Sarepta Therapeutics (SRPT -1.52%), a midcap biotech company, was riding high 18 months ago. The company was awaiting a crucial regulatory approval from the U.S. Food and Drug Administration (FDA) while delivering solid financial results.
However, a lot has happened since. Sarepta Therapeutics encountered clinical and regulatory headwinds that dragged down its stock price. Sarepta has not performed well on the stock market over the past year. Can the biotech bounce back, or is investing in the stock no longer worth it today?
Sarepta's sales are still growing rapidly
Sarepta Therapeutics earned approval for Elevidys, a treatment for Duchenne muscular dystrophy (DMD), last year. DMD is a rare, progressive neuromuscular disease that significantly reduces patients' life expectancies.
Sarepta has specialized in developing therapies for this illness: All four of its approved products treat DMD. The addition of Elevidys, developed with the partnership of biotech giant Roche, was a big deal since it became the first FDA-approved, one-time gene therapy for DMD.
However, Sarepta faced some challenges. A panel of experts convened by the FDA to discuss Elevidys' approval barely voted in favor -- the final vote was eight for and six against. Furthermore, the agency delayed the therapy's review process, something biotech investors don't like very much. Still, Elevidys made it to the market and is significantly contributing to the company's financial results already.
Sarepta Therapeutics released preliminary full-year 2023 results in early January. It expects $1.145 billion in revenue, for a year-over-year increase of 22.7%. Elevidys' net revenue for the year will be on the order of $200 million -- an impressive amount considering it spent less than six months on the market last year.
An important regulatory catalyst on the way
Elevidys could be headed toward more positive news. Last year's FDA nod was under the accelerated approval pathway, which allows biotech companies to submit applications based on surrogate endpoints -- clinical data that's thought to predict efficacy but that isn't a direct measure of efficacy. In other words, drugmakers are allowed to use a proxy for clinical benefits in their application package asking for accelerated approval.
However, to gain full approval, they must complete confirmatory trials and submit actual, direct evidence of efficacy. In October, Sarepta Therapeutics announced mixed, but overall positive, results from a confirmatory phase 3 study for Elevidys in treating DMD. Though the medicine missed its primary endpoint in the trial, it hit all secondary endpoints.
Sarepta vowed to pursue full approval anyway and submitted an application to the FDA. The agency recently accepted the company's package -- with some good news. Regulators granted Elevidys priority review, meaning the process should be quicker. The FDA should decide by late June.
It's also worth noting that the health regulatory body will not convene a committee to discuss the approval, which is a good sign. The FDA often calls on the opinion of independent experts when there is significant ambiguity in the data.
Here's what this approval could mean for Elevidys. It was initially granted the green light for ambulatory patients between the ages of 4 and 5, but restrictions on age and ambulatory status will be lifted. That should significantly expand the medicine's patient population and lead to even stronger revenue growth for Sarepta Therapeutics.
Is it too late to buy the stock?
Sarepta has many other programs in the pipeline -- more than 40, the company says. Its focus on rare diseases is on full display. It is still targeting DMD with many of its candidates, while it recently started a phase 3 study for a potential treatment for limb-girdle muscular dystrophy, a group of illnesses that causes weakness in several muscle groups.
Sarepta is an adept innovator although it remains unprofitable. With the rapid adoption of Elevidys, a likely full approval for the medicine, and the help of the healthcare giant Roche, Sarepta's top and bottom lines should move in the right direction. Also, the company's lineup should improve even more in the next three years.
In short, Sarepta Therapeutics can deliver solid returns from here on out. It isn't too late to buy the stock.
