serious illness in an ongoing trial.

Sarepta said it was not known whether the patient had received its experimental therapy or a placebo in the trial, and that independent safety monitors decided the study should continue.

“While none of these single events are catastrophic, the cumulative effect is wearing on investor patience,” Baird analyst Brian Skorney said.

The Exondys 51 drug targets 13% of DMD patients, while the newest treatment would have treated about 8% of DMD patients. Analysts have forecast annual sales of golodirsen to reach a peak of nearly $400 million in five years.

The company is also developing another similar treatment that would target a further 8% of the population. (Reporting by Manas Mishra in Bengaluru; editing by Patrick Graham)

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