Sarepta Therapeutics (NASDAQ:SRPT)

On Monday, Sarepta's stock closed the day up 73.85% after the company announced that the FDA had given its drug Eteplirsen FDA approval. More specifically, the company filed for accelerated approval. In other words, drugs can be approved after only completing a phase 2 study if the results show that a surrogate endpoint is met. If that happens then they company can gain approval for an unmet medical need without having to go through a phase 3 trial.

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Duchenne Muscular Dystrophy -- DMD -- is a rare muscle wasting disorder where patients are unable to produce their own dystrophin for muscular movement. A lot of patients are in wheelchairs by the time they are in their teens and live as long as up to 30 to 40 years of age. Although, with recent treatments patients of this rare disorder have been living somewhat longer. Still, Eteplirsen has been showing to help patients restore some dystrophin levels in the body.

The approval picture was quite mixed. There were a majority of analysts who believed that the FDA would reject the drug, and a few analysts that thought the FDA would be more lenient because the drug treats a rare condition. As was seen on Monday, the FDA was more lenient with the drug approval process. Considering that the stock had gained 20% for the year, before FDA approval, there seems to have been a highly bullish bet.

It was an uphill battle for Sarepta to obtain this FDA approval for Eteplirsen. That's because an FDA advisory committee voted against approval for the drug. Of course, that panel wasn't the final decision but typically the FDA listens to its advisory panel. In this case, it doesn't seem like the FDA took the panel's recommendation to heart. Even the FDA's own reviewers on that panel expressed multiple concerns. Such concerns were the fact that the trial was done without a placebo drug in place.

Normally, every other pharmaceutical company in the business must run a final placebo controlled trial to test the efficacy of the drug in question. Without a placebo the FDA does not give out a marketing approval. Which is why many were shocked that Sarepta received approval for its drug. One of the lead FDA reviewer on the panel, Dr. Ronald Farkas, contested against the efficacy of the drug. He believed there was not enough evidence to prove that Eteplirsen was providing adequate dystrophin levels for these patients. He wanted to see a placebo controlled trial that would prove that the drug was far superior.

It seems highly odd that Dr. Ronald Farkas resigned from the FDA one week before this decision was announced. Nobody knows the reason, but it is highly possible he was not happy with the FDA's decision on the matter. It seems that the FDA caved in to lobbyists who have been calling for Eteplirsen approval for many months now. The agency's chief Scientists and other internal members opposed approval, but ultimately it was up to head of pharmaceuticals Janet Woodcock. Considering the huge involvement from patients and lobbyists it seems that Janet was swayed to approve the drug despite lack of efficacy.

Many analysts were perplexed with this decision. This is because pharmaceutical companies are supposed to be held to higher standards. The FDA can't just approve drugs based on lobbyists and patient advocates. Of course the FDA is compromised of human beings, but they must make the decision based on science and merit. In this case, it seems the decision to approve was based on emotion. Analyst Simos Simeonidis of RBC capital markets had this to say:

He stated that the approval was "one of the most perplexing regulatory decisions in recent history"

This statement above by Simos states what every other analyst is thinking. The FDA wasn't looking at efficacy or data for approval. It approved Eteplirsen based on pressure from lobbyists, patient advocates, and patients themselves. Sarepta will sell the drug on the market as " Exondys 51", and the drug is estimated to make up to $2 billion in peak annual sales. Sarepta also received a voucher for its rare pediatric disease.

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The company can use this to either gain approval of its drug within a 6 month time frame instead of 10 months, or it can choose to sell it to another biotech for $350 million. Even though Sarepta made it out with an accelerated approval it doesn't mean its time to bring out the party hats quite yet. The stipulation for accelerated approval of the drug is that Sarepta must run a confirmatory trial. This new confirmatory trial will be one that runs Exondys 51 against a placebo compound. That means if the confirmatory trial fails to show Exondys 51 superior over placebo, then the FDA has the authority to yank the drug off the market.

[Image Courtesy of Pixabay]

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