Credit Suisse analysts initiated coverage on Sarepta Therapeutics Inc. (NASDAQ:SRPT) with an Outperform rating and price target of $68 in a research report dated October 18. Shares in the biotech are trading up 1.5% on the news at $49.66 apiece as of 9.51 am EDT.
Sarepta is the only biotech company in the industry to have an approved treatment for the rare genetic disorder, Duchenne Muscular Dystrophy (DMD). The company recently won US regulatory accelerated approval for its DMD drug called Exondys 51 after almost a year of internal agency conflict over the drug’s proposed clinical benefit. Finally, giving in to pressure from DMD-affected families and patient advocacy groups, the Food and Drug Administration cleared the drug with the condition that Sarepta will have to deliver positive data from an ongoing late-stage DMD trial. Exondys 51 is designed to treat some 13% of the total DMD patients, which makes up some 1,200-1,500 patients in the US, and will cost around $300,000 per patient per year.
The drug’s launch is currently underway and Credit Suisse estimates first sales in the fourth quarter of this year. Analysts Alethia Young and team wrote, “We model US EXONDYS 51 sales of ~$400M by 2020, and we think ultimately US payers will support reimbursement.”
Currently US health insurers Cigna and UnitedHealth have supported reimbursement for the drug without restriction. Anthem, however, has formally declined coverage, citing “uncertainty” of the drug’s efficacy in the wake of criticism from several FDA officials, its advisory committee, and some in the scientific community.
Credit Suisse analysts, however, believe there is “room for negotiation” with Anthem and Sarepta. “Ultimately, we think that it will be hard payers to deny an approved therapy to patients who are looking for potential disease-modifying therapies,” they wrote. They expect sales of $14 million from the drug in 2016 and $217 million in 2017.
The analysts also expect an imminent approval of Sarepta’s DMD drug in Europe, with a 70% chance of success and royalty payment of 5%. They estimate EU sales worth $18/share, assuming a launch and potential settlement in 2018. They believe the long-term success of Sarepta depends on its potential to expand its DMD exon-skipping technology, which has potential to treat up to 80% of patients. Trial data for Exon 53 is expected mid-17, which can add another 8% of patients and be a key catalyst for the stock.