Just two weeks ago, Sarepta said the FDA would not ask a panel of independent experts to weigh the risks and benefits of its gene therapy for Duchenne muscular dystrophy. But the agency changed its mind during a late-cycle meeting, Sarepta said in a news release Thursday.
Sarepta is asking for an accelerated approval, meaning it still hasn’t completed two Phase 3 studies of the drug, SRPT-9001. But it believes the treatment works based on elevated levels of a key protein in patients. The outside experts will likely debate whether this protein signals a benefit to patients.
“While we now see more near-term equity volatility potential with upcoming regulatory events, we still see many paths for SRPT-9001 to ultimately cross the line,” RBC Capital Markets analyst Brian Abrahams said in a note to clients.
In today’s stock market, SRPT stock fell 18% to close at 122.69.
SRPT repository: Surrogate endpoint
Sarepta developed its gene therapy for patients with Duchenne muscular dystrophy. In this condition, patients’ bodies do not make enough of the dystrophin protein needed for muscle function and strength. Sarepta’s drug encodes a shortened version of the dystrophin protein.
The company is betting on accelerated approval based on elevated levels of the shortened protein in patients’ blood. This is known as a “surrogate endpoint”.
Mizuho Securities analyst Uy Ear says Sarepta does not believe there are any problems with its filing. The company also does not believe the FDA has manufacturing issues. Two out of three sites have already passed the inspection with minimal problems.
This “suggests that one reason for this decision change may be because the agency is exploring the innovative use of surrogate endpoints, where appropriate, in the accelerated approval to advance cell and gene therapy for rare and life-ending degenerative diseases,” Ear said in a note.
He maintained his buy rating and 160 price target on SRPT stock.
Streamlining gene therapy approvals
It is promising that the advisory committee meeting will take place before May 29, the day the FDA will make a decision on whether to approve SRPT-9001.
UBS analyst Colin Bristow says the news from the advisory committee is not a “red flag”. Peter Marks, director of the FDA’s Center for Biologics Evaluation and Research, has publicly supported the use of surrogate endpoints to streamline accelerated approvals of cell and gene therapies.
But “given the announcement of the advisory committee’s decision, based on (the FDA office) communicating how capacity-constrained it is at any public appearance, we see a potential risk of (approval date) extension,” he said in a memo.
Still, he maintained his buy rating and 158 price target on SRPT shares.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
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