Sarepta (SRPT) – Is there any upside
- The overall US market for DMD is expected to be in the $4B+ range by 2023.
- Sarepta is the current leader in the DMD space and is looking to improve its earnings outlook with the recent approval of Casimersen in Feb 2021.
- Sarepta has a Market Cap of $6.9B as of March 2021.
Read our popular report on DMD market here.
Sarepta has a approved pipeline consisting of three main Exon-skipping drugs in the DMD space.
|Drug||Drug Type||Population Addressed||Primary Endpoint||Secondary Endpoint||Approved|
|Exondys 51||Exon 51 Skipping||13% of DMD Population||6 Minute Walking Distance||Dystrophin Levels in Skeletal Muscle||Approved in 2016|
|AMONDYS 45 (Casimersen)||Exon 45 Skipping||8% of DMDM Population||Dystrophin Levels in Skeletal Muscle||6 Minute Walk Test||Approved Feb 2021|
|Vyondys 53||Exon 53 Skipping||8% of DMD Population||Dystrophin Levels in Skeletal Muscle||None||Approved in 2019|
As recently as last month their third Exon skipping drug – AMONDYS 45 was approved giving them access to approximately 29% of the DMD population. On the surface this sounds like a feel-good story – Market leader, three proven drugs, lots of potential, etc. However, their stock has been trading recently at about half the valuation that they started the year with. So why are investors not piling on this success story with the recent approval of Casimersen?
The reason is market potential – like all other previous Sarepta drugs, Casimersen can only address patients that have a specific exon (exon 45) which limits its market size to this tiny segment. Sarepta’s biggest hope was a drug called SRP-9001 – a gene editing drug with a target population that was much bigger than what Casimersen is trying to address – it could have become the #1 prescribed therapy for DMD if it had delivered on the promise shown in early clinical trials.
However, SRP-9001 failed to deliver on its promise -> https://www.evaluate.com/vantage/articles/news/trial-results/gene-therapy-trial-fails-rectify-sareptas-sorry-record
And this setback caused Sarepta’s Market Cap to be cut in half as this means at least 2-3 years of delay if not more.
So, Sarepta doesn’t have a universal therapeutic and is highly unlikely to have one in the next 2-3 years. This is a huge risk for any investor because Pfizer (PFE) is testing a universal drug that could be in the market before any ‘universal’ product Sarepta’s could put out there, and there are potential universal therapies from CAPRICOR (CAPR) and Solid Biosciences Inc (SLDB). Added to that, SRPT is now facing competition in the exon-skipping space with NS Pharma providing possibly a better drug for exon-53 skipping. If you’re long on SRPT, you’re basically banking on the earnings and specifically current earnings. The challenge SRPT faces is increased competition in its approved therapies and it becomes increasingly difficult to gain market share going forward as each future target is going to offer in increasingly smaller patient population. For example, the next logical target – Exon-44 skipping – only covers 6% of the DMD patients.
Think of this as a mining company – everything was looking rosy when you discovered gold and started mining, but now you’re reached a point where you have to dig through a lot of ground to yield smaller and smaller amounts of output.
As an investor, you want to catch an investment vehicle just before it hits the steepest part of its rise. With $SRPT you have an incumbent whose value was cut in half by a binary event that could easily show up in the rest of the pipeline if someone like PFIZER or CAPRICOR finds success in their lead candidates.
|Sarepta Therapeutics. (SRPT)
We think that SRPT has a decent shot are maintaining their hold on their existing portfolio and they could bring new improvements in their platform which addresses the EXON skipping space. However, the inability to completely corner the market with a universal therapy poses risk and could limit growth potential if someone like Pfizer or Capricor deliver on their universal therapeutic product.