Sarepta Falls 50% To 10-Month Low After DMD Gene Therapy Study Misses Primary Endpoint

Shares of Sarepta Therapeutics Inc SRPT, which had a lot riding on its gene therapy candidate for treating Duchenne muscular dystrophy in the new year, are sinking.

What Happened: Cambridge, Massachusetts-based Sarepta announced topline results from Part 1 of the Phase 2/3 study of SRP-9001, its investigational gene therapy to treat DMD, showing the study didn't achieve statistical significance on the primary functional endpoint of improvement in North Star Ambulatory Assessment, or NSAA, total score compared to placebo at 48 weeks after the treatment.

Forty-one patients, ages 4-7 years, were evaluated in the trial dubbed Study-102.

The study did meet its primary biological endpoint of micro-dystrophin protein expression. Patients receiving SRP-9001 had mean micro-dystrophin expression of 28.1% as measured by western blot, at 12 weeks after the treatment.

Microdystrophin protein expression in the earlier Phase 1/2a Study 101 was about 74.3%, not adjusting for fat and fibrotic tissue, SVB Leerink analyst Joseph Schwartz said.

What IS DMD? DMD is a genetic disease caused by a mutation in the DMD gene, impairing the ability to produce a muscular protein called micro-dystrophin. SRP-9001 functions by delivering micro-dystrophin-encoding gene to muscle tissue for the production of micro-dystrophin protein.

Accompanying secondary biological endpoints, including vector genome copies per nucleus, percent positive fibers, intensity, and reduction in creatine kinase were also met, the company said.

"The randomization process resulted in a significant imbalance in baseline NSAA scores between the active and placebo cohorts of the participants ages 6-7, making the 6-7 age groups non-comparable and likely substantially contributing to the inability to achieve statistical significance," said Doug Ingram, CEO of Sarepta.

Sarepta also noted a favorable safety and tolerability profile of SRP-9001, with no safety signals identified.

Related Link: Attention Biotech Investors: Mark Your Calendar For January PDUFA Dates

What's Next: Sarepta said Study 102 is ongoing and all 41 participants have completed their Part 1, 48-week assessment and have entered the Part 2 crossover phase.

Participants continue to be monitored for safety and will undergo another biopsy at week 12 in Part 2 to assess the expression and biological markers, in addition to longer-term assessments of functional outcomes, it added.

The company has also enrolled and dosed 11 participants in Study 103, and expect to have biomarker and safety results from that cohort in the second quarter.

Sell-side Tempers Expectation: Following the data readout, Leerink's Schwartz lowered the probability of success for the company's micro-dystrophin program from 70% to 60%. Given the increasing likelihood that additional Study 301 data may be required for approval, the analyst pushed ahead SRP-9001's potential commercial launch timeline from 2023 to 2024.

"With the stock trading near floor value of SRPT's exon-skipper base business, now could be an opportune time to get involved ahead of PPMO data expected in 2Q21," Schwartz wrote in a note.

The analyst lowered the price target for the shares from $197 to $125, while maintaining an Outperform rating.

Raymond James analyst Danielle Brill downgraded Sarepta from Outperform to Market Perform. The analyst noted the company is now meaningfully behind Pfizer Inc. PFE, which announced the first patient had been dosed in its pivotal study.

"As such, we think SRPT will be range bound for the foreseeable future," the analyst said.

Morgan Stanley's Matthew Harrison said, "While we recognize the potential imbalance in the older DMD patients, we believe mixed Study-102 data changes the risk dynamic."

Harrison now assumes about 40% odds of success for SRP-9001 and see commercialization in 2023, potentially later than competitors.

Morgan Stanley downgraded Sarepta from Overweight to Equal-weight and slashed the price target from $182 to $95.

SRPT Price Action: In premarket trading Friday, Sarepta shares were plunging 48.17% to $87.78, their lowest level since last March.

Other gene therapy stocks working on DMD treatments are also moving lower. Solid Biosciences Inc SLDB, which is developing SGT-001 for the same indication, was seen down 18.87% to $6.88.