Duchenne Muscular Dystrophy Drug Could Unlock Huge Potential For This Pharmaceutical

Jordo is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Presenting at the 31st Annual JPMorgan Healthcare Conference, Sarepta Therapeutics (NASDAQ: SRPT) CEO Christopher Garabedian focused primarily on the company's Duchenne muscular dystrophy program.

Duchenne Muscular Dystrophy is a disease that is characterized by patients being unable to produce the essential protein Dystrophin. Because of this lack of Dystrophin, patients end up on a progressive track towards losing the ability to walk by their pre-teen years, and have a life expectancy into their 20s, rarely living beyond the age of 30.

Dystrophin is the shock absorber of the muscles and allows people to maintain good muscle function into their adult lives. The company's drug, Eteplirsen, is an anti-sense Oligonucleotide with a very different backbone structure than seen in any other RNA therapeutics. The drug is made by manipulating RNA, or ribonucleic acid, which controls protein synthesis. The company is working on using its technology to direct alternative splicing to repair the RNA mutation and restore the translation to produce the protein. The mechanism of action is what can be described as Exxon skipping; the Duchenne genotype is defined an out of frame deletion in the dystrophin gene. This renders them unable to translate to the protein. If translation can be restored by turning this out of frame deletion into an in-frame deletion, then the translation of the protein can be restored.

Market Opportunity

From a market opportunity point of view, there are many drugs that have been approved. The various price points are, on average, between $300,000 and $500,000 per patient per year.  If you consider this in terms of the target population, the company estimates there would be about 2,000 patients in the U.S. that would be amenable to Eteplirsen. This translates into a $600 million to $1 billion market opportunity in the U.S. alone. The EU could add 9,000 additional patients as well.

Financials

Sarepta has a strong cash position, with approximately $187 million on the balance sheet. 2012 guidance showed an operating loss of $25 million to $30 million. Significant additional cash burn is not expected in 2013. Any increases would come from a manufacturing scale up, and this depends on whether or not large scale production and accelerated approval is pursued. 

Seeking Overseas Partners

Sarepta may seek advisers to find an overseas partner for the therapy. The company is talking with more than a dozen drug makers about a partnership for international sales of eteplirsen. While successful testing of eteplirsen may make Sarepta an acquisition target, CEO Christopher Garabedian said he wants it to become a rival to large biotechnology companies such as Gilead Sciences (NASDAQ: GILD), the world’s biggest maker of AIDS medicines, and Celgene (NASDAQ: CELG), the maker of the $3 billion cancer drug Revlimid. 

Gilead is set to report fourth quarter 2012 earnings soon, and the company is expecting to beat analyst estimates for the third quarter in a row. Gilead beat estimates in the third quarter of 2012 with net income of 47 cents per share compared to the mean estimate of 45 cents.

Gilead recently petitioned the FDA to change the way it grants exclusivity to fixed-dose combination drugs. The reason for this push is that the company wants to generate two years of additional revenue out of its recently approved Stribild HIV treatment. Gilead's petition argued that Stribild should be granted five years of exclusivity due to it being a fixed-dose combination drug which contains two active moieities that has never been approved in any other drug application. Analsysts believe Stribild has the potential to generate up to $1.5 billion in sales by 2016. 

The market for AIDS treatments is vast. Over the past ten years, global efforts have given people living with HIV/AIDS access to antiretroviral therapy. Over 8 million people are currently receiving therapy for HIV/AIDS. However, there are currently more than 34 million people living with HIV. The World Health Organization (WHO) currently recommends Gilead's Viread and Truvada as part of antiretroviral therapy. Gilead has made these medicines available in low and middle-income countries across the globe.

The market for cancer treatments could also present a big opportunity for Sarepta. It is estimated that Pancreatic cancer killed an estimated 37,390 people in the U.S. in 2012, according to the National Cancer Institute. Cowen & Co. analyst Eric Schmidt said that Celgene's Abraxane could generate $2.1 billion in peak global sales for use in pancreatic cancer. A recent study on Celgene's Abraxane noted that when used in combination with chemotherapy, it was found to help patients with advanced pancreatic cancer live about two months longer than those given chemotherapy alone. Celgene also makes Revlimid, which, in combination with dexamethasone, is indicated for the treatment of multiple myeloma patients who have received at least one prior therapy. The company expects sales of Revlimid to jump 19% in 2012, with sales in the range of $3.75 to $3.85 billion.

Celgene recently reported strong fourth quarter and full year 2012 earnings results. Net product sales rose 14% to $1.41 billion for the fourth quarter compared to the same period in 2011. The company's fourth quarter adjusted net income jumped 21% to $572 million, up from $473 million in the same quarter of 2011. 

If Sarepta can find a partner in either of these companies, it could transform itself into a global powerhouse.  

Clinical Trial Agreement with AVI-7100

Sarepta entered into a Clinical Trial Agreement (CTA) with the National Institute of Allergy and Infectious Diseases (NIAID), part of the National Institutes of Health (NIH), to conduct a Phase 1 study with AVI-7100, the company's lead drug candidate with a novel mechanism of action and potentially broad-spectrum activity against influenza viruses, including Tamiflu-resistant virus strains.

AVI-7100 is Sarepta's lead therapeutic candidate for the treatment of influenza and targets a well-conserved region of the influenza A virus, affording it the potential to act as a broad-spectrum treatment for multiple influenza strains, including Tamiflu-resistant flu strains. Seasonal influenza (H3N2) and the more recently emergent swine origin influenza virus (SOIV) H1N1, are both caused by the influenza A virus. AVI-7100 employs the company's patented PMOplus technology that selectively introduces positive charges to a phosphorodiamidate morpholino oligomer (PMO) backbone to improve selective interaction between the drug and its target. AVI-7100 was developed and identified as a lead candidate with support from the U.S. Department of Defense's Joint Project Manager Transformational Medical Technologies under contract

Conclusion

Sarepta has a lot of potential in its drug pipeline, and several of these drugs could dominate the market in the coming years. It has shown extremely promising results and the FDA can approve the drug without phase 3 trials when a drug treating life threatening conditions shows large potential in earlier testing. It is extremely unlikely that the company will face competition in the near-term, because Prosensa's drug is reported to have dreadful side effects, while eteplirsen has so far shown impeccable safety results. The company could become an acquisition target with GlaxoSmithKline, Pfizer, and Sanofi as likely bidders, as they are looking to acquire drugs to expand their products for rare diseases. Investors looking for exposure to the biotech space should consider Sarepta Pharmaceuticals.


jordobivona has no position in any stocks mentioned. The Motley Fool recommends Gilead Sciences. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

blog comments powered by Disqus