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Sarepta Shares Still Have Upside

Stocks in this article: SRPT

Assuming no supply constraints (more on that below) implies worldwide sales of $326 million in 2015.

Finally, let's calculate fair value.

Given the excitement surrounding eteplirsen and the potential expansion of Sarepta's exon-skipping technology to other patient subgroups, I'm going to apply a seven multiple to our sales estimate and estimate an 85% chance of FDA approval. Combining these variables and discounting the "future value" of eteplirsen -- I use a 12% discount rate -- yields a present value of $1.4 billion, or $50 per share.

Despite today's success, Sarepta isn't home free. As I have noted before, manufacturing scale-up is a significant challenge and will likely be the rate-limiting step for approval. Manufacturing is exceedingly complex and requires lots of expertise, which Sarepta doesn't currently have in-house. The company will almost certainly receive multiple commercial partnering or acquisition offers from large pharmaceutical and biotech companies over the next few months. Absent an outright acquisition and assuming favorable economic terms -- co-promotion rights would make sense in a partnership -- I would advise Sarepta to ally itself with a more experienced partner to ensure that eteplirsen reaches patients in adequate supply as soon as possible.

Sadeghi has no position in Sarepta.

Nathan Sadeghi-Nejad has 15 years experience as a professional health-care investor, most recently as a sector head for Highside Capital. He has worked on the sell side (with independent research boutiques Sturza's Medical Research and Avalon Research) and the buyside (at Kilkenny Capital prior to Highside). Sadeghi-Nejad is a graduate of Columbia University and lives in New York. You can follow him on Twitter @natesadeghi.
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