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Sarepta's Lone Analyst Skeptic Takes On 22 Bulls With Renewed Warnings

Sarepta's Lone Analyst Skeptic Takes On 22 Bulls With Renewed Warnings

(Bloomberg) -- Sarepta Inc.’s bizarre plunge last week over an “erroneous” safety report only galvanized the one analyst on Wall Street who isn’t bullish on the stock.

Oppenheimer’s Hartaj Singh remains skeptical of the company’s valuation, aspirations and the lack of disclosures, which came to a head after one of its drugs was cited in a government database tracking adverse events. That posting triggered a sell-off in the stock even though Sarepta said the safety signal wasn’t submitted by an employee or the principal investigator leading the drug’s clinical trial.

A broader lack of transparency surrounding Sarepta’s gene therapy trials in Duchenne muscular dystrophy has stoked questions from investors, according to Singh. The company has run its trials at one center, while peers have expanded to multiple sites.

“People are puzzled with why the data hasn’t been presented” by a person that isn’t associated with the company, said Singh, the only analyst tracked by Bloomberg who doesn’t have a buy rating on the stock. Lack of clarity about the data combined with an escalating market valuation that now tops $9 billion -- 16th-largest in the Nasdaq Biotechnology Index -- suggests Sarepta investors are “pricing in perfection at these levels,” he said.

Sarepta's Lone Analyst Skeptic Takes On 22 Bulls With Renewed Warnings

“The study is ongoing and blinded and will remain blinded -- and that is why the data haven’t been presented,” a Sarepta spokeswoman commented by telephone.

Last week’s safety posting followed at the heels of Sarepta announcing that it was increasing the number of patients in a closely watched study and delaying the start of a trial that would use commercial scale of its gene therapy.

A key for bullish investors had been the drug’s superior safety profile and more proof of clinical benefit versus competitors like heavyweight Pfizer Inc. and small-cap Solid Biosciences Inc. At the same time, Sarepta has only treated “four boys over the last few years,” Singh said. Potential regulatory clearance isn’t likely until late 2021 if the company gets accelerated approval, or could take until 2023 while the company gathers more data, he said. Some other analysts expect sales could start in 2021.

“We have initiated and completed dosing 24 patients in the Phase 2 study and are dosing up to 40 total patients while doing the manufacturing work to start the Phase 3 trial with commercial drug in early 2020,” the company’s spokeswoman said. “We’re moving with incredible urgency.”

Singh said in a phone interview that gene therapy is “much more complicated and going to take a lot more time than people are expecting, and we’ve said that since April. The gap between Sarepta and Pfizer is probably in months as opposed to the current thinking that it’s in years.”

To be sure, manufacturing concerns have long been a bear argument that buy-rated analysts have dismissed as irrelevant. Sarepta said setbacks for Pfizer and Solid Biosciences helped persuade the company to spend more time optimizing its commercial production capabilities. And Wall Street bulls say that will help reduce risks for the program, which is the first of its kind.

While focus has been on Sarepta and its gene therapy portfolio, the drugmaker already sells Exondys 51 for patients with DMD, and may add another drug to its arsenal next week with the upcoming FDA decision for Vyondys 53 (formerly golodirsen). That drug would have the potential to treat about 8% of boys with exon 53-skipping DMD. Analysts expect it could bring in $217 million in sales by 2022 if approved, compared to $1.5 billion for the gene therapy and $496 million for Exondys 51, data compiled by Bloomberg show.

To contact the reporter on this story: Bailey Lipschultz in New York at blipschultz@bloomberg.net

To contact the editors responsible for this story: Catherine Larkin at clarkin4@bloomberg.net, Steven Fromm

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