Monday, 4 February 2013

Analyst Target Upgrades Abound for SRPT and its Miracle Drug

After tremendous success with our RIMM call on January 8th, we give our readers another undervalued gem. This one could provide returns much higher than RIMM's 50% move in a matter of a couple of weeks in early January. Sarepta Therapeutics (SRPT) closed at $27.51 on Monday but has upside potential of $83 to $139 according to Lazard Capital analyst William Turner. Wedbush Securities has an outperform rating on SRPT with a $70 target, Burrill Institutional Research has a $54 target while Motley Fool writer Brian Nichols claims that the stock could reach the $100's based on SRPT's technology, pipeline, and the Orphan drug status.

What has caused numerous analysts to upgrade SRPT to several multiples of its current stock price despite it already moving from as low as $3.30 from the summer of 2012? It is all based on what many are calling a miracle drug - eteplirsen - and the positive effect it is having on boys and young men afflicted with Duchenne muscular dystrophy (DMD), a genetic degenerative muscle disease, as outlined in the WPXI Pittsburgh news clip below.

Duchenne Muscular Dystrophy Drug Could Unlock Huge Potential For This Pharmaceutical

How quickly can SRPT rise to these analyst price targets? A big factor is how soon the drug can achieve accelerated approval. Because of the degenerative nature of the disease and the grassroots movement to get eteplirsen approved as soon as possible by the parents of children afflicted with DMD, many people are optimistic it will happen within the first 3 months of 2013 as CEO Chris Garabedian stated that SRPT will have an End Of Phase II Clinical Data Meeting with the FDA within that timeframe. Demand was so great from institutional investors for SRPT's equity offering priced at $25.25 that their original offering of $75M was increased to $125M to meet it. One could surmise that accelerated approval has an excellent chance at happening based on the demand for the stock from people with great investment knowledge within the biotech industry.

Adam Feuerstein had the following to say about SRPT's chance at accelerated approval for eteplirsen:

"It's reasonable to assume FDA will convene an advisory panel to review eteplirsen if the agency allows Sarepta Therapeutics to file for accelerated approval. I'd say a panel is a near certainty, given the novel exon-skipping mechanism of eteplirsen and the lingering controversy over the small number of Duchenne muscular dystrophy patients with the drug to date.

I don't see an eteplirsen advisory panel as a negative. In fact, I'd wager that a panel would bolster the drug's chances of being approved early. The convincing efficacy and safety data generated already, coupled with powerful patient testimony, would make it extremely difficult for any expert sitting on the panel to vote against eteplirsen.

I say, bring on FDA panel. It's a positive for Sarepta."

Reviewing the daily chart on SRPT shows a stock on the verge of a huge breakout.

Since SRPT's original breakout and pullback in October, the stock has been relatively range bound in the mid-to-high 20's as the 50-day moving average caught up to and eventually surpassed the stock price. The stock had struggled to keep above the 50-day MA until heavy buying on January 25th once again broke that barrier and now represents a strong base of support at just under $27. Note that this support is so strong that a fraudulent claim on Twitter on January 30th that there were issues with eteplirsen data which caused 700K of volume to be sold in panic could only drop the stock price under this level of support for a few moments before it raced back up again as desperate shorts covered and buyers quickly brought the stock back up.

Based upon the chart and the near-term catalysts, namely accelerated approval for Sarepta's miracle drug eteplirsen, investors will not have to wait for long before the $45 price level reached in October is once again challenged as the 52-week high.

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