In a surprise decision, the Food and Drug Administration said it will hold an advisory committee to discuss Sarepta Therapeutics' muscular dystrophy gene therapy, and SRPT stock tanked Friday.
Just two weeks ago, Sarepta said the FDA wouldn't ask a panel of independent experts to weigh in on the risks and benefits of its gene therapy for Duchenne muscular dystrophy. But the agency changed its mind during a late-cycle meeting, Sarepta said in a news release Thursday.
Sarepta is asking for an accelerated approval, meaning it still hasn't finished two Phase 3 studies of the drug, SRPT-9001. But it believes the treatment works based on elevated levels of a key protein in the patients. The outside experts will likely debate whether that protein signals a benefit for patients.
"While we now see more near-term stock volatility potential with upcoming regulatory events, we still see many path for SRPT-9001 to ultimately get over the line," RBC Capital Markets analyst Brian Abrahams said in a note to clients.
On today's stock market, SRPT stock crashed 18% and closed at 122.69.
SRPT Stock: Surrogate Endpoint
Sarepta developed its gene therapy for patients with Duchenne muscular dystrophy. In this condition, patients' bodies don't make enough of the dystrophin protein needed for muscle function and strength. Sarepta's drug codes for a shortened version of that dystrophin protein.
The company is banking on accelerated approval based on elevated levels of that shortened protein in patients' blood. This is known as a "surrogate endpoint."
Mizuho Securities analyst Uy Ear says Sarepta doesn't believe there are any issues with its application. Nor does the company think the FDA has manufacturing concerns. Two out of three sites have already passed inspection with minimal problems.
This "suggests that a reason for this decision change could be because the agency is exploring the innovative use of surrogate endpoints, where appropriate, in the accelerated approval to advance cell and gene therapy for rare and life-ending degenerative diseases," Ear said in a note.
He kept his buy rating and 160 price target on SRPT stock.
Streamlining Gene Therapy Approvals
Promisingly, the advisory committee meeting will take place before May 29, the day the FDA is due to make a decision on whether to approve SRPT-9001.
UBS analyst Colin Bristow says the advisory committee news is not a "red flag." Peter Marks, director of the FDA's Center for Biologics Evaluation and Research, has publicly supported the use of surrogate endpoints to streamline accelerated approvals of cell and gene therapies.
But "given the announcement of the advisory committee decision, against a backdrop of (the FDA office) communicating how capacity constrained it is at every public appearance, we do see a potential risk of (approval date) extension," he said in a note.
Still, he kept his buy rating and 158 price target on SRPT stock.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
