Insights

Why Sarepta Therapeutics Stock Is Perking Up Today

What happened

Shares of the rare disease specialist Sarepta Therapeutics (NASDAQ: SRPT) rose by as much as 11.5% on heavy volume in early morning action Friday. Although the biotech’s stock has pulled back to some degree since its strong opening, its shares were still up by a healthy 9.4% as of 11:54 a.m. ET.

What’s fueling Sarepta’s strong showing today? Ahead of the opening bell, the company announced that it would seek accelerated approval from the U.S. Food and Drug Administration (FDA), for its Roche-partnered gene transfer therapy, SRP-9001 (delandistrogene moxeparvovec). SRP-9001 is indicated for the X-linked, inherited muscle-wasting disorder known as Duchenne muscular dystrophy (DMD).

So what

SRP-9001 is designed to promote the production of the microdystrophin protein. People afflicted with DMD are unable to produce a sufficient amount of this key structural dystrophin protein, leading to a progressive loss of muscle strength. If approved by the FDA, Sarepta and Roche’s experimental gene therapy could potentially revolutionize the treatment of this inherited, and often deadly, disease.

From a commercial standpoint, Wall Street thinks the therapy could generate nearly $2 billion in annual sales at peak. This sizable revenue forecast is a key reason why the investment bank Needham immediately raised its price target on Sarepta’s shares to $162 in the wake of this regulatory news. The firm’s latest 12-month price implies a whopping 71.8% upside potential in the drugmaker’s shares, relative to current levels.    

Now what

Is Sarepta’s stock still a red-hot buy? There’s no way to know if the FDA will green-light this intriguing gene therapy for DMD on an accelerated basis. Given the dire need for new treatment options for DMD and the therapy’s strong data thus far, an accelerated approval certainly isn’t out of the question. Still, this mid-cap biotech stock is arguably only suited for investors with a high tolerance for risk due to the uncertainty surrounding SRP-9001’s upcoming regulatory review. 

George Budwell has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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