CAMBRIDGE, Mass. (
) -- Wednesday was apparently "Let's Rehash the Sarepta Therapeutics Bear Thesis" Day at
. Two contributors penned articles for the DIY investment web site raising questions and concerns about
(SRPT - Get Report)
Duchenne muscular dystrophy drug eteplirsen.
Neither article said anything new about Sarepta or eteplirsen that hasn't been already debated endlessly by bulls and bears. Sarepta shares fell nonetheless, down 8% to $38.63. A downgrade of Sarepta by analyst Bill Tanner at his new sell-side shop FBR (he left Lazard recently) probably contributed as much or more to Sarepta's fall Wednesday.
It's a waste of time -- and impossible, quite frankly -- to rebut every article regurgitating the eteplirsen bear thesis. The eteplirsen data are what they are. Investors find the data convincing or not. Still, I feel compelled to address some of the poorly reasoned arguments and mis-statements made by yesterday's
contributors. I don't expect to sway many minds.
EnhydrisPECorp, a pseudonym, insists the
phase II study of eteplirsen failed
. He knows this because he's apparently the only person who read the
. Untrue. Moreover, he insists Sarepta knows eteplirsen doesn't work but is covering up the truth with with bio-statistical flimflam and really effective propaganda. EnhydrisPECorp is short Sarepta, according to his disclosure.
But on Sept. 26, EnhydrisPECorp was long Sarepta, according to the disclosure on this
Seeking Alpha article
. He wasn't exactly enthusiastic about eteplirsen in this article but enough to own Sarepta, apparently.
EnhydrisPECorp doesn't explain when or why he went from owning Sarepta to shorting the stock. Maybe he's just a daytrader.
What's interesting to me about the latest EnhydrisPECorp article is that it taps into the same conspiratorial thinking I hear from a small group of institutional investors who believe strongly Sarepta CEO Chris Garabedian is a liar. These people insist Garabedian has willfully mis-represented the eteplirsen data, and in doing so, they believe he has purposefully manipulated the emotions of DMD patients and their families. Of course, they're short the stock.
Sarepta bulls are often criticized for allowing emotion to sway their thinking. The "Garabedian is evil" people are the same except in the other direction. It is a trip to talk to them, however.
Next, Steven Breazzano makes two major arguments for why
Sarepta is much more risky than investors realize and therefore the stock is over-valued
. Breazzano has no position in Sarepta, according to his disclosure.
Breazzano's Sarepta bear argument No. 1 (I'm summarizing): Results from the phase II study of
drisapersen look very similar to the "positive" results of Sarepta's eteplirsen phase II study. The larger drisapersen phase III study failed, therefore, Sarepta's phase III study (not yet started) will inevitably fail, too.
Let's take a look at slides depicting results from the two, phase II studies:
Here is the Prosensa/
(GSK - Get Report)
drisapersen phase II study:
And here is the Sarepta eteplirsen phase II study:
The drisapersen and eteplirsen arms of the studies do look vaguely similar, except we have data on six-minute walk test performance for the eteplirsen patients out to 96 weeks, double the amount of data in the 48-week drisapersen study. That's a significant difference Breazzano fails to note.
He also argues performance on six-minute walk tests can be highly variable and skewed when patients know they're on drug or not. True, but again, the eteplirsen data are so compelling because patients continue to perform well over 96 weeks. That's a long time to fight against the muscle-wasting progression of DMD.