There is always something interesting happening in the Bio-Pharma sector due to a number of firms working on several new drugs. Sarepta Therapeutics Inc (NASDAQ:SRPT) is a biopharmaceutical company focused on developing RNA-based therapies. The company is currently working on Eteplirsen, a drug to cure Duchenne Muscular Dystrophy – it is a rare disease that mainly occurs in boys.
The disease is caused by a mutation in a gene, called the DMD gene. Individuals who have DMD have progressive loss of muscle function and weakness, which begins in the lower limbs. Duchenne muscular dystrophy affects about 1 in 3,500 male births worldwide.
Lucrative drug category
If approved, Eteplirsen is likely to be categorized as an orphan drug – this category is reserved for the drugs that have extremely small target market, and volumes of sales are not expected to be high. An example of orphan drug is Questcor Pharmaceuticals Inc (NASDAQ:QCOR) Acthar gel, a drug that can be used for a number of conditions.
The manufacturers of orphan drugs are allowed to charge high prices in order to cover research and development expenses. Since these drugs cater to small target markets, research and development expenses, as well as profits, are earned by charging substantially higher prices than other drugs.
Questcor Pharmaceuticals Inc (NASDAQ:QCOR) raised Acthar’s price to over $23,000 from a mere $1,650 per vial, which has resulted in Questcor being one of the most profitable biopharmaceutical companies. The company has been able to beat analyst estimates for the past eleven consecutive quarters. So, when Sarepta’s drug is approved, it will prove to hugely profitable for the company like Questcor Pharmaceuticals Inc (NASDAQ:QCOR)’s Acthar.
Eteplirsen is expected to be priced between $150,000 and $200,000, if approved. The target market for Eteplirsen is extremely small. As a result, the drug will be categorized as an orphan drug and the company will be able to charge a substantially high price.
When will it be approved?
There is no doubt about the approval of the drug. However, it is not clear when the approval will come. There are two sets of arguments. On one side, we have the proponents of the early approval of the drug, and on the other side, we have some experts who believe the drug should go through the normal process.
The first set includes the parents of affected boys, activists, company officials, and some experts – this set of people believes that the results of the trials are sufficient for the early approval of the drug. Boys participating in the test showed remarkable improvement in their walking ability, results that have been unmatched by any other drug. Recently, the company announced new results of the test, which were extremely impressive.
On the other hand, opponents of early approval advocate that the sample size used in the tests was not big enough and the results are not clear. As a result, the drug should go through the normal process used by the FDA. However, opponents of the early approval are in minority, and the pressure from parents might result in government allowing for an early approval.
There is no doubt that the need for treatment exists, and some boys are in acute need of treatment – delaying the treatment can cause deaths. So, it is normal that the parents are pushing for an early approval of the drug.
Competitors
Sarepta Therapeutics Inc (NASDAQ:SRPT) will likely have competition for Eteplirsen from GlaxoSmithKline plc (ADR) (NYSE:GSK). The healthcare giant is working on its own Duchenne muscular dystrophy drug, Drisapersen. Recently, the company revealed the results of clinical trials, which were satisfactory. The company will have results from the phase III study by the end of the year.
If GlaxoSmithKline is able to get its drug approved, then Sarepta will have to face stiff competition from the healthcare giant, which might result in less than impressive earnings. However, at the moment, Sarepta and GlaxoSmithKline plc (ADR) (NYSE:GSK) are the only players in this segment. GlaxoSmithKline’s results had one problem — the drug did not increase the strength of the muscles. On the other hand, Eteplirsen has a better safety and efficacy profile, which will give it an edge of over Drisapersen.
Conclusion
Sarepta Therapeutics Inc (NASDAQ:SRPT)’s shares have gone up substantially in the past two weeks due to the release of data from GlaxoSmithKline plc (ADR) (NYSE:GSK). However, the stock can also pull back if the company decides to start phase III clinical trials, instead of presenting the drug for early approval.
Sarepta Therapeutics Inc (NASDAQ:SRPT)’s stock has been trading higher due to the possibility of early approval. If the company decides for an early approval, the stock will go up substantially. However, if phase III trials are chosen, then Sarepta’s stock will lose substantial value in the short-term. But, if you are a long-term investor, then it should not bother you.
Ishtiaq Ahmed has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.
