Sarepta's Upside Story Is Just Getting Started

Analysts at Morgan Stanley conducted a tracking survey to gain a better understanding of Sarepta Therapeutics Inc SRPT's outlook for its Exondys 51 therapy. After coming away with encouraging data, the firm's David Lebowitz upgraded Sarepta's stock rating from Equal Weight to Overweight with a price target boosted from $33 to $60.

The third version of Morgan Stanley's "AlphaWise tracking survey" of Sarepta's therapy to treat Duchenne muscular dystrophy bodes well for the stock, Lebowitz explained. In the third quarter, Sarepta could report sales of $55 million, which is notably higher than the current consensus estimate of $40 million. In addition, data from physicians show they are "likely to at least try" Exondys 51 on a large proportion of amenable patients.

Thirty-seven percent of eligible patients have been prescribed Sarepta's therapy, data from the survey showed. This marks an increase from the 26 percent seen in a prior survey.

On top of that, Sarepta's momentum appears to be sustainable, as there was no meaningful change in dropout rates versus prior similar surveys, Lebowitz continued. The survey also showed a "slight uptick" in the percent of cases being reimbursed from 71 percent in the prior survey to 80 percent, with a slight increase (although still steady) in time to first payment from 6.9 weeks to 7.6 weeks.

Bottom line, sustainable topline beats in quarterly earnings report will drive near-term upside for Sarepta's stock while the company's "underappreciated" pipeline offers a longer-term optionality.

At last check, shares of Sarepta were up 5.16 percent at $47.70.

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