It's not every day that a stock is up 40% but still might have another 50%+ to go. However, that is the case with Sarepta Therapeutics Inc. (NASDAQ:SRPT).
Sarepta Therapeutics Inc., formerly AVI BioPharma, Inc., biopharmaceutical company focused on the discovery and development of ribonucleic acid (RNA)-based therapeutics for the treatment of rare and infectious diseases. Its product candidates include Eteplirsen, AVI-6002, AVI-6003, and AVI-7100.
From what we can gather online:
AVI-6002 is for the Ebola virus AVI-6003 is for Marburg hemorrhagic fever (MHF) AVI-7100 is for H1N1 (swine flu).
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Al the hubaloo today is due to Eteplirsen. Earlier today, the company announced it plans to submit a New Drug Application (NDA) to the U.S. Food and Drug Administration (FDA) by the end of 2014 for the approval of eteplirsen for the treatment of Duchenne muscular dystrophy (DMD). Eteplirsen is Sarepta's lead exon-skipping drug candidate in development for the treatment of patients with DMD who have a genotype amenable to skipping of exon 51.
Chris Garabedian, president and chief executive officer says, "As we announce our plan to submit an eteplirsen NDA by the end of 2014, we are very pleased with the detailed guidance that the FDA has provided us on a potential eteplirsen approval pathway and their support of a historically controlled eteplirsen confirmatory study. We also appreciate that the FDA shares our urgency in dosing a broader base of eteplirsen patients and has encouraged us to begin the clinical program with our follow-on exon-skipping drugs as soon as possible."
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As such, management plans to initiate several additional clinical studies with eteplirsen later this year in exon-51 amenable genotypes.
A pair of research firms upped their opinions on SRPT on the FDA news. William Blair and JMP Securities moved to an "outperform" rating from "market perform." JPM put a price tag of $54 – upside potential of 58.82% to target.
According to the CDC, "Duchenne muscular dystrophy (DMD) is a genetic disorder that causes muscles to gradually weaken over time. A person with DMD will eventually lose the ability to walk and will have problems with breathing and his or her heart. It most often affects boys and occurs among all races and cultures. Sometimes this disorder affects other members of a person's family, but in many cases it is new to a family."
The Muscular Dystrophy Associations (MDA) says, "DMD is the most frequently occurring and one of the most rapidly progressive of the childhood neuromuscular disorders. It affects approximately 1 in 3500 live male births throughout the world. DMD affects only boys (with extremely rare exceptions)."
The CDC reports roughly 4 million babies are born in the US per year. Slightly more than half are boys, meaning a little more than 2 million "It's a Boys" annually. Using the MDA's 1 in 3,500 figure, we arrive at about 570 babies born a year with the condition.
At the moment, SRPT has a market cap of $1.28 billion on trailing twelve month (TTM) revenue of $14.22 million – 64.82 times sales is a steep price to pay.
The average biotech trades at 16 times sales. Now, if Sarepta Therapeutics captured 100% of the potential market for the next decade, they would have to charge $14,000 per year to generate enough revenue to meet the current market cap using the average price-to-sales ratio. That doesn't include any revenue sources beyond eteplirsen. At JPM's $54, the cost would have to be $22,314 per year to trade at the peer average P/S ratio.
Overall: In our opinion, Sarepta Therapeutics Inc. (NASDAQ:SRPT) is more likely to get to $54 compliments of a short squeeze as 40% of the float (stock available for trading) is sold, than from eteplirsen driven fundamentals.
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