Some investors might love biotech stocks for their lottery ticket-like returns when a company strikes medical gold. A lottery ticket, however, costs only a buck or two, while getting a biotech company wrong can hurt a lot more than that. Case in point: Sarepta Therapeutics (SRPT) shares tanked ~50% in Friday’s trading session, following the release of underwhelming clinical trial results.
Specifically, top-line data from the first part study evaluating SRP-9001, the company’s microdystrophin gene therapy, for Duchenne muscular dystrophy (DMD) patients, failed to show a statistically meaningful improvement when compared to the placebo.
Although patients displayed an improvement in the amount of dystrophin in their muscle fibers after 12 weeks of treatment, at 48 weeks, the gene therapy didn’t show enough of an improvement in muscle function to count the trial as a success. The study is still in process and remains blinded.
Following the news, Leerink analyst Joseph Schwartz lowered the company’s microdystrophin program’s PoS (probability of success) from 70% to 60%.
“Given the increasing likelihood that SRPT will require Study 301 data for approval,” the 5-star analyst said, “[We] now model SRP-9001’s potential commercial launch in 2024 (previously 2023).”
Prior to the trial’s commencement, Schwartz thought its chances of success hung in the balance. The results have justified his concerns.
“The wide variability in North Star Ambulatory Assessment (NSAA) scores – the rating scale which measures functional motor abilities – predicted by natural history paired with the uncertainty regarding the NSAA improvement attributed to steroids vs. SRP-9001 in Study 101 led us to hypothesize SRPT had little room for error in Study 102,” the analyst commented.
However, Schwartz tells investors there could be another possible catalyst on the horizon.
Sarepta will soon release additional data from the Phase 2 trial of the company’s next-generation exon skipper SRP-5051. The treatment uses Sarepta’s peptide phosphorodiamidate morpholino oligomer (PPMO) technology.
“With the stock trading near floor value of SRPT’s exon-skipper base business,” Schwartz summed up, “Now could be an opportune time to get involved ahead of PPMO data expected in 2Q21.”
However, due to the trial’s failure, Schwartz lowered his price target from $197 to $125, indicating 49% upside from current levels. The analyst’s Outperform (i.e. Buy) rating on SRPT stays intact for now. (To watch Schwartz’s track record, click here)
Overall, with 15 analyst reviews on record, split into 9 Buys, 5 Holds, and single Sell, SRPT gets a Moderate Buy consensus rating. Meanwhile, the average price target clocks in at $153.33 and implies shares will appreciate by 82.5% over the next 12 months. (See SRPT stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
