asbe Sarepta Therapeutics (NASDAQ:SRPT) has always been pushing the edge of biotech by advancing therapies for several rare diseases using RNA therapies, gene therapies, and gene editing. Not only has the company excelled in the clinic, but Sarepta has shown strong commercial performance with significant revenue growth, which has accelerated in recent quarters thanks to their freshly approved DMD gene therapy, ELEVIDYS. Despite missing its primary endpoint in the Phase III EMBARK trial, ELEVIDYS achieved key secondary endpoints and increased dystrophin expression, leading to a landmark FDA approval to broaden use in all DMD patients ages 4 and older, which is roughly 80% of all diagnosed patients. In addition, Sarepta’s extensive pipeline including SRP-9003 and SRP-5051, bolster its long-term growth prospects and create the horizon for gene therapeutics. It looks as if Sarepta is ready to go full steam ahead with ELEVIDYS and the market has reacted appropriately moving SRPT from $115 to $181 per share. Now that ELEVIDYS is approved and the company is well-funded, I am looking to ramp up my buying activity below my Buy Threshold that I reset in my last Sarepta article. I intend to provide a brief overview of Sarepta and ELEVIDYS. Then, I will take a look at the Street’s expectations for Sarepta in the second half of this year and beyond. In addition, I will point out some risks that investors should keep an eye on following the ELEVIDYS label expansion. Finally, I refined my SRPT strategy for the approval and the ticker’s reaction to the announcement. Background on Sarepta Therapeutics Sarepta Therapeutics is a trailblazing biotech devoted to discovering, developing, and commercializing therapies for several rare diseases utilizing three different platform technologies (RNA, Gene Therapy, and Gene Editing). These treatments take on the principal cause of their targeted rare diseases, therefore, offering a potentially curative therapy. Sarepta Therapeutics Overview (Sarepta Therapeutics) Sarepta’s pipeline has over 40 programs in their books, which certainly puts the company in the discussion as the forerunner in gene therapy and rare diseases. However, it is without any doubt that Sarepta is the bell cow in DMD RNA and gene therapies. Sarepta Therapeutics Pipeline (Sarepta Therapeutics) In terms of performance, Sarepta has been on a steep growth trajectory and has recorded a positive EPS for two consecutive quarters. Sarepta Therapeutics Earnings History (Sarepta Therapeutics) Taking a look at the company’s account balance, Sarepta finished Q1 with about $1.39B in the bank. Background on ELEVIDYS ELEVIDYS is intended to treat Duchenne muscular dystrophy (DMD), which is caused by mutations in the gene responsible for a crucial protein for muscle integrity called dystrophin. These alterations in the dystrophin genes inhibit the production of functional dystrophin, thus, leading to disease progress with muscle degeneration. ELEVIDYS (delandistrogene moxeparvovec-rokl) utilizes Sarepta’s adeno-associated virus AAV platform to introduce a gene that encodes ELEVIDYS micro-dystrophin. Sarepta employs the AAVrh74 virus to deliver the truncated form of dystrophin that mimics its essential functions to restore function in both cardiac and skeletal muscle tissues. Despite missing the primary endpoint in its global Phase III EMBARK trial, ELEVIDYS was able to show improvements in motor function using the North Star Ambulatory Assessment (NSAA). Additionally, secondary functional endpoints showed statistically significant results without new safety concerns. Notably, ELEVIDYS increased dystrophin expression, which could potentially alleviate DMD symptoms. It is also important to note that, Sarepta and Roche (OTCQX:RHHBY) are partnered for ELEVIDYS outside the United States. Sarepta is handling ELEVIDYS inside the U.S. and manufacturing, whereas Roche is in charge of the therapy’s regulatory approvals and distribution in regions outside the U.S. Landmark Approval Recently, Sarepta Therapeutics publicized the FDA approved the expanded label for ELEVIDYS, to cover DMD patients aged 4 and above. Into the bargain, the FDA granted ELEVIDYS full approval for ambulatory patients and accelerated approval for non-ambulatory patients. Notably, ELEVIDYS is “contraindicated” for DMD patients with deletions in exon 8 and/or exon 9. In order to maintain their market approval for non-ambulatory patients, Sarpeta has already started their Phase III ENVISION study, which will serve as a confirmatory trial. Commercial Potential DMD touches around 1 in every 3,500 to 5,000 male births around the globe. Inside the U.S., it is projected that there are about 15K to 20K cases. Although this level of prevalence classifies DMD as a rare disease, the market is forecasted to grow as more treatment options become available and there is greater access around the globe. Market estimates have the DMD market hitting $27.4 billion by 2030, which would be a 40% CAGR. With the expanded label, ELEVIDYS can now be administered to 80% of DMD patients, so roughly 12K to 16K DMD patients in the United States. Assuming strong adoption, payer support, and no supply issues, ELEVIDYS could capture 10% of the U.S. DMD population (approximately 1,500 to 2,000 patients), which could generate between $4.8B and $6.4B in annual revenue. However, the big unknown is the international market, which could potentially double their revenue. Indeed, these are just rudimentary calculations, and we don’t know if the company will be able to supply enough product for that many treatments, or if the company’s treatment centers can handle that patient load to achieve those numbers. An ELEVIDYS infusion requires admission into the treatment center, a 1-2 hours infusion, and then post-infusion monitoring. So, I don’t see a bottleneck at the treatment centers unless they are simply