This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Sarepta Is Undervalued Even Without Eteplirsen Accelerated Approval

NEW YORK ( TheStreet) -- A lot of investors are obsessed with the question of "Will Sarepa Therapeutics (SRPT - Get Report) receive accelerated approval for eteplirsen?" The focus on the outcome of this month's meeting between Sarepta and FDA is understandable but misses a broader point: Sarepta at its current stock price is undervalued even if eteplirsen accelerated approval is not granted.

My biggest worry as a Sarepta shareholder used to be that eteplirsen wouldn't receive accelerated approval, allowing GlaxoSmithKline (GSK - Get Report) to reach the U.S. market first with its competing Duchenne muscular dystrophy (DMD) drug drisapersen. But now that safety questions have been raised about drisapersen, it is more apparent that eteplirsen will be the market leader even if FDA approval isn't granted for another three years.

Eteplirsen is likely a $500 million-plus market opportunity for Sarepta in the U.S., which has only about 2,000 patients with the missing exon-51 gene. This captures 6% of the total DMD patient population. The same exon-skipping drug technology can be used to treat other forms of the disease. Sarepta's next four targets encompass about 9,000 patients. If you count all the the patients that could benefit from exon-skipping drugs, the total is near 30,000.

Sarepta has already received notice from the FDA that at some point they will not have to do a separate clinical trial for each exon-skipping drug (Although FDA first wants to see separate, successful data on the first three or four targets.) Sarepta is expected to start new clinical trials by early next year.  

Let's take a look at a reasonable scenario that assumes no accelerated approval for eteplirsen: The drug reaches the U.S. market in early 2016 and three new exon-skipping targets -- 45, 50 and 53 -- are approved in 2017. This gives Sarepta a market opportunity totaling 7,000 patients in four years. Let's assume a price of $350,000 (on the lower side of estimates) and a capture rate of 70% by 2019. That would give Sarepta $1.7 billion in sales in six years time.  

Keep in mind that these 7,000 patients are only one-quarter of the addressable market. Once it dawns on investors that Sarepta's exon-skipping technology works in the first few targets, the company's market value will begin to bake in other targets as well.

Alexion Pharmaceuticals (ALXN - Get Report) generated a bit less than $1.2 billion in sales in 2012 by selling the ultra-orphan drug Soliris. Alexion's market cap: $17 billion. Biomarin Pharmaceuticals (BMRN - Get Report), another ultra-orphan drug marketer with only $500 million in annual revenue (but the opportunity to double that in a few years) has a market cap of over $7 billion.

Today, Sarepta's market cap stands at $800 million. If one assumes a similar market cap as Alexion in six years time, Sarepta has the potential to be a 20-bagger -- if my scenario plays out.    

I first bought Biomarin seven years ago when its market value was similar to Sarepta today. Owning Biomarin required some patience but the stock is up five fold since I first invested. Accelerated approval or not, Sarepta has the potential to move much higher in the years to come, if the company's exon-skipping technology can prove to treat DMD effectively and safely.

Rosenblum is long Sarepta and Biomarin.
Dan Rosenblum has been a full-time stock trader since 1999 after leaving a job at a publicly held medical-device company. Rosenblum joined that year and has been the online trading community's resident biotech expert ever since. Rosenblum writes the newsletter, which has outperformed the S&P 500 and the Nasdaq Biotechnology Index every year since its inception in 2006. Rosenblum lives with his wife and kids in Rockland County, New York.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
ALXN $154.50 -3.40%
BMRN $101.04 -1.80%
GSK $40.20 -0.45%
SRPT $33.52 -3.70%
AAPL $112.00 0.36%


Chart of I:DJI
DOW 17,118.78 -13.08 -0.08%
S&P 500 2,014.89 +15.91 0.80%
NASDAQ 4,815.5410 -23.1020 -0.48%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs