Sarepta seen as a take-over target

Sarepta Therapeutics’ current valuation does not reflect the company’s FY17 guidance for Exondys 51, its treatment for Duchenne muscular dystrophy

Exondys 51 has a worldwide sales potential of $750M

#Sarepta Therapeutics, Inc. (SPRT) is a biopharmaceutