Sarepta’s stock falls on the pessimistic results of gene therapy

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Until Thursday,

Sarepta Therapeutics

led the race to prove that gene therapy could cure Duchenne muscular dystrophy, a genetic disease that progressively weakens children’s muscles. At the end of the day, however, the company announced that a controlled test of its gene therapy failed to improve the average muscle strength of children treated in a statistically clear way.

“It is an understatement to say that initially I was not only surprised, but deeply disappointed,” Sarepta Chief Executive Doug Ingram said in a conference call on Thursday night. The company blamed the poor results on the unfortunate random choice of sickest children for the treatment group, as opposed to the placebo group. Younger children have had good results with gene therapy, noted Sarepta.

But clearly, if gene therapy had produced a great medical benefit, no statistical discussion would be necessary.

Wall Street was discouraged. At the start of Friday’s trading session, Sarepta’s shares (ticker: SRPT) fell 50% to $ 85. Many of the company’s analyst fans maintained their buying recommendations, but the price targets for the shares fell across the board. the line, with the company’s advantage over the rival of gene therapy

Pfizer

(PFE) evaporated. Of almost 20 analysts surveyed by FactSet, only four downgraded the score.

Pfizer’s stock was practically stable on Friday morning, while another company with experimental gene therapy for muscular dystrophy –

Solid biosciences

(SLDB) – saw its stock drop nearly 12% to $ 7.48. O

Nasdaq Composite

The index, in turn, rose 0.8%.

Both Sarepta and Pfizer are starting Phase 3 testing of their gene therapies, which inject patients’ muscle cells with healthy copies of the genetic instructions for a muscle cell protein, to augment the broken instructions that patients have inherited. But the intermediary study reported by Sarepta on Thursday offered the first randomized, placebo-controlled data on gene therapy for muscular dystrophy, and the company hoped that U.S. regulators could allow treatment on the market based on the results.

Now, an approval for Sarepta gene therapy will have to await the result of its Phase 3 study, which could delay any launch of a Sarepta product by two years, until 2024, wrote Mizuho Group analyst Difei Yang in a note on Friday.

The disappointing results announced on Thursday are just a tentative analysis, and the study continues. On Thursday’s call, CEO Ingram and Sarepta’s chief scientific officer, Louise Rodino-Klapac, argued that the therapy can still be proven. Children in the 4 to 5 year old group showed significant improvement in the battery of the study of muscle strength measures, and muscle cells produced healthy proteins in treated children of all ages.

Sarepta executives attributed the poor overall scores to the muscle strength of the older group of children aged 6 to 7, whose performance actually worsened somewhat with the study. After inspection, older children who were randomly assigned to treatment were weaker at baseline than those assigned to receive placebos. The treated patients and those who received a placebo in the best performing group of young people in the study were well matched.

“I will not ignore the fact that I am extraordinarily disappointed that this imbalance has made us lose statistical significance,” Ingram told listeners.

RBC Capital Markets analyst Brian Abrahams generally agrees that the lost study was the result of bad luck. His Friday note also notes that older patients with muscular dystrophy have suffered more damage and, therefore, may be more difficult to rescue by gene therapy. Abrahams reduced its target price for Sarepta’s shares from $ 200 to $ 143, because Sarepta’s need for Phase 3 data will now reduce its pioneer advantage to gain market share.

But the RBC analyst maintained his Outperform rating, convinced that Sarepta’s existing drug treatment for muscular dystrophy will continue to grow in sales from a 2019 level of $ 381 million, to $ 552 million in 2020 and $ 713 million in 2021. Abrahams had hoped that a therapy gene would allow Sarepta to achieve a profitability of $ 2.50 per share in 2022, but now he projects his losses to continue, with $ 2.20 per share in losses on sales of $ 1 billion in 2022.

“All is not lost,” wrote Abrahams, arguing that Friday’s sale does not take into account the chances that Sarepta’s gene therapy may still be justified.

Sarepta said more than 50 children have already been safely treated with their SRP-9001 gene therapy, including 10 with the production version it hopes to commercialize. “We are convinced that SRP-9001 will play a transforming role in the treatment of Duchenne muscular dystrophy,” Ingram said at his hearing on Thursday.

But Thursday’s bad news will rekindle the debate over the value of Serepta’s treatments, including its existing drugs. The company’s first drug, Exondys 51, was approved in 2016, when a senior US Food and Drug Administration official rejected a recommendation to reject the agency’s scientific team. The drug improved biological measurements of protein levels in children, but did not show that it improved muscle performance. Sarepta’s second drug, Vyondys 53, was also approved after an initial rejection by the agency.

The measures of healthy protein production in the latest gene therapy data were disappointing for some analysts who asked questions on the Sarepta call on Thursday, and the average levels of these biological measures did not correlate with muscle strength.

Therefore, investors will look forward to data this year that could justify the prospects for Sarepta’s muscular dystrophy.

Write to Bill Alpert at [email protected]