Lazard Analyst Note on Sarepta Therapeutics Is Generating Buzz

BOTHELL, Wash. ( TheStreet) -- Sarepta Therapeutics ( SRPT) is the subject of a research note from Lazard Capital Markets Wednesday in which analyst Bill Tanner summarizes feedback from some doctors in the Duchenne muscular dystrophy community regarding the 48-week eteplirsen data announced last week.

A full presentation of the eteplirsen data takes place Saturday at the World Muscle Society meeting.

Tanner writes:

Dystrophin production remains bedrock of enthusiasm. There is a consensus opinion that dystrophin production in patients treated with eteplirsen is encouraging. The data in humans are consistent with observations made in pre-clinical animal models so, in a sense, they are not overly surprising. On the 48-week data conference call, we asked Sarepta management if immunoblot data would be presented. In contrast with muscle fiber staining, assessment of dystrophin quantity may be a more important measurement than immunohistochemical staining, according to a DMD expert we frequently speak with. Management indicated that the data were still being reviewed so we will have to wait and see if immunoblots are presented. Experts agree that those data and a safety profile that remains relatively benign are supportive of additional clinical testing.

Further testing? Does this mean DMD doctors are less confident in Sarepta's ability to win accelerated approval for eteplirsen?

Not necessarily, says Tanner:

While some investors may recoil in fear that the data "merely" warrant further testing, we do not view the experts' opinions as necessarily indicative that accelerated approval is not possible. We have spoken with DMD KOLs who are unaware of Subchapter H filing opportunities. We suspect they may also be unaware of the mention of measures of intermediate clinical benefit for muscular dystrophy drugs suggested in the recent report issued by the President's Council of Advisors on Science and Technology (PCAST). Data that support the thesis that sustained treatment leads to durable dystrophin production will be viewed as positive, we believe. Because of the potential for intra-subject variability in dystrophin production muscle to muscle and limited ability to biopsy repeatedly, we are not necessarily expecting to observe there to be a tight correlation, or any perhaps, between dose and duration of treatment.

In his conversations with DMD docs, Tanner picked up on concerns about the performance of the patients treated with 30 mg of eteplirsen which echoed criticism leveled at the data by some investors last week.

In Wednesday's note, Tanner writes:

Given the inherent variability in the 6MWT, the lack of a correlation between performance and dystrophin production, particularly at the 30mg/kg dose, is viewed as curious by some experts. The small sample size, 2, likely makes drawing conclusions about the correlation challenging. Some experts noted that patients treated with placebo in the trial progressed at a rate that might not be "normal" for the disease history. We have heard that criticism from some investors as well. Concern as to whether the 30mg/kg dose may have contributed to the rapid progression of the two boys who were excluded from the 6MWT seems misplaced to us as no such effect was seen with the 50mg/kg cohort. Nominally, one might expect there to be some positive relationship between dose and severity of side effects. The most interesting observation was that physicians found the believability of the p-values to be challenging given the small sample size and variability in 6MWT across a population. Still, the 6MWT data were viewed as positive and encouraging. If, ultimately, an increase in dystrophin production does not correlate with a delay in disease progression, we wonder whether the entire underlying hypothesis would have to be discarded.

Tanner doesn't expect etelplirsen data being presented Saturday will differ materially from what's already been announced. The near-term value of Sarepta shares, therefore, will hinge on how investors view the relative risk of the eteplirsen program, he says.

There are four "de-risking" events for Sarepta, Tanner believes:
1. Ability to file for accelerated approval -- the most important de-risking event.
2. Immunoblot data to quantify (and confirm) increased dystrophin production in eteplirsen patients. The dystrophin data announced already was based on assessment by immunohistochemical staining.
3. Questionable data for PRO051, the competing DMD drug from GlaxoSmithKline ( GSK) and Prosensa. The biggest concern with PRO051 is kidney toxicity at higher doses. Data from a 53-patient, phase II study are expected in the first quarter 2013, while data from the 180-patient pivotal phase III study are expected at the end of 2013.
4. Sarepta raising money or signing a partner. Tanner believes the former is preferred over the latter.

Sarepta shares closed Tuesday at $33.33. The stock is down 26% from its $45 per share high reached last week following the release of the eteplirsen data. Still, Sarepta shares are up 640% this year.

-- Reported by Adam Feuerstein in Boston.

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.