Shares of Sarepta Therapeutics Inc. dropped 16% at market open Aug. 20 after the U.S. Food and Drug Administration rejected the company's flagship Duchenne muscular dystrophy treatment golodirsen.
The rejection was a surprise setback for Cambridge, Mass.-based Sarepta, which develops RNA and gene therapy medicines for rare diseases. The FDA cited concerns of possible infection and kidney toxicity in its complete response letter for golodirsen.
Duchenne muscular dystrophy, or DMD, is a genetic disorder characterized by progressive muscle degeneration and weakness. An error in the gene for dystrophin, a protein vital to healthy muscle function, causes the disorder.
Golodirsen is an exon-skipping RNA therapy. It skips over the troubled portion of the gene and allows the creation of a form of dystrophin protein and a correction of the gene mutation.
Sarepta said the toxicity issues the FDA flagged were seen in preclinical doses 10x higher than the dose of golodirsen given to patients during clinical trials. The toxicity was not seen in the human clinical trial on which the application was based. The FDA did not raise these concerns during the review period, Sarepta said.
Morgan Stanley analysts predicted the plunge in Sarepta's shares but said the golodirsen rejection will not be "a major fundamental valuation driver." The analysts believe that investor jitters are instead related to concerns that the FDA may be raising the bar for approving DMD therapies. Therefore, Sarepta's other gene therapies that do drive valuation in this space may be at risk.
The FDA's rejection caught Sarepta's management off-guard, Leerink analysts said, and may have more to do with the prior approval of the company's DMD drug Exondys 51. The FDA approved the drug in September 2016 against the recommendation of a panel of experts. The approval was based on a small study with about a dozen children and did not include placebo controls for comparison with the treatment group.
"[Sarepta] is being slapped on the wrist for the prior questionable accelerated approval of Exondys51," Leerink said. "The FDA may be holding [Sarepta] to a higher standard now, but we are optimistic that golodirsen can overcome this speedbump on its way to an eventual approval."
Sarepta also noted that the company had agreed with the FDA on a label for golodirsen and had provided an advance copy of a press release announcing the approval for the agency's review. The ultimate rejection was signed by a director above the division that had been reviewing the drug.
"Taken together, we believe that the rejection of golodirsen accelerated approval may be less about safety and toxicity and more about making a point," Leerink said.
Instinet Equity Research analysts believe the setback puts golodirsen on track for approval and launch in the second half of 2020 instead of fourth quarter 2019 as initially estimated. The firm is not concerned about the toxicity and infection issues the FDA raised. Instinet noted that these are well-known side effects of this type of RNA treatment and that Sarepta's therapies seem to be among the safest in this class of drugs.
Leerink suggested that any raising of the bar for DMD treatments could also signal trouble for Wave Life Sciences Ltd.'s WVE-210201.
Sarepta plans to meet with the FDA to discuss the rejection. The company hopes to possibly negotiate a black box warning — the FDA's strictest warning label — on the risk of infection and kidney toxicity.
The company's DMD franchise has also faced scrutiny from the U.S. drug pricing watchdog, the Institute for Clinical and Economic Review. ICER found earlier in August that Exondys 51 provides low long-term value for its more than $1 million price tag.
Sarepta's shares were down 17.76% to $98.94 as of 2:15 p.m. ET on Aug. 20.
