I was wrong to be bullish on Sarepta, even if I had warned recently about greater regulatory risk. I'll have more to say about my mistakes below, but first let's start with some thoughts from a fund manager who has been critical of Sarepta and short the stock.
I can't identify him by name but he made the right call and he does a good job explaining why Sarepta's stock price took such a beating. Below is an email from this investor, reprinted with his permission:
The FDA's issues with trial design are so wide-ranging that it seems like wishful thinking that Sarepta will be able to agree on a study design and start enrolling by the second quarter 2014.
Major questions with dystrophin quantitative assay. Questions with results of anything less than two years. Need for a larger study to power the six-minute walk test (6MWT) data. Possible need to expand study population both high and low and go beyond 6MWT as primary endpoint. The FDA is very deeply skeptical and Sarepta will have a difficult time coming to a study design that the company thinks they can do and that the FDA will be satisfied with.
And any trial seems likely to last 2 years. Seems to me that even if all goes well, approval would get pushed out much more than two years. They're going to spend 9 months arguing over study design and probably won't start enrolling until early 2015. Two-year trial plus filing and approval. Sounds like early 2018 approval at best.