This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
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
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

A Rousing Rebuttal of the Sarepta Serial Short

CAMBRIDGE, Mass. ( TheStreet) -- Wednesday was apparently "Let's Rehash the Sarepta Therapeutics Bear Thesis" Day at Seeking Alpha. Two contributors penned articles for the DIY investment web site raising questions and concerns about Sarepta's (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 Seeking Alpha 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 published study. 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 Prosensa's (RNA) 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/ GlaxoSmithKline (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.

1 of 2

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
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

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
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
RNA $18.65 0.00%
GSK $47.71 0.00%
SRPT $13.36 0.00%
AAPL $129.36 0.00%
FB $79.60 0.00%

Markets

DOW 18,203.37 -85.26 -0.47%
S&P 500 2,107.78 -9.61 -0.45%
NASDAQ 4,979.9010 -28.1950 -0.56%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs