These Biotech Stocks Could Move on BioMarin's Duchenne Drug FDA Panel

BioMarin will almost certainly be halted all day next Tuesday, so traders should watch Sarepta Therapeutics and PTC Therapeutics as proxies.
By Adam Feuerstein ,

A short follow-up, (I promise) to my 2,000-word preview of next week's BioMarin Pharmaceuticals (BMRN) - Get Report FDA advisory panel for drisapersen:

Several readers (traders, I assume), wanted me to discuss the potential impact that BioMarin's advisory panel will have on related biotech stocks. BioMarin will almost certainly be halted all day Tuesday, so where else can traders go for fun?

Sarepta Therapeutics (SRPT) - Get Report is the most obvious derivative play off the BioMarin drisapersen advisory panel, but it's difficult to predict the stock's direction until we hear what's actually discussed at the drisapersen panel.

A panel vote recommending drisapersen's approval could move Sarepta's stock price higher or lower depending on the discussion and reasons for the vote. Same is true in the opposite direction.

There are too many possible scenarios to diagram all  of them, but here's a couple: If the panel says yes to BioMarin primarily for having data on lots of patients from placebo-controlled studies, Sarepta's stock price might fall. (Sarepta has eteplirsen data on 12 patients, only.)

If the panel criticizes drisapersen's efficacy data, harps on safety, bemoans lack of dystrophin data but still votes yes and approves it, Sarepta's stock price is probably moving higher as the likelihood of an eteplirsen approval increases.

I'll spend time during Tuesday's live blog discussing the ramifications of the drisapersen deliberations on Sarepta's stock price -- just another reason for you to log in and spend the entire day with me.

PTC Therapeutics (PTCT) - Get Report is the other proxy biotech stock for Tuesday's drisapersen panel and simpler to game out. A positive drisapersen panel moves PTC's stock price higher. PTC shares fall in value if the drisapersen panel is negative.

PTC's stock price is already up more than 30% this month in anticipation of a positive Biomarin drisapersen panel outcome.

I devoted a good amount of space in yesterday's preview discussing the ways in which BioMarin will strive to transform messy, equivocal drisapersen clinical data into a recommendation for approval. But how might Tuesday's panel go really wrong for BioMarin? What warning signs for disaster should investors look for during the panel's discussions?

Here's one: The placebo effect in drisapersen's clinical trials. I wrote about this potential problem two years ago when GlaxoSmithKline (then developing drisapersen) presented what looked like statistically significant, positive results from a randomized, placebo-controlled phase II study.

In reality, there's no way for a drisapersen study to be blinded because an injection of the drug causes almost immediate pain. DMD patients know if they're receiving receiving drisapersen or a placebo.

I explained in April 2012 why an "unblinded" blinded, placebo-controlled study is a potential problem for drisapersen:

It's entirely possible patients who knew they were receiving drisapersen were motivated to perform better during the two six-minute walk tests performed at weeks 13 and 25. Likewise, the kids on placebo were unmotivated. It's impossible to quantify with any precision the effect of unblinding might have had on this trial, but the placebo effect needs to be taken into account.

BioMarin is relying heavily on positive drisapersen data from the blinded, placebo-controlled phase II studies because the phase III study failed. If the FDA and/or the panel dismiss the drisapersen benefit observed in the phase II studies because they believe painful injections biased the outcome, BioMarin could be in for long and troubling day.

Remember, the briefing documents for the drisapersen advisory panel prepared by the FDA will be released Friday morning. That's tomorrow.

Bookmark this FDA web page

, which is where you'll be able to download the documents.

Adam Feuerstein writes regularly for TheStreet. In keeping with company editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback; click here to send him an email.

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