Wall Street Cheers As Sarepta Soars 50% Premarket on Muscular Dystrophy Drug Filing

Published: May 21, 2015

Wall Street Cheers As Sarepta (SRPT) Soars 50% Premarket on Muscular Dystrophy Drug Filing
May 20, 2015
By Riley McDermid, BioSpace.com Breaking News Sr. Editor

Sarepta Therapeutics is apparently back on track, after the company said its Duchenne muscular dystrophy drug had a pre-New Drug Application (NDA) meeting with the U.S. Food and Drug Administration (FDA), sending its share price soaring 50 percent in premarket trading Wednesday.

Sarepta said it plans to submit the final component of the NDA by mid-year 2015.

"We will initiate a rolling NDA submission to facilitate the regulatory review of the NDA,” said Edward Kaye, Sarepta’s interim chief executive officer and chief medical officer. “The initiation of our NDA submission for eteplirsen marks a significant milestone for the Duchenne community and we look forward to completing the submission by the middle of the year and to continuing to work with the Agency towards the goal of providing treatments to patients as quickly as possible.”

Sarepta has come under withering criticism over the last year for failing to get timely approval from FDA for eteplirsen, its muscular dystrophy drug, which ultimately led to the resignation of its CEO. News of the ouster of former Sarepta Chief Executive Officer Chris Garabedian was greeted warmly by analysts and close watchers of the company in early April, with several saying in notes April 2 that they couldn’t be happier he was leaving.

Garabedian was abruptly replaced by Kaye, after months of tensions between investors and management over eteplirsen’s holding pattern boiled over, and some analysts said he had lacked the “gravitas” needed for the role.

“We believe that this is a step in the right direction as it might potentially improve the relationship/interaction with the FDA,” wrote Yaron Werber, head of the biotech analysis team at Citigroup, in a note to investors. “Sarepta continues to make progress on generating additional data as required by FDA.”

Simos Simeonidis, a biotech analyst with RBC Capital Markets, said his team believed that change is a smart one for Sarepta.

“We view the news as an incremental net positive for Sarepta, since we expect the change at the CEO position can help with improving the company's problematic interactions with FDA, and its credibility with investors,” wrote Simeonidis, in a note to investors.

“Dr. Kaye’s background as a pediatric neurologist with industry experience in rare disease drug development at Genzyme Corporation definitely brings a different gravitas to the role,” he said. “Mr. Garabedian’s regulatory interactions had drawn investor criticism, following the volatility in the stock after a number of announcements by the company regarding the NDA.”

The company has also apparently been rushing to assure analysts, who can affect the buy or sell rating on a stock that it will continue to meet its timelines for pushing out eteplirsen.

“We spoke with senior management [Wednesday], and we were told that the change ‘would not impact timelines,’ in terms of the mid-2015 submission and that ‘there are no issues with the data,’” said Simeonidis. “Given that, and barring any significant surprises, other than hearing from the new CEO for the first time under his new role, we don’t expect to hear much that would impact what Sarepta does going forward, or on the details that led to Mr. Garabedian's departure, given general corporate reticence on specifics behind such changes.”

Indeed, statement from the board made pointed references to the approval process for eteplirsen as a key goal for the company moving forward.

“We believe this change will facilitate the company’s clinical and regulatory discussions and relationships with the goal of meeting its stated timelines for bringing a potentially disease-modifying treatment to patients with DMD as soon as possible,” said John Hodgman, Sarepta’s interim Chairman of the Board.

“Dr. Kaye has a proven track record of leading teams that have brought some of the most successful rare-disease drugs to market, including Myozyme, Lumizyme and Fabrazyme. Further, he has excellent relationships with the clinical, regulatory and patient advocacy communities so critical to making this treatment a reality for this underserved patient population.”

Garabedian’s ouster came suddenly, but it was not wholly unexpected. Although he is credited with having shepherded the company from a little known antiviral firm, AVI Biopharma, to the shareholder favorite it is today, the board’s focus on pushing out lucrative drugs as soon as possible—and their frustration with what was seen as Garabedian’s lack of focus—made it clear that whatever his track record had been, his current job performance was just as crucial.

“This seems to be the culmination of management turnover and Board changes relating to concerns about the CEO's level of influence concerning discussions with the FDA,” said Werber, who has written numerous notes over a period of months raising concerns about Sarepta’s direction and relationship with regulators.

“There have been some concerns about Sarepta’s relationship with FDA. We expect that the change in management will potentially help Sarepta improve its relationship/interaction with FDA,” said Werber.

“But ultimately we believe in the FDA decision on whether to accept eteplirsen NDA filing/approve will depend on the quality of additional data that will be submitted by Sarepta.”

In an interview with Forbes, Kaye said he was contacted abruptly the night before the resignation by the company’s board, and had accepted the position, although the change happened suddenly.

“The executive team here has rallied,” he told Forbes. “They’ve been incredibly supportive. And I’ve had several conversations with the muscular dystrophy patient organizations and they’ve also been very, very supportive. And I’ve talked with some of our key opinion leaders and the physicians in the area. So it’s been a good day.”

Kaye also said that the ability to hit targeted timelines for drug approval was a major factor in any new direction Sarepta takes.

“I think, as you know, the focus for the company right now is really on the clinical research and the regulatory pathway,” he said. “And so there has really been a change in direction. And based on my background and experience, the board has asked me to really focus on our regulatory approvals at this point.”

But, at the end of the day, some analysts said that although a changing of the guard may be a big move, it could turn out to be a largely symbolic gesture.

“We also believe that, in the end, what really matters, is the eteplirsen dataset itself and whether the FDA will deem it sufficient and convincing enough for approval,” said Simeonidis. “And we don’t think that who the CEO is can make a very significant difference there.”

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