Sarepta: Looming Catalyst Makes This Worth A Look (NASDAQ:SRPT)

Sarepta Therapeutics, Inc. (NASDAQ:SRPT) is a great speculative biotech play to own. The reason why I believe it is very important to go over this biotech again is because it just recently announced that it raised its financial guidance for 2022. It stated that net product revenues for Q4 2022 are expected to come in at about 32% higher at $235.5 million.

In the prior Seeking Alpha article named “Sarepta: Advancement In DMD Space With SRP-9001 And Licensed MyoAAV,” I noted that revenue for Q3 of 2022 was up by 50% year-over-year to $211.2 million. While the revenue reported for the most recent quarter was not as large of an increase as the prior quarter year-over-year, it still was a double-digit growth that was achieved nonetheless. The basis for revenues continuing to do well is that this biotech continues to generate sales for the current Duchenne muscular dystrophy (DMD) market it serves. More specifically, it has several Phosphorodiamidate morpholino oligomers ((PMOs)) approved for the treatment of patients with DMD. All these drugs are still continuing to do very well, as evidenced by the raised financial guidance. While it is stated that the final results to be released in late February 2023 may differ slightly, it is still nice to see that Sarepta Therapeutics, Inc. expects to generate higher than expected net product revenues.

Not only that, but it holds potential to expand the market opportunity it has for the DMD market. The Biologics Licensing Application (BLA) to the FDA was finally accepted on November 28, 2022. With that said, a Priority Review Date, of the BLA for SRP-9001 for the treatment of patients with DMD, was established for May 29, 2023. Another item I wrote about in the prior Seeking Alpha Article is that Sarepta would be able to file its BLA for SRP-9001, which it had done. Not only did it already file this regulatory application for this gene therapy for DMD, but it has been accepted for review by the FDA.

Whether Sarepta obtains Accelerated FDA approval for this gene therapy for this patient population remains to be seen. On the other hand, there is potential to recover even if it doesn’t receive such an approval right away. Final results from another study known as EMBARK, using SRP-9001 for the treatment of DMD patients ages 4 to 7, are expected by the end of 2023. This was established as a post-marketing confirmatory trial for SRP-9001. The worst-case scenario, if the FDA rejects Accelerated FDA Approval of SRP-9001, would be to wait after this study’s data has been released. Either way, I believe the ability for Sarepta to expand its presence in the DMD market makes it a great long-term biotech to own. In my prior article, I noted that the BLA would be filed and that was achieved along with acceptance of a Priority Review. Not only that, but I also concluded that net product revenues have been climbing.

Well, this quarter was the same, as revenue yet again climbed. Again, not as high as the prior third-quarter revenue year-over-year of 2022, but still was a huge percentage increase nonetheless. Based on the established goal of having the BLA of SRP-9001 accepted with Priority Review by the FDA, plus revenues continuing to climb by a huge margin as noted in both of my articles, these are the reasons why I believe that Sarepta Therapeutics, Inc. stock is an upgraded buy.

SRP-9001 FDA Filing Accepted With Priority Review Date Established

As I noted above, the FDA accepted the Biologics Licensing Application (BLA) of SRP-9001 for the treatment of patients with Duchenne Muscular Dystrophy (DMD). Not only was this BLA accepted by the agency, but a Priority Review date was set for May 29, 2023. The reason for the BLA of this gene therapy all has to do with Sarepta’s ability to get to the finish line with multiple clinical trials. The trials that it had completed and established positive clinical results from are as follows:

• Study SRP-9001-103 (also named ENDEAVOR)
• Study SRP-9001-101
• Study SRP-9001-102.

Positive results were obtained from all of these studies. Sarepta released results from all pooled studies to show that its gene therapy works in treating these DMD patients. However, I want to zero in on a 20-patient cohort found in the SRP-9001-103 study (ENDEAVOR). This particular trial recruited patients ages 3 and older. It was shown that SRP-9001 treated patients achieved a 4 point improvement from their baseline measurement (Baseline meaning before they were treated with any therapy) at 52 weeks on the North Star Ambulatory Assessment (NSAA) compare to a propensity-weighted external control group. Treatment with SRP-9001 was statistically significant compared to the external control group with a p-value of p=<0.0001. To understand the significance of the NSAA score, it is important to understand what it is. NSAA is a 17-item rating scale which tracks functional motor abilities.

It remains to be seen whether or not Sarepta obtains FDA Accelerated Approval for SRP-9001 in DMD. However, as I stated before, in the event such an approval is not given early on, that doesn’t mean it won’t be able to recover afterwards. It’s just that it might take a little longer to achieve its goal of obtaining regulatory approval of this gene therapy.

Why do I say that? Well, it has its other ongoing study for SRP-9001 in DMD known as EMBARK. Looking at the design of this particular study, it was established to recruit patients ages 4 to 7. This trial is fully enrolled and final results from this study are expected to be released by the end of 2023. This study will not only act as additional proof for SRP-9001 in DMD, but it could be the company’s saving grace. That is, this trial was set up as a post-approval confirmatory trial. In the even that Sarepta does not obtain Accelerated Approval, it could still use this other study (EMBARK) as another study to file for regulatory approval again afterwards, should quick approval not pan out.

I think it holds a great chance at obtaining FDA Accelerated Approval, because trial data has been demonstrated for up to 4-years of treatment. Not only proving efficacy of this gene therapy, but the safety profile which has been shown to be good thus far. Should it obtain FDA approval, either Accelerated or not, it has already established two important factors. The first factor is that it already has a big pharma partner helping it move this gene therapy forward, which is Roche (OTCQX:RHHBY). The second factor is that it had already signed a commercial supply agreement with Catalent (CTLT), so that it will provide the manufacturing of SRP-9001 for DMD patients. Another positive expansion to note for Sarepta would be its pipeline advancing gene therapy candidates for another muscle disorder, known as limb-girdle dystrophy. It was stated that Catalent also intends to provide supplies of gene therapies for this indication as well.

Financials

According to the 10-Q SEC Filing, Sarepta Therapeutics had cash, cash equivalents, restricted cash and investments of $2.1 billion as of September 30, 2022. It enacted a convertible note offering during 2022, which was priced with a $980 million aggregate principal amount. However, this amount was offset by repayment of a term loan and a portion of the convertible debt and cash. It believes it has enough cash on hand to fund working capital requirements for at least 12 months from the date of this SEC Filing.

Sarepta is in a different position compared to most other biotechs, in that it already generates product revenues. Again, it has received FDA approvals for several PMOs which are used to treat patients with DMD. Good growth is being shown with respect to these products. For instance, in its Q3 of 2022 earnings, Sarepta Therapeutics, Inc. noted net product revenues of $207.8 million, which was a 24% increase year-over-year. With respect to the raised guidance recently released, it expects Q4 2022 net product revenues of $235.5 million, which is a 32% increase year-over-year.

Risks To Business

There are several risks that investors/traders should be aware of before investing in Sarepta Therapeutics. The first risk deals with the next earnings report expected in late February 2023. While it is believed that net product revenues are to be $235.5 million, there is no guarantee of this number. That’s because it was stated that such financial results are unaudited and subject to adjustment. That is, the final released numbers could be different from the preliminary numbers released.

A second risk to consider would be with respect to the ongoing Priority Review of SRP-9001 for the treatment of patients with DMD. A final decision for this gene therapy is expected on or before May 29, 2023. There is no guarantee that the FDA will give Accelerated Approval for it. Even if Sarepta does obtain Accelerated Approval, it will still have to reinforce its prior data with the post-approval confirmatory study EMBARK. Should this trial fail to deliver the necessary data, then the FDA could possibly pull the gene therapy off of the market.

Another risk to consider is how gene therapies are being priced. Even if SRP-9001 makes it to the market, how well it does will depend up on sales. More specifically, whether or not insurance carriers would be willing to foot the bill for an expensive gene therapy. Therefore, it just depends upon what the final cost of this therapy will end up being.

Conclusion

The final conclusion is that Sarepta Therapeutics is a great long-term biotech to own. I say that, because it has proven to continue to increase its net product revenues. I displayed this above with its latest release of preliminary Q4 2022 and full-year guidance. Net product revenues for its full-year 2022 are expected to be $843.3 million, which is a 38% increase over the same period in 2021. Besides the huge 38% growth expected for full-year 2022, it raised guidance of net product revenues higher than what it expected with a range of $825 million to $840 million. The ability for it to continue to grow net product revenues from its several PMOs for DMD has been shown over the course of the last few years.

On top of that, Sarepta Therapeutics, Inc. also has a few catalysts for investors to look forward to as well. The first of which could be the potential FDA Accelerated Approval of SRP-9001 for the treatment of patients with DMD. Such an approval is expected on or before May 29, 2023. The second catalyst is with respect to a data readout. That is, results from the ongoing EMBARK study using SRP-9001 for the treatment of DMD patients ages 4 to 7 are expected by the end of 2023.

Based on growing sales in DMD, plus its ability to possibly expand further into this market, these are the reasons why I believe that Sarepta Therapeutics is a great long-term biotech to own. Based on what I have noted above about the BLA filing of SRP-9001 for DMD with Priority Review, plus net product revenues continuing to grow at an alarming rate year over year, these are the reasons why I believe that Sarepta Therapeutics is an upgraded buy.

Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.