April 2, 2015
By Riley McDermid, BioSpace.com Breaking News Sr. Editor
News of the ouster of Sarepta Therapeutics Chief Executive Officer Chris Garabedian was greeted warmly by analysts and close watchers of the company alike this week, with several saying in notes Thursday that they couldn’t be happier he was leaving.
Garabedian was abruptly replaced by Chief Medical Officer Ed Kaye late Tuesday, after months of tensions between investors and management over the failure to get timely approval from the U.S. Food and Drug Administration (FDA) for a muscular dystrophy drug finally boiled over.
“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 and reiterated its intention to file NDA in mid-2015, but will provide further update following the meeting with FDA expected in the second quarter of 2015.”
Wall Street analysts and Sarepta investors alike have been frustrated by how long it has been taking Garabedian to get eteplirsen for Duchenne muscular dystrophy, which is currently Sarepta ’s lead drug candidates. The company said in a press release late Tuesday evening that Garabedian has resigned, effective immediately.
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. 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 early Wednesday, Kaye said he was contacted abruptly Tuesday night 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.”
