Sarepta Stock Has Fully Consolidated; Leerink Upgrades To Outperform

Leerink upgraded Sarepta Therapeutics Inc SRPT to Outperform from Market Perform, saying the stock appears to have fully consolidated and reflects reasonable expectations for the Exondys launch.

The Backdrop

Sarepta Therapeutics has received FDA’s accelerated approval for eteplirsen (Exondys 51) in September 2016 for Duchenne muscular dystrophy (DMD).

Sarepta is working on other exon skipping drugs (e.g., SRP-4045 and SRP-4053) that may be able to ameliorate the progression of DMD in patients with various disease-causing mutations.

Analyst Joseph Schwartz believes the company’s revenue outlook of $13 million–$15 million for the first quarter and over $80 million for FY 2017 is highly conservative.

Related Link: The Street Is Misreading Sarepta's Guidance

“SRPT should be able to meet revenue guidance in 2017 with relatively low conversion of existing pts. From start forms to reimbursed status,” Schwartz wrote in a note.

Expectations

Sarepta expects conversion rates to improve throughout the year and the analyst’s checks suggest that conversion rates are running 40-60 percent, and now are sufficient to meet expectations based on existing backlog of start forms which was last reported at over 250 patients.

“Our model projects an average of 117 patients on drug during 2017, which equates to just 47 percent of 250 start forms (and less of a percent conversion of “over 250 start forms,” Schwartz continued.

The analyst also acknowledged the conversion rate would need to increase to 65 percent throughout 2017 assuming no increase in start forms. But, the company has commented that it has seen a steady increase in start forms after an initial bolus.

“Therefore, we believe that current guidance is achievable even with very conservative assumptions,” Schwartz added.

The analyst, who raised his price target to $47 from $27, says additional upside could come from Exondys 51 approval in EU and/or successful development of SRP-4045 and SRP-4053.

Shares of Sarepta closed Wednesday’s trading at $30.38. In the pre-market hours Thursday, the stock was up 4.58 percent to $31.77; shortly after the opening bell, the stock was seen up 6.78 percent at $32.44.