Updated with new comments, information and analysis. CAMBRIDGE, Mass. ( TheStreet) -- The U.S. Food and Drug Administration is actively reviewing the efficacy and safety of Sarepta Therapeutics' ( SRPT) Duchenne muscular dystrophy drug eteplirsen even though the drug has not been formally filed for approval yet. Weird, huh? But also good news for Sarepta. While investors have been obsessing over whether or not FDA will allow an eteplirsen accelerated approval, the agency is already reviewing the drug as if it was filed. Why? Because FDA understands that a decision to allow Sarepta to file for accelerated approval filing means eteplirsen will be approved. What's going on with eteplirsen now at FDA is not a "file or don't file" decision, it's a mini review. Read carefully Sarepta's announcement Monday because the evidence of an ongoing eteplirsen review is all there. FDA has asked the company to provide written summaries supporting the use of dystrophin as a surrogate endpoint for approval, as well as a discussion of clinical outcomes from the phase II study. The FDA doesn't ask for this type of information from companies who haven't yet filed a drug for approval. Instead, these are the types of questions FDA asks of a drug sponsor during the review process. Baird analyst Brian Skorney gets it. "On the surface it appears that the FDA is requesting information that would normally be part of the NDA review process," he writes in a research note. "This appears to be a bit of a departure from precedent and shows the FDA's willingness to remain flexible (at least publicly) on this review. We believe that the agency is essentially doing the bulk of the review on this application prior to submission and would view a recommendation by the agency to file based on the available data as a very strong indication that it will result in an approval." Exactly. Once you get your head around the FDA reviewing a drug that's not officially filed for approval, the Sarepta situation makes more sense. So, what happens now? Sarepta puts together the data and submits it to FDA in the coming weeks. The agency will then review the new data, meet with Sarepta again in the third quarter, and make a final decision on accelerated approval.We don't know what the FDA will ultimately decide, but if the agency tells Sarepta, "Yes, you can file," then investors should interpret this as eteplirsen being approved.
Why is this good news, again? Because the FDA could have easily told Sarepta to come back with data from the planned phase III study. That would have told us FDA didn't believe the existing eteplirsen data. What could go wrong? Sarepta fails to convince FDA that its data on dystrophin production is strong enough to warrant eteplirsen's approval. If that happens, FDA will "reject" eteplirsen following this mini-review, meaning the agency will tell Sarepta to revisit the drug's approval with more data following the conduct of the phase III trial. I spoke briefly with Jenn McNary and Christine McSherry, mothers of boys with DMD and advocates who have met with top officials at FDA several times to lobby for eteplirsen's rapid approval. Both women are pleased with today's news because it shows the FDA is willing to work with Sarepta to get the drug to market as soon as possible. "What we're seeing is a progressive, creative FDA," said McSherry, co-founder of the Duchenne Alliance. "I feel pretty good about this," said McNary, whose son, Max, received eteplirsen in the phase II study. "This is what the FDA told us they'd do." Sarepta shares are down 7% to $36.60 in Tuesday pre-market trading. The stock was down as much as 12% last night following Sarepta's announcement. -- Reported by Adam Feuerstein in Boston. Follow @AdamFeuerstein