Sarepta disappoints fussy investors again

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What was on the surface good news for Sarepta was not quite good enough for its investors. With its Duchenne muscular dystrophy project eteplirsen burdened with high expectations, the FDA's lack of clarity on an acceptable pivotal endpoint for the drug caused shares to plummet 19% to $37.68 yesterday.

While the Massachusetts group may in one sense be meeting investor expectations that it will be filing for US approval on phase II data, it is not at all clear that regulators will accept the submission. With GlaxoSmithKline already underway in phase III with competing candidate drisapersen – and awarded the prized breakthrough therapy designation – investors are now concerned that the two will be launching on a similar timeline.

Where does the FDA stand?

It seems that there were two points that Sarepta wanted to highlight from its recent meeting with the FDA, convened to discuss additional analyses that the agency had requested regarding eteplirsen’s preclinical and clinical data.

Most important for the bull case is that the company has committed to filing an NDA for eteplirsen next year. Sarepta says has done so because the FDA is “open to considering an NDA” based on the existing data from its tiny and heavily interrogated phase II dataset (Sarepta wobble underlines need for perfection, April 16, 2013).

However, the FDA is still not prepared to deem change in dystrophin levels an acceptable surrogate endpoint before the filing is made. This issue is crucial because accelerated approval, based on just such a surrogate endpoint, would allow a 60-day review period.

Eteplirsen patches the damaged exon 51 in the gene that encodes for dystrophin, a protein that helps maintain the structure of muscle fibres. As such, it helps patients produce a shorter but functional form of dystrophin – elevated levels of dystrophin could be seen as a surrogate.

Much of Sarepta’s bloated market valuation had priced in accelerated approval for eteplirsen based on a surrogate endpoint, and doubts about approvability based on this likely explain the share price fall.

Moreover, the FDA still has some questions and has requested additional data analyses related to the methodology and verification of dystrophin quantification, and Sarepta cautions that the filing depends on the outcome of this.

In a day of frenetic trading the biotech company’s stock first rose 10% in pre-market trading as its announcement hit the wires, before crashing to close down nearly one-fifth after the company hosted a conference call.

Confirmatory trial

There was a third point, too. Sarepta outlined plans for a confirmatory phase III study, which it said would measure change in six-minute walk test as the primary endpoint and enrol 60 patients into its active arm plus 60 in a control arm that have different damaged exons. A placebo arm of patients with damaged exon 51 may also be necessary, depending on FDA input.

While Sarepta insists that the eteplirsen NDA could be supplemented with early experience data from the phase III trial, there are now concerns as to just how much data the agency might want to see, and whether the agency will in fact risk approving eteplirsen based on questionable phase II results and not wait for more robust phase III data.

In any case, there is some question how regulators view clinical meaningfulness of the six-minute walk test as a measure of patient function. The 478-patient drisapersen phase III programme will measure that as a primary endpoint, but the largest trial of 220 has a variety of function and quality of life and biological measures.

No doubt Sarepta will want to do the same – however, what it has disclosed so far is not quite as robust, neither in patient population or in endpoints, as what GlaxoSmithKline has done. More clarity on that point would provide some comfort for investors.

Ultimately, Sarepta stressed that “an NDA is an NDA”, and that it was at the FDA’s discretion to assign accelerated approval based on how it interpreted the dataset. The company insisted that it had not expected the FDA to grant accelerated approval before an NDA had been filed.

Unfortunately, not all of the company’s bullish followers were equally restrained. The slide in Sarepta’s share price continued today, down another 2% to $37 in mid-morning trading.

Sarepta is not going away by any means, and despite a disastrous day or two on the exchange the odds still seem pretty good that eteplirsen will ultimately get regulatory approval. It is suffering from a case of expectations running far ahead of reality. Management would do well to seek to manage those expectations a bit better, although that is a big ask in the current overheated biotech market.

To contact the writers of this story email Jacob Plieth or Jonathan Gardner at news@epvantage.com or follow @JacobEPVantage or @JonEPVantage on Twitter

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