is a near-perfect microcosm of the promise and pitfalls of biotech. After 22 years in relative obscurity and $369 million in cumulative losses, the company finally seems to have an exciting drug candidate in eteplirsen, an "exon skipping" compound for the treatment of Duchenne muscular dystrophy (DMD) -- a progressive disease that leaves patients wheelchair bound by their teens and dead shortly thereafter.
Yet despite a positive update Friday from the company's critical Phase IIb trial, shares slid nearly 8%. It's not entirely clear what prompted the selloff and I try not to be distracted by short-term price movements. Sarepta shares are still up 466% year-to-date and the slide could simply reflect year-end profit taking ahead of likely tax changes next year. Nonetheless, I want to address a few concerns I've heard about the new 62-week data for eteplirsen, presented on Friday at the European Neuromuscular Center Workshop.
These data further support my view that eteplirsen produces a major clinical benefit in DMD. Assuming management can successfully negotiate manufacturing scale-up, which isn't easy but should be doable, eteplirsen will be a blockbuster drug. I'm not convinced the company can obtain FDA accelerated approval based solely on existing data, but it's certainly not out of the question, especially considering what will likely be intense pressure from patient advocacy groups.
Risk-tolerant investors with some patience should buy Sarepta at current prices.
Let's take a closer look at the new data: After 62 weeks, the six patients in the pooled modified intent-to-treat eteplirsen group -- this excludes two patients with rapidly progressive disease -- remained essentially stable, showing only a 3.9% decline in six-minute walk test (6MWT) scores. Some investors expressed concern about what I would call the "optical erosion" in 6MWT score versus the 48-week update (from an 8-meter
in 6MWT versus baseline to a 16 meter
.) That's the wrong way to think about these data.
First of all, there is inherent variability in any effort-based test like the 6MWT, especially in children. That's why each patient performed two 6MWTs at each key timepoint in the study -- baseline and weeks 12, 24, and 48. (More on this later.) For patients in the drug arm, the 6MWT at each timepoint falls within 5% of baseline, which is a narrow enough margin that the absolute values should be considered equivalent. Even without the company's positive dystrophin biopsy results, 6MWT stability suggests eteplirsen is very active, since DMD patients are extremely unlikely to remain clinically stable for more than a year.