By Sarah Toy
Shares of Sarepta Therapeutics Inc. fell 13% Tuesday on the news that the Food and Drug Administration rejected the company’s marketing application for an experimental drug to treat patients with Duchenne muscular dystrophy.
Sarepta /zigman2/quotes/206140855/composite SRPT -0.72% disclosed on Monday afternoon that the FDA would not approve the drug, an injection called Vyondys 53, due to risk of infections related to intravenous infusion ports and renal toxicity seen in pre-clinical animal experiments.
The rejection took both the company and Wall Street by surprise. Sarepta was seeking accelerated approval of the drug using the same method it used to gain approval for another Duchenne drug, Exondys 51, in 2016. Duchenne patients lack dystrophin, which is critical for muscle function, and Sarepta submitted data showing that Vyondys increased the amount of dystrophin in patients. However, it wasn’t clear that the drug could actually slow disease progression down or improve muscle function. Sarepta was hoping the FDA would go ahead and approve the drug first, and the company would do a trial confirming clinical benefit afterward.
Analysts had thought the same, assuming Vyondys would be readily approved given the drug’s similarities to the previously-approved Exondys.
“We are surprised by the FDA’s reasons/concerns and did not anticipate a complete response letter for safety reasons given Exondys 51 has similar backbone chemistry and has never shown any serious safety signal,” Cowen’s Ritu Baral wrote in a note to clients on Tuesday. Whenever the FDA declines to approve a drug, the agency issues a notice called a complete response letter that details the reasons for the rejection.
The “FDA’s concern around potential renal toxicity and infection risk seems not cleanly logical to us,” she added. “We think the ultimate Vyondys 53 risk/benefit will prove to be no different than Exondys, resulting in ultimate approval.”
SVB Leerink’s Joseph Schwartz called the news “unanticipated,” adding that he thought that the company was being “slapped on the wrist for the prior questionable accelerated approval of Exondys 51.”
RBC Capital Markets’ Brian Abrahams thought the same. “We believe this could in some ways be a referendum on the controversial approval of their currently-marketed drug Exondys 51... with FDA senior leadership potentially using Vyondys as an opportunity to send a message that the agency’s bar for safety will be exceptionally high in cases where an unproven surrogate is used to support accelerated approval of a drug,” he wrote in a Tuesday note.
The FDA’s 2016 approval of Sarepta’s Exondys was fraught with controversy. The drug was shown to facilitate production of dystrophin in patients, but players at the FDA at the time disagreed about whether enough of the protein would be produced to be “reasonably likely” to predict patient benefit. Exondys was still ultimately approved.
“The FDA may be holding Sarepta to a higher standard now, but we are optimistic that [Vyondys] can overcome this speed bump on its way to an eventual approval,” SVB Leerink’s Schwartz wrote.
Sarepta said it would immediately request a meeting with the FDA to determine next steps. Shares of the company have fallen 4.1% so far this year, while the S&P 500 /zigman2/quotes/210599714/realtime SPX +0.47% has gained 16.2%.
More on Duchenne trials : Sarepta Therapeutics stock up 3.4% after Phase 3 interim analysis shows positive results for DMD drug and Capicor Therapeutics’ stock rockets on heavy volume after positive MD trial results