Sarepta Therapeutics' gene therapy, Elevidys, faces an uphill regulatory journey, analysts said Tuesday after the treatment for a muscle-wasting disease flopped in its final-phase study. SRPT stock crashed more than 37% after it was halted overnight.
Elevidys gained accelerated approval this summer for children ages 4 and 5 with Duchenne muscular dystrophy, a devastating disease in which young boys progressively lose the ability to walk. But drugs that win accelerated approval must prove their benefit in a confirmatory study.
That's where Sarepta failed.
Patients who received the one-time infusion of Elevidys a year ago showed a 2.6-point improvement on a 34-point scale measuring ability to move. In comparison, placebo recipients improved by 1.9 points. The results weren't statistically significant and were driven by patients ages 4 and 5, Needham analyst Gil Blum noted. There was no real change in score for children ages 6 and 7.
In an email to Investor's Business Daily, Sarepta spokeswoman Tracy Sorrentino said the broad evidence "does verify the clinical benefit and provides evidence that meets the FDA's standards for effectiveness." Further, she argued Duchenne muscular dystrophy is a progressive disease. That means "stability is an excellent outcome" for children ages 6 and 7, Sorrentino said.
On today's stock market, SRPT stock fell sharply, down 37.5%, ending the regular session at 67.31. At one point, shares hit their lowest level in six years.
SRPT Stock: 'Nothing Short Of Surprising'
"In typical Sarepta fashion, the most hotly anticipated readout of 2023 was nothing short of surprising," Leerink Partners analyst Joseph Schwartz said in a report.
Although the results weren't statistically significant for the primary goal of the study — the 34-point scale measuring movement — secondary measures were more positive. Patients who received Elevidys showed statistically significant improvements in how long it takes them to stand and walk 10 meters.
The company says it has shared the results with the FDA. The agency is open to expanding Elevidys to children ages 6 and 7, Sarepta said in a news release.
Analysts don't expect the FDA to pull Elevidys from the market, but they also don't expect the agency to approve the gene therapy for older boys with Duchenne muscular dystrophy.
"While the message on Sarepta's conference call was overwhelmingly positive, we have to accept that these data are a major disappointment and complicate the regulatory path moving forward for Elevidys," Leerink's Schwartz said.
He kept his outperform rating on SRPT stock, but cut his price target to 130 from 185.
Elevidys Is Still Likely A Blockbuster
In Duchenne muscular dystrophy, patients' bodies don't make enough of the dystrophin protein needed to keep the muscles intact. Instead of becoming stronger with age, the boys' muscles break down. Elevidys works by helping the body create a shortened version of that protein, called microdystrophin.
So far, it appears the benefits of Elevidys outweigh the risks in children ages 4 and 5, RBC Capital Markets analyst Brian Abrahams said in a report. Leerink's Schwartz noted the FDA has historically been flexible when considering treatments for Duchenne muscular dystrophy.
Abrahams sees an 80% chance Elevidys remains on the market, leading to $1 billion in annual sales. In the unlikely case the FDA expands the gene therapy to older children, he estimates a peak of $3.4 billion in U.S. sales, and a long-term tailwind of $2 billion in sales each year.
But Abrahams cut his price target on SRPT stock to 148 from 217, though he kept his outperform rating.
This "still represents meaningful upside to where the stock last traded," he said.
Follow Allison Gatlin on X, the platform formerly known as Twitter, at @IBD_AGatlin.
