Sarepta Therapeutics (SRPT) is under Wall Street’s microscope right now.
Shares dropped by 49% in a single session last week, following the release of disappointing clinical trial results.
Specifically, top-line data from the first part of the Phase 2 study evaluating SRP-9001, the company’s microdystrophin gene therapy for Duchenne muscular dystrophy (DMD) patients, failed to display a statistically significant improvement vs. the placebo.
Sarepta management has explained the study’s failure was due to an imbalance in the 6-7-year-old cohort which resulted from the randomization process. This made the 6-7 age groups hard to compare, a factor which largely contributed to the inability to attain statistical significance.
However, Oppenheimer analyst Hartaj Singh has a bone to pick with this explanation.
“This conveniently ignores the fact that SRPT only ran the study at two sites (companies like Catabasis and Solid Biosciences ran Phase 2 studies that were 50% smaller in patient size at 3-4 sites),” the 5-star analyst said. “Good clinical practice (and statistical design) argues for a greater number of sites and patient heterogeneity to ensure a lack of such imbalances. SPRT’s argument in this regard continues a record of circular logic and opacity which led us to downgrade the stock to neutral in May 2018.”
The analyst offers a harsh assessment of Sarepta’s practices, calling into question its “opacity of clinical data, unique terminology for its clinical studies (which never matched with other DMD competitors), and suspect clinical design.”
Unsurprisingly, Singh remains on the sidelines, rating SRPT shares a Perform (i.e. Hold). (To watch Singh’s track record, click here)
On the other hand, RBC analyst Brian Abrahams thinks there “could still be a path forward” for SRP-9001 in this “high unmet need disease.”
While the analyst admits the study did not “make it over the goal line,” there were enough signals to offer hope the “program could still be viable.”
“NSAA separation between ’9001 and placebo across multiple timepoints appeared clear from the time curves, increases from baseline were statistically significant, parameters such as expression and biomarkers showed statistical significance, and younger 4–5yo pts in a prespecified analysis showed a significant +4.3 point gain vs. +1.9 points for placebo—all pointing to true activity with a delta clouded by variability,” the analyst commented.
However, Abrahams also believes the study’s failure to meet the primary end point has added risk, prolonged timelines, and reduced “any potential first-mover advantage for future market share.”
Therefore, the analyst cut his price target from $200 to $143. Nevertheless, after last week’s bloodbath, investors are looking at upside of 59% from current levels. Abraham’s rating stays an Outperform (i.e. Buy.) (To watch Abrahams’ track record, click here)
What does the rest of the Street make of Sarepta’s prospects right now? Currently, the stock has a Moderate Buy consensus rating, based on 9 Buys, 5 Holds and 1 Sell. At $148.42, the average price target suggests upside of 65% over the next 12 months. (See SRPT stock analysis on TipRanks)
To find good ideas for healthcare stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
