Sarepta Therapeutics (SRPT) Stock Crashes as Nine-Year Trial Ends in Disappointment

TLDR

• Sarepta Therapeutics stock dropped 36% in premarket trading after a nine-year clinical trial for two Duchenne muscular dystrophy treatments failed to meet its primary endpoint.
• The study tested casimersen and golodirsen in 225 patients aged 6-13, showing improvement in climbing four steps but results were not statistically significant.
• This setback follows previous troubles including Elevidys gene therapy being briefly pulled from market in July after three patient deaths from acute liver failure.
• Sarepta blamed COVID-19 pandemic disruptions for affecting trial participation and data collection during the study period.
• Despite the trial failure, Sarepta reported strong Q3 revenue of $399.4 million, beating analyst estimates of $338.7 million.

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Sarepta Therapeutics stock crashed 36% in premarket trading Tuesday after the company announced that a long-awaited clinical trial for two Duchenne muscular dystrophy treatments missed its primary goal. The news sent shares spiraling, adding to what’s already been a brutal year for the biotech company.

Sarepta Therapeutics, Inc., SRPT

The trial took nine years to complete and enrolled 225 boys between ages 6 and 13. It tested two drugs called casimersen and golodirsen, both part of a drug class known as phosphorodiamidate morpholino oligomers or PMOs.

These drugs work by helping patients produce functional dystrophin protein. Dystrophin is essential for muscle strength and is deficient in people with Duchenne muscular dystrophy.

After 96 weeks of treatment, patients showed some improvement in climbing four steps. However, the difference wasn’t statistically significant, which is what matters to regulators and investors.

The company reported a tiny difference of just 0.05 steps per second on the main study measure. That’s not enough to convince anyone the drugs are working as hoped.

Sarepta pointed to COVID-19 as a major culprit. The company said pandemic disruptions affected trial participation and data collection throughout the study period.

When excluding patients impacted by COVID-related issues, Sarepta claims the drugs appeared to slow disease progression by about 30%. The company also cited long-term data suggesting a three-year delay in wheelchair dependence.

But that’s not how clinical trials work. You can’t just cherry-pick data after the fact and expect everyone to be satisfied.

Another Problem for Troubled Pipeline

This latest setback comes at a terrible time for Sarepta. The stock has already lost about 80% of its value this year following multiple problems with its drug pipeline.

Back in July, the company’s top-selling gene therapy Elevidys was briefly pulled from the market. Three patients died from acute liver failure, raising serious safety concerns.

Analysts at Baird were blunt in their assessment. They said the trial failure makes things worse for Sarepta in the DMD space.

Both the company’s gene therapy and PMO franchise now face increased scrutiny. Regulators, payers, and physicians will all be watching more carefully going forward.

Brian Abrahams from RBC Capital Markets said the miss wasn’t entirely surprising. He added that it creates uncertainty around the base business.

FDA Meeting on the Horizon

Despite the disappointing results, Sarepta isn’t giving up. The company plans to meet with the FDA to discuss converting the drugs’ current accelerated approvals into full approvals.

Sarepta executives emphasized they don’t believe there’s a risk of losing marketing authorization. They pointed to the drugs’ strong safety profile as a key factor.

J.P. Morgan analyst Anupam Rama remains somewhat optimistic. He suggested COVID-related disruptions could explain the trial’s failure to meet its endpoint.

Rama also noted that results excluding affected patients showed encouraging trends. He said there’s a solid case for full approval but warned that the regulatory process remains unpredictable.

The company did deliver some good news on Monday. Third-quarter revenue came in at $399.4 million, crushing analyst estimates of $338.7 million.

The earnings per share loss of $0.13 also beat expectations. Wall Street had forecast a loss of $0.70 per share.

But none of that mattered once the trial results hit. Revenue beats don’t mean much when your pipeline is struggling.

Wall Street currently has a Hold rating on the stock based on six Buy ratings, 13 Hold ratings, and five Sell ratings. The average price target sits at $24.40, roughly where the stock was trading before this latest drop.

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