Sarepta's DMD Drug Should Have A Strong Launch, But Long-Term Prospects Uncertain

Sarepta Therapeutics Inc’s SRPT first drug, Exondys 51 [eteplirsen] has been approved by the FDA for boys with Duchenne Muscular Dystrophy.

Although approval for DMD therapy offers the company significant market opportunity, there are long-term uncertainties, Morgan Stanley’s Matthew Harrison said in a report. He initiated coverage of Sarepta with an Equal-weight rating and a price target of $53.

Strong Launch

Exondys 51 is likely to penetrate the available patients quickly and reach peak penetration above 90 percent in boys less than 15 years by its second year on the market. There would likely be more modest penetration with older patients, with about 25 percent peak penetration, Harrison added.

The analyst projected peak US sales of ~$420 million, with a modest contribution of ~$200 million from Europe. The estimates are ~$125 million higher than the current consensus expectations through 2017.

LT Uncertainty

“While we expect rapid penetration, we see a quick moderation to sales growth as expert feedback suggests only those boys with perceived benefit will continue on drug after a year given cost, weekly infusions and likelihood to seek other therapy with disease progression,” Harrison wrote. He added that “a growing gross-to-net, lower average weight and limited persistence to limit long-term growth.”

The analyst projected long-term costs of ~$350,000 per year, higher than management's estimate of ~$300,000.