3 Reasons 2017 Launch Expectations For Sarepta's EXONDYS 51 Are 'Too High'

Leerink's Joseph Schwartz felt it prudent to take a deep dive into Sarepta Therapeutics Inc's SRPT EXONDYS 51, the company's therapy for the treatment of Duchenne muscular dystrophy (DMD).

There are three reasons investors should take a "more cautious view" on Exondys 51's first year on the market, especially as other analysts are more optimistic of a strong start for the therapy.

1. Number Of Patients Unknown

According to Schwartz, the true DMD prevalence remains unknown and could range from 9,000 to 16,000 in the US and the addressable popular for Exondys 51 ranges from 1,200 to 2,100.

Based on the analyst's estimates, the company's therapy would need to reach 190 to 212 patients in the first and second quarter of 2017 to achieve consensus revenue estimates.

2. Pricing Concerns

Schwartz noted that he spoke with Sarepta's management to discuss the pricing of its therapy.

The analyst believes the average cost of the drug will be around $300,000 and the two types of government discounts, including Medicaid and 340B, can only introduce a 23.1 percent discount to the drug price since only one of the discounts can occur at a time.

As a result, Schwartz believes management has understated the true price of the drug which they have yet to realize.

3. Street Consensus Estimates

The analyst is estimating Sarepta's fourth quarter revenue will be around $7.3 million and $101 million for the full year 2017.

By comparison, the Street is modeling $215 million for the full fiscal year 2017 and the analyst stated this implies the company needs to reach 401 patients for the full year or a 19 percent market penetration.

The analyst is skeptical the company can achieve a 19 percent market penetration as only a very small handful of rare disease drugs have breached the 20 percent penetration mark in their first full year of launch.