The Food and Drug Administration approval of Sarepta Therapeutics’ new gene therapy for Duchenne muscular dystrophy—which came after months of regulatory twists and turns—has landed with a thud.
Investors rushed to sell shares of the biotech after the decision Thursday. Sarepta stock fell 2.3% during Thursday’s session and another 11% in recent Friday trading. At least one Wall Street analyst downgraded the stock, and others expressed doubts about
It’s an unusual response to a landmark drug approval.
Sarepta’s
(ticker: SRPT) $3.2 million one-time treatment—which will be marketed under the name Elevidys—is the first gene therapy approved to treat DMD, a progressive and fatal condition that manifests in early childhood. The $3.2 million price tag makes Elevidys one of the most expensive medicines in the world.
Approval of the drug has largely been expected since late May. What wasn’t expected, however, was the FDA’s warning Thursday that it might withdraw its approval for Elevidys later this year if the results of an ongoing Phase 3 trial, known as EMBARK, aren’t positive.
The warning and the dramatic selloff that followed highlight the risks of the aggressive approval strategy that Sarepta embraced. Instead of waiting for the results of the EMBARK trial that aims to prove Elevidys’s clinical benefit, Sarepta decided last year to go ahead with its application for approval, based on data showing it causes patients to produce a version of a protein linked to muscle growth, which their bodies cannot otherwise produce.
Sarepta’s application for approval of Elevidys relied on a controversial FDA mechanism known as accelerated approval, which the agency has historically used to approve cancer drugs before the completion of yearslong outcomes studies to confirm their clinical benefit. The influential head of the FDA’s Center for Biologics Evaluation and Research, Dr. Peter Marks, has called for using more accelerated approvals for gene therapies to treat rare diseases like DMD.
On Thursday, the FDA granted Elevidys accelerated approval, but only for a subset of the population that Sarepta had asked for. The approval was limited to children ages 4 and 5 who are still able to walk. Sarepta had tested the drug in children ages 4 to 7 years old, and had asked the FDA for approval in all DMD patients still able to walk—which could include some individuals as old as 13.
The agency also signaled, however, that it plans to move quickly if the EMBARK trial fails. That data is expected in the fourth quarter of this year.
“As a condition of approval, the FDA is requiring the company to complete a clinical study to confirm the drug’s clinical benefit,” the FDA said in its Thursday statement. “The agency will review the data from this trial as quickly as possible to consider if further action, such as a revised indication or withdrawal of Elevidys, may be necessary.”
That puts all of Sarepta’s eggs back in the EMBARK basket, and analysts aren’t certain just how steady that basket is.
In a note out late Thursday, Raymond James analyst Danielle Brill wrote that if the trial fails, but Elevidys remains approved in the U.S. for the 4- and 5-year-old cohort, the fair value for Sarepta falls to $110 per share. If the trial fails and Elevidys is entirely pulled from the market, she says the stock will be worth $60 to $65. And if the trial succeeds, she expects it to climb to the $185 to $200 range.
Sarepta shares were trading at $109.43 midday Friday, down from $123.92 at Thursday’s close.
Brill isn’t optimistic. She projects that there’s a 20% to 30% chance that EMBARK succeeds.
Sarepta, for its part, remains hopeful.
“We’re very excited for the results of EMBARK,” the company’s CEO, Douglas Ingram, said on a Thursday investor call. He said that the company’s goal is to have Elevidys’s label expanded in the first half of next year.
As for the drug’s price, Sarepta justifies it based on the estimated cost savings to the healthcare system from a one-time treatment, as compared with other standard therapies and treatments delivered chronically. Other gene therapies also have multimillion-dollar price tags, including
Novartis’s
(NVS) $2.1 million Zolgensma,
Bluebird Bio’s
(BLUE) $3 million Skysona, and CSL Behring’s $3.5 million Hemgenix.
Write to Josh Nathan-Kazis at [email protected]
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