Sarepta is the leading company in Duchenne Muscular Dystrophy, with four commercial DMD therapies generating >$1B annually. Our Outperform thesis is based on: (1) Elevidys demonstrated robust efficacy in 4-5yo patients; (2) Our physician checks suggest that the unprecedented unmet need in DMD can drive significant Elevidys uptake, almost independent of physicians' view on Elevidys. Remarkably, Elevidys generated $200M+ during Jun-Dec 2023, despite Oct'23 announcement that Elevidys missed the primary endpoint in confirmatory trial; (3) Management's unparalleled clinical/regulatory/commercial expertise in DMD creates high barriers to entry. Initiating Outperform, $170 target.
Sarepta is a commercial company focusing on DMD. Sarepta's commercial products include: (1) Three ASO therapies for DMD, generating ~$1 billion annually; (2) Elevidys, a gene therapy for DMD that received FDA accelerated approval in Jun'23 (4-5yo), with FDA's decision on full approval expected by ~Aug'24. Note that Elevidys didn't meet the primary endpoint in the PhIII confirmatory study in Oct'23, despite its accelerated approval in Jun'23, raising investor concerns about Elevidys' viability.
We expect Elevidys quarterly sales to drive the SRPT story in 2024. Elevidys generated $200M (+12% vs. cons) in the first two quarters post-approval, reflecting a strong patient demand. Our physician checks suggest that the vast majority of eligible patients will be willing to receive Elevidys, as even the most bearish/negative physicians expect ~50% of their patients to use Elevidys. As such, we anticipate significant commercial Elevidys uptake and model $960M Elevidys revenues for 2024 (vs. $920M for consensus). In the near/mid-term, we see the main/only limiting factor in Elevidys uptake being the manufacturing capacity (suspension manufacturing in ~2026+ will expand manufacturing capacity) and don't anticipate any material threat from competitors. FDA's decision on Elevidys by Aug'24 can move SRPT up to ~50% due to implications around the addressable population. Our base case scenario for FDA's decision on Elevidys is full approval with ambulatory restrictions based on: (1) Elevidys stat sig clinical effect on secondary endpoints, especially TTR and SV95C; (2) Unprecedented unmet need that can drive pressure on FDA by DMD families to approve Elevidys (in all ages); (3) Peter Mark (FDA) bullish comments around regulatory flexibility and importance of gene therapy's overall effect rather than individual endpoints. Note that ~10% of FDA approved drugs during 2018-2021 didn't meet their primary endpoint(s), similar to Elevidys.
Our target price of $170 for Sarepta is based on our sum of-the-parts (SOTP) discounted cash flow analysis driven by NPV of Exondys 51, Vyondys 53, Amondys 45, Elevidys, SRP-9003, SRP-9004, SRP-6004 cash flows through 2041. We use a WACC of 9% based on the methodology for our biotech coverage (9-10% for commercial companies). We assign a terminal value to Sarepta revenues with a growth rate of 0%.
Our upside case assumes a full approval for Elevidys without age/ambulatory restriction. Under this scenario, peak risk-adjusted revenues increase from approximately $5.0B to approximately $5.5B. For the upside scenario to materialize, the FDA will view stat sig changes in secondary endpoints favorably and will use micro-dystrophin expression levels as basis for lifting ambulatory restriction.
Our downside case assumes withdrawal of Elevidys from the market. Under this scenario, peak risk adjusted revenues decrease from approximately $5.0B to approximately $2.4B. For the downside scenario to materialize, the FDA will issue a complete response letter (CRL), citing lack of efficacy in Elevidys confirmatory trial.
Potential full approval and removal of ambulatory restrictions for Elevidys in DMD (Mid-2024); (2) PhI data readout for SRP-6004 in LGMD2B (1H24); (3) Pre-NDA meeting result with the FDA for SRP-5051 (3Q24); (4) PhIII data readout for PF-06939926 (2H24) in DMD; (5) PhI/II functional readout for RGX-202 in DMD (2024); (6) PhI data readout for SGT-003 (3Q24) in DMD.
Sarepta is a commercial-stage biotech company that discovers, develops, and commercializes medicines for the treatment of rare, genetic-based disorders. Sarepta has a portfolio of four commercial assets targeting Duchenne muscular dystrophy. These assets are characterized by RNA-based PMO franchise therapies and a gene therapy approach for the treatment of Duchenne.