short-staffed or have a limited amount of beds. The company appears to have around 100 treatment centers on the map. I will make note that there is a strong concentration of treatment centers in the New York area, which has over 1,000 patients. Sarepta ELEVIDYS Treatment Centers (Sarepta Therapeutics) So, it does look like the infrastructure is set up for ELEVIDYS to treat thousands of patients a year… again, assuming the company can keep up with supply. Therefore, I think it is appropriate to expect ELEVIDYS to quickly hit blockbuster status and ultimately be a multi-billion dollar product. In fact, some Street analysts are in agreement with Goldman Sachs (GS) projecting $2.6B in revenue for 2028, while Needham is forecasting $6B in sales in 2027. The company has estimated ELEVIDYS could bring in $6B in annual sales. Considering the peak revenue number above, it appears likely that the label expansion for ELEVIDYS in both ambulatory and non-ambulatory DMD patients will have a significant commercial impact, potentially resulting in billions of dollars in annual sales. If we pick the company’s estimate of $6B in peak sales and use the industry’s average price-to-sales of 4x-5x, SRPT could be valued between $250 and $317 per share… just on ELEVIDYS alone. Considering SRPT is trading at around $160 per share, I think it is appropriate to assert that this approval could have a dramatic impact on the ticker over the next few years. Risks To Consider Indeed, ELEVIDYS could be a home run for Sarepta, but there are a handful of risks or concerns that investors need to consider when factoring this approval into their bull thesis. One of the lingering concerns has been around supply constraints around ELEVIDYS to support the label expansion. The company believes there are no near-term supply constraints, nor treatment site restrictions. However, they are working on future plans for site capacity and manufacturing capacity with the eventual transition to suspension manufacturing to help support commercialization outside the United States. Another concern is that ELEVIDYS is a one-time therapy, with some analysts having its peak sales in 2028. Investors need to consider that ELEVIDYS might have a short period of recording peak sales as it reduces the prevalence of symptomatic DMD patients. Consequently, the therapy’s target market will shift to the incidence of newly diagnosed DMD patients. In essence, ELEVIDYS will gradually diminish its own market, likely resulting in a brief peak sales period followed by limited sales thereafter. ENVISION study is another lingering risk to consider. ENVISION is only an 18-month study, so investors need to accept that the market will not unleash SRPT until the company reports positive data and the FDA grants full approval in non-ambulatory. Clearly, investors also need to consider that the data could be disappointing or the FDA could withdraw the accelerated approval, which would demolish the share price. Another apprehension is getting payers to cover the cost of ELEVIDYS, which is $3.2M. So far, most companies have priced their approved gene therapies to cost considerably less than paying for a lifetime of the standard treatment options. That way, payers pay more upfront, but it is supposed to be cheaper than paying for a lifetime of other treatments. Although ELEVIDYS has the potential to reduce medical costs by millions of dollars, therapy, and medical equipment, investors should not be surprised to see payers reluctant to quickly pick up the bill, which could hurt the growth trajectory. Despite these concerns, I am maintaining a conviction rating of 3 out of 5 and SRPT will maintain its position in the Compounding Healthcare “Bio Boom” Speculative portfolio. Updated Plan In my previous Sarepta article, I stated that my SRPT position was dormant and I was waiting for an opportunity to accumulate an upsized position to compound again. However, the ticker was unwilling to give up its premium valuation and continued to trade above my Buy Threshold. Consequently, I had to amend my Buy levels in order to recalibrate to the ticker’s new state. My new Buy Threshold is $125 per share with my Buy Target 1 to $116 per share and my Buy Target 2 to $69 per share. Admittedly, I have not touched the position since that article, but I am foaming at the mouth to grab some shares if the ticker recedes to the $125 level. Yes, I am sure a great number of you are probably thinking I am crazy (or worse) to think that SRPT will retreat from its current trading levels, however, the market loves to play volatility in both directions, so I am being prepared for any scenario. Especially, considering SRPT’s seasonality trends point to a bearish July. SRPT Seasonality (Trendspider) In addition, the share price is pushing the upper limit of the Monthly Keltner channel, which can trigger a snapback toward the middle of the channel. SRPT Daily Chart (Trendspider) In these situations, I like to wait for the market to digest the recent news and the technical conditions to stabilize before making a move. However, if the share price remains in its current trading range, I will have to readjust for the ticker’s new behavior. It is possible that SRPT is setting up for a continuation move higher, so I will reset both my buy and sell targets if the ticker holds above the anchored-VWAP from the May 7th high for longer than a week. I still plan on amassing a large SRPT position over the remainder of 2024 and plan to bank profits once the share price reaches my sell targets in an effort to get my position back to a “House Money” status. I intend to continue trading the ticker in this fashion to build a core position to eventually transfer to my “Bioreactor” growth portfolio in the coming years.
sekar nallalu Biologics,Cryptocurrency,SRPT Sarepta Therapeutics Stock: Pushing The Edge And Creating The Horizon (NASDAQ:SRPT)