Jordan C.. asks, "What do you make of Sarepta Therapeutics raising money right now?"
On Wednesday night, Sarepta announced a follow-on stock sale raising $37 million. Naturally, everyone wants to speculate about what this deal means to the outcome of the ongoing eteplirsen review by the FDA, particularly with controversy still buzzing over Monday's development.
Going into this financing, Sarepta had about one year of cash in the bank. Raising just a little bit of money now -- essentially one quarter's worth -- provides an operational cushion to ensure compliance with the company's contract manufacturers of eteplirsen, according to people familiar with the deal.
Sarepta will need to raise additional money. Everyone knows that. But the company would rather raise more money at a much higher stock price, assuming FDA approves eteplirsen in the next two or three months.
If FDA rejects eteplirsen, this week's mini cash raise will be dwarfed by larger fiscal issues.
Investors who know the Sarepta story well viewed the equity offering as a prudent financial move. The deal came together quickly on Wednesday night and was eight to 10 times oversubscribed, according to sources. Most, if not all, of the buyers were already holding significant Sarepta long positions, according to people familiar with the deal.
On Thursday afternoon, Sarepta shares were up 10% to $21.43, another indication that the financing was being viewed positively.
"Mtman" writes, "Why isn't PTC Therapeutics (PTCT - Get Report) getting the same compromise as Sarepta Therapeutics from the FDA when they already have approval overseas for a drug for Duchenne muscular dystrophy?"
Probably because the PTC Therapeutics drug, Translarna, failed a large phase III study in "nonsense mutation" Duchenne patients. (A different form of Duchenne than what's addressed by Sarepta with eteplirsen.)
PTC submitted the failed phase III study of Translarna to the FDA, anyway, but the agency responded with a refuse-to-file letter. PTC has not disclosed the specific reasons behind FDA's refusal to accept the Translarna submission, except to say the application was "not sufficiently complete." The company says it is talking with FDA to find a way forward.
Translarna is approved in Europe on a conditional basis, despite the failed phase III study. In a private session last month, regulators with the European Medicines Agency, or EMA, met with PTC to review the Translarna data again and determine whether the drug should remain on the market there. A decision could be announced at the end of the next EMA meeting, scheduled for June 20 to 23.
"Neverwincasey" has a follow-up question to my story this week on Sarepta submitting new dystrophin expression data on eteplirsen to the FDA.
"Will the data that Sarepta is submitting to the FDA in the upcoming weeks have to be released to the public shortly after submitting it? Isn't this data material data that falls under SEC guidelines to be released to shareholders? I'm taking this data as if it would be material bound to release like any other data from any other ongoing study? If so, wouldn't this data when released prior to any decision of the FDA make guessing the outcome of the FDA decision far more reasonable that it is now? Looking forward to your take on this matter."
Sarepta has not decided how it will announce publicly the submission of the new data to the FDA, the company told me earlier this week.
My guess, based on the conversation with Sarepta, is that there will not be a full disclosure of the actual dystrophin expression data, only an announcement of the data's submission to FDA. The company's lawyers might have a different view if the information is deemed to be material, so stay tuned.
So, I'm stepping back from the "Who Will Gilead Buy?" guessing game. With Gilead stuck in what seems like an endless valuation rut where it trades at seven times forward earnings, "Is Gilead a value stock or a value trap?" is the question more on the minds of investors.
The shortfall in hepatitis C drug sales in the first quarter remains an overhang on Gilead's stock price for which even a resurgent HIV business (due to the new TAF regimens) can't compensate. Gilead insists all is well and on track with the oncology business, but investors don't see it.
The market's consensus view is Gilead needs to spend its billions to buy growth, but the company is so big that small-ish, bolt-on acquisitions don't move the needle enough. Mega-deals, like buying Vertex Pharma (VRTX - Get Report) , Alexion (ALXN - Get Report) or Bristol-Myers Squibb (BMY - Get Report) , are easier to speculate about than to actually execute. And they may not deliver the desired growth.
Gilead was picked by 68% of the respondents, followed by Biogen at 19% and Alexion at 13%. 1,100 votes were cast. (Biogen is a holding in Jim Cramer's Action Alerts PLUS portfolio.)
There's still hope.
@adamfeuerstein You are being paid $$$ by your short buddies to ruin immu's day at court.— Rodney (@IMMU_Rod) June 7, 2016
And this concludes the "Blame Adam for everything" portion of this week's Mailbag.