Sarepta (SRPT) Q2 Loss Widens Y/Y, Golodirsen Nears Approval

Sarepta Therapeutics, Inc. (NASDAQ:SRPT) incurred an adjusted loss of 83 cents per share in the second quarter of 2019, wider than the year-ago loss of 43 cents per share. The wider year-over-year loss can be primarily attributed to a significant rise in operating expenses. Notably, the adjusted figure excludes one-time items, depreciation & amortization expenses, interest expenses, and income tax benefit. Including all these items, the company incurred a loss of $3.74 per share compared with a loss of $1.67 in the year-ago quarter. The Zacks Consensus Estimate was pegged at a loss of $1.08.

Meanwhile, Sarepta’s Exondys 51 — the first Duchenne muscular dystrophy (“DMD”) treatment to gain approval in the United States — continued with its strong performance. The company derives revenues solely from the sale of Exondys 51. Sarepta recorded total revenues of $94.7 million, up 8.9% sequentially, which beat the Zacks Consensus Estimate of $91.26 million. In the prior-year quarter, Sarepta had earned revenues of $73.5 million.

Duchenne muscular dystrophy is a rare muscular degenerative disease that mostly affects boys and can be fatal before patients turn 30.

Shares of Sarepta were down 4.4% in after-market trading on Aug 7, following the earnings release. However, the stock has gained 30.4% so far this year against the industry ’s decrease of 2.9%.

Operating Expenses

Adjusted research and development (R&D) expenses totaled $87.5 million in the second quarter, up 53.5% year over year. The increase was primarily due to the ramp-up of manufacturing activities for micro-dystrophin program and progress of clinical development related to gene therapies, the PPMO platform and casimersen. The rise in R&D expenses was partially offset by lower cost related to clinical studies evaluating Exondys 51 and golodirsen and winding down of activities on Utrophin platform by Sarepta’s partner, Summit.

Adjusted selling, general & administrative (SG&A) expenses were $52.3 million, up 40.2% year over year. Higher costs related to the global commercial expansion of its products and increased personnel expenses led to the rise in SG&A expenses.

Cost of sales was also higher, reflecting higher inventory costs due to rising demand for Exondys 51 and royalty payments to BioMarin (NASDAQ:BMRN) per the terms of the 2017 settlement and license agreements related to the latter’s exon-skipping technology used in DMD therapies.

Exon-Skipping Pipeline Update

Sarepta is building its DMD pipeline, which will enhance its approved drug portfolio. The pipeline candidates, on approval, will be eligible to treat a larger patient population than Exondys 51. Currently, the company has about eight exon-skipping pipeline candidates, which can treat 75-80% of DMD patients. Sarepta is also developing gene therapies for treating DMD.

In February, the FDA granted priority review to the new drug application (“NDA”) seeking accelerated approval for golodirsen. A decision is expected later this month. The FDA has conditionally approved the trade name of Vyondys 53 for golodirsen. Sarepta is ready to launch the drug immediately following the potential approval.

A potential approval to Vyondys 53 is likely to boost Sarepta’s top line as the drug will increase the eligible DMD patient population by 8%.

Moreover, Sarepta is planning to submit a NDA for its second DMD candidate, casimersen, soon. The company plans to have three approved exon-skipping drugs — Exondys 51, Vyondys 53 and casimersen — in its portfolio by the first quarter of 2020, following which it expects the eligible patient population to double.

Meanwhile, the company initiated a phase II study — MOMENTUM — on its next-generation PPMO platform candidate, SRP-5051, in DMD patient amenable to exon 51 skipping, an indication similar to Exondys 51. Based on an earlier stage study, the company planned monthly intravenous administration of the candidate in patients in the MOMENTUM study.

Gene Therapy Progress

Sarepta is progressing well with the development of the micro-dystrophin gene therapy candidate, SRP-9001, in a phase II study in DMD patients. Dosing of 24 patients has been completed. However, the company amended the study protocol to expand the patent population to 40 for better proof of concept.

In May, the company announced a gene therapy candidate, calpain 3, as a potential treatment for Limb-girdle muscular dystrophy type 2A. The company is also planning to expand its gene therapy programs into additional indications — Rett Syndrome, cardiomyopathy, Emery-Dreifuss muscular dystrophy type 1 and multiple sclerosis.

Meanwhile, during the quarter, two other companies developing gene therapies for muscular dystrophy – Solid Biosciences (NASDAQ:SLDB) and Pfizer (NYSE:PFE) –announced unfavorable data from clinical studies on their candidates. These events place Sarepta’s gene therapy program at an advantageous position as its development remains on track.

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Sarepta Therapeutics, Inc. Price, Consensus and EPS Surprise

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Written By: Zacks Investment Research