Analysts Unfazed By FDA Snub Of Sarepta's DMD Drug, Pin Hopes On Gene Therapy

Sarepta Therapeutics Inc SRPT's new drug application for its second Duchenne muscular dystrophy drug received a a complete response letter from the FDA on Monday. 

The Analysts

Nomura Instinet analyst Christopher Marai maintained a Buy rating on Sarepta with a $230 price target. 

Bank of America Merrill Lynch analyst Tazeen Ahmad reiterated a Buy rating and lowered the price target from $200 to $189.

Credit Suisse analyst Martin Auster maintained an Outperform rating and reduced the price target from $207 to $201.

Nomura Sees Weakness As Buying Opportunity

The renal toxicity highlighted by the FDA is not a concern, as antisense oligonucleotides are well known for their renal toxicity, particularly at high doses and frequency, Nomura analyst Marai said in a Monday note.

No renal toxicity has been observed with Sarepta's third DMD drug in the pipeline, casimersen, the analyst said. 

Marai also expressed surprise at the port infection risk noted in the CRL, given that the previous FDA briefing documents and his key opinion leader check supported indwelling ports.

Nomura now expects a golodirsen launch in the second half of 2020 compared to its earlier expectation of the fourth quarter of 2019.

"We see weakness as an attractive buying oppy," Marai said. 

Nomura also sees no read through to Exondys-51, casimersen or gene therapy.

BofA: Gene Therapy For DMD Is Sarepta's Value Driver 

The CRL came as a surprise, BofA's Ahmad said in a Monday note, pointing out the fact that it did not identify any efficacy questions and that renal toxicity was not observed with the already approved Exondys 51 and casimersen.

The analyst expects Sarepta to request a Type B meeting with the FDA to gain visibility on the path forward, with the meeting likely to take place within 60 days of the request.

Sarepta hopes for a productive discussion with the FDA, given the higher unmet need and the occurrence of renal toxicity only at very high dose for golodirsen, the analyst said. 

The company also indicated a likely delay in its casimersen filing, originally scheduled for 2019, he said. 

BofA now models a 2021 U.S. launch for both golodirsen and gasimersen.

"We reiterate our Buy rating, noting our key value driver for SRPT remains its gene therapy treatment for DMD for which we model $85 in value," Ahmad said. 

Credit Suisse: Sarepta Will Ultimately Succeed If DMD Gene Therapy Wins

Notwithstanding the setback with Golodirsen, Sarepta stock will ultimately succeed if its DMD gene therapy SRP-9001 wins, Credit Suisse's Auster said in a Monday note. 

The analyst sees the FDA snub pressuring the assumptions in the floor value provided by the golodirsen and the PPMO business.

Accordingly, Auster reduced the value of Sarepta's base business from $25 per share to $19 per share.

Credit Suisse lowered its probability of success estimate for golodirsen from 70% to 30%; from 30% to 20% for casimersen; and from 30% to 20% for the next generation of PPMOs.

The firm also widened its 2019 loss per share estimate for Sarepta from $3.74 to $3.91.

The Price Action

Sarepta shares were falling by 16.74% to $100.17 at the time of publication Tuesday. 

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