Here's Why Sarepta Therapeutics May Be The Rarest Of Finds: A 'Value' Biotech Stock

Sarepta Therapeutics Inc SRPT was trading higher Friday after a Thursday-night update of Exondys 51 annual sales guidance from $80 million to $95 million. The figure still fell short of Oppenheimer’s $100 million estimate — and analyst Hartaj Singh even considers his rate conservative.

The Exondys Path

Exondys 51, a drug delaying Duchenne muscular dystrophy symptoms, beat Oppenheimer’s first-quarter sales estimates by 12.5 percent, and factors suggest impending growth acceleration with more patients soon beginning therapy. The fact that the treatment isn’t a full cure does not appear problematic.

“As we have pointed out recently, and physician checks have validated, delaying progression offers important clinical and pharmacoeconomic benefits in DMD,” Singh wrote in a Friday note. “Disease areas as diverse as PAH and oncology have many examples of blockbuster drugs that slow, rather than cure, disease.”

Sarepta is expected to gain approval by the European Medicines Agency in early 2018 to capitalize on a foreign market size twice as large as that of the United States. Currently, the company is preparing responses to the regulatory body’s “Day 120” questions and has intimated its intent to request a six-month clock stop to finalize a study.

Other Catalysts

Another DMD candidate, eteplirsen, is on the accelerated approval track, and Singh “anticipate[s] follow-on compounds could double SRPT's initial market opportunity.”

Sarepta also aims to conclude toxicology and pharmacology studies for its next-generation PPMO chemicals in the first half of 2017 and file an Investigational New Drug application with the U.S. Food and Drug Administration by the end of the year.

Additionally, Oppenheimer gleaned hope from upcoming leadership changes, with Singh affirming it “makes sense” for Sarepta CEO Ed Kaye to transition out by the end of the year.

Oppenheimer maintains an Outperform rating on the stock with a $76 price target. Risks to the thesis include failure to secure approval for eteplirsen and follow-on compounds, as well as failure of PROMOVI Phase 3 clinical trials.

Sarepta was trading up 4.11 percent at a rate of $36.15 at the time of publication.

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