Sarepta stock rocketed Friday after hitting a "grand slam" approval that expands the market for its Duchenne muscular dystrophy gene therapy more than tenfold, according to one estimate.
The gene therapy, dubbed Elevidys, already had accelerated approval for children age 4 and 5 with the muscle-wasting disease. Late Thursday, the Food and Drug Administration gave Elevidys a traditional approval for children age 4 and up who can still walk.
In a surprise twist, the FDA also granted Sarepta Therapeutics' gene therapy an accelerated approval for non-ambulatory children. That approval is contingent upon the results of a study called Envision, which began last year and is expected to wrap up in 2027.
"This regulatory outcome is the best-case scenario, with the FDA granting the broadest label possible for Elevidys," Mizuho Securities analyst Uy Ear said in a report. He described the approval as a "grand slam" and kept his buy rating on Sarepta stock.
On the stock market today, Sarepta stock catapulted 30.1% to 160.72.
Sarepta Stock: Tenfold Expansion In Market
The approval expands the market for Elevidys by more than tenfold, Leerink Partners analyst Joseph Schwartz said. Under the original approval, about 7% of patients were eligible for the gene therapy. Now, about 80% are eligible, he said in a report.
"As Elevidys generated about $200 million in sales in three quarters with a narrow label, we are increasingly bullish on the therapy's commercial prospects now that the addressable population has grown by more than tenfold," he said. "Looking ahead, we assume about $1 billion in sales for 2024, which requires about 417 patients to be treated and only assumes use in ambulatory patients."
He reiterated his outperform rating on Sarepta stock.
The accelerated approval in non-ambulatory patients came as a surprise. Duchenne is caused by a genetic mutation that prevents patients from making dystrophin, a protein that keeps muscles intact. But test results were mixed and not statistically significant.
Several FDA staffers were prepared to reject Sarepta's gene therapy, according to a memo from Dr. Peter Marks, who heads up the Center for Biologics Evaluation and Research. But Marks overrode his colleagues' concerns to give Elevidys the approval.
"Dr. Marks acknowledged his colleagues' concerns but chose to override their decision based on benefits seen in secondary and exploratory (goals)," Needham analyst Gil Blum said in a report. "Dr. Marks based his decision for accelerated approval in non-ambulatory patients on biomarker increases which, in his view, are likely to translate into clinical benefit over time."
Blum has a buy rating on Sarepta stock and raised his price target to 235 from 166.
Manufacturing, Reimbursement Are Next
The next roadblocks for Sarepta are manufacturing and insurance reimbursement. The company has signed on Catalent and Thermo Fisher Scientific for the former.
Needham's Blum expects pent-up demand for Elevidys. A doctor recently said he expects all 40 of his Duchenne patients to apply for Elevidys. Blum calls for a peak of $6 billion in sales by 2027.
"In order to meet this demand, Sarepta will need to ensure that patients receive reimbursement and that there are no manufacturing constraints," he said.
William Blair analyst Tim Lugo said insurers might have less urgency now that Elevidys has a broad label.
"While payers have been supportive over the past year of getting boys on Elevidys therapy before they age out of the previously age-restricted label, with the new label covering a much larger population, we will now watch if payers continue this support given the potential budget impact of a large bolus of patients in the near term," he said in a report.
But Lugo maintained his buy rating on Sarepta stock.
Regenxbio, Solid Stocks Surge
The news is also a boon for other gene therapy companies. Shares of Regenxbio stock surged 3.8% to 12.33. Solid Biosciences stock rose 2.2% to 6.44. Both companies are working on gene therapies for Duchenne muscular dystrophy.
Leerink's Schwartz estimates 17,000 patients in the U.S. aren't eligible for Elevidys due to preexisting antibodies — preventing their immune systems from accepting the gene therapy — and specific exon deletions. The latter prevents the gene from becoming assembled.
"We think the market is large enough to support multiple sponsors, especially with the recent failure of Pfizer's gene therapy candidate," he said. "The fact that the FDA was comfortable with an expanded approval speaks volumes to the agency's willingness to be flexible for gene therapies in this (disease)."
Follow Allison Gatlin on X, the platform formerly known as Twitter, at @IBD_AGatlin.
