) -- The bearish view of
outlined Monday by Aafia Chaudhry
-- she believes FDA won't allow the company to seek accelerated approval for its Duchenne muscular dystrophy drug eteplirsen -- aligns with Wall Street's consensus opinion.
I spent a good amount of time yesterday on Twitter defending Chaudhry's right to express a bearish opinion on Sarepta. More importantly, I was trying to explain to my fellow Sarepta bulls that we are in the minority when it comes to eteplirsen's chances for accelerated approval.
Twitter can be an echo chamber. Sarepta bulls carry a bigger megaphone and therefore dominate the social media conversation, but institutional investors carry bigger wallets, which is why Sarepta shares trade in the mid-to-high $20 range. If Wall Street believed more confidently in eteplirsen's chances for accelerated approval, the stock would be double the price.
This is not to say Sarepta doesn't have its supporters on Wall Street. Of course, it does. But I asked one of the company's largest institutional shareholders -- and a believer in eteplirsen's accelerated approval -- to gauge the view of his Wall Street colleagues. He believes they're at four or five on a ten-point confidence scale.
That suggests more upside than downside in Sarepta if the FDA meeting this quarter goes well and the company is given the green light to file for accelerated approval. A negative outcome is baked into Sarepta's valuation to some extent.
I also tweeted yesterday that I wasn't going to respond specifically to Chaudhry's column because the fundamentals behind Sarepta haven't changed. I changed my mind. She does a good job discussing the risks of over-interpreting data from a small study. Sarepta bears and bulls need to appreciate the challenge facing the company to convince FDA to go along with the accelerated approval filing.
With that said, I believe the eteplirsen data demonstrate a clear and consistent benefit for DMD patients. Yes, the study is unblinded and therefore subject to potential bias, but I think the small number of patients actually helps make Sarepta's case because FDA (and an inevitable advisory panel) will have the opportunity to scrutinize individual patient data in ways not possible with a larger trial. The more you look at the results over time, the more convincing eteplirsen's benefit becomes.
responded to the Sarepta bear thesis
, so I won't repeat it here in detail. Please go back and re-read what I wrote last October.
I like being a contrarian, so I predict a positive outcome from Sarepta's FDA meeting and an allowance for eteplirsen's accelerated approval. Once Sarepta clears this hurdle, bulls and bears can move to debating the outcome of the inevitable FDA advisory panel.
On a related note, DMD advocates are holding a press event Wednesday in Washington, D.C. to
press FDA to consider eteplirsen for accelerated approval
. Later in the week and next week, parent of DMD kids, including
, will be meeting with top FDA officials.
The precise timing of the more important meeting between Sarepta and FDA has not been disclosed other than it will occur sometime in the first quarter. Sarepta has previously stated that it will not publicize the outcome of the meeting until after it receives FDA's minutes. Don't expect to hear a decision on eteplirsen's FDA filing strategy until March, perhaps into April.
-- Reported by Adam Feuerstein in Boston.