Sarepta Therapeutics (NASDAQ: SRPT) is a biopharmaceutical company that many momentum investors are familiar with. The company is a leader in treating Duchenne muscular dystrophy, a horrible disease that weakens muscles and usually begins around the age of four in boys and worsens very quickly.
Sarepta develops a therapy to treat DMD called Exondys 51, or etelirsen. The therapy is intended to create dystrophin which in the patient which is the muscle protein that is missing among individuals diagnosed with DMD.
Back in April of this year, the Peripheral and Central Nervous System Drugs Advisory Committee of the U.S. Food and Drug Administration (FDA) voted against approving Sarepta’s drug. The company’s stock was heavily sold off and investors questioned if the therapy would ever gain approval after a huge setback.
The company’s outlook improved in September when a major critic of the drug, Dr. Ron Farkas, left his position at the FDA. By leaving the organization investors rightfully assumed that Sarepta’s therapy would now be approved.
And right they were. The next week Sarepta received FDA’s approval and was granted priority review. This designation is given to companies that provide a treatment for a disease where no other therapy exists.
Naturally, Sarepta’s stock soared in the days following the FDA’s approval. It is now higher by more than 175 percent over the past three months. However, an announcement form a major health insurance company spoiled the bullish sentiment – at least for the time being.
Sarepta’s stock lost around 6 percent on Friday after Anthem Blue cross, a leading healthcare insurance provider, discussed Sarepta’s drug in a medical policy paper. The insurance company concluded that the use of eteplirsen is “considered investigational and not medically necessary for all indications, including but not limited to the treatment of Duchenne muscular dystrophy.
Here is part of what Anthem said: “The FDA’s final approval was based on an unpublished, open-label study of 13 boys who were on a stable dose of corticosteroids (≥ 6 months) and who were treated with eteplirsen (30mg/kg) weekly for 48 weeks (1 subject was unavailable for analysis at 48 weeks).”
Commenting on Sarepta’s prior studies, Anthem said: “Overall, there was a median increase after 48 weeks of 0.1% in the dystrophin levels after treatment with eteplirsen. A statistically significant increase in dystrophin was reported (0.22% to 0.32% of normal). However, a statistically significant, yet minimal magnitude, increase in dystrophin, the surrogate endpoint of this study, does not assure a clinical benefit.”
Anthem concluded: “In summary, the clinical benefit of treatment for DMD with eteplirsen, including improved motor function, has not been demonstrated. Establishment of a clinical benefit is warranted in on-going clinical trials.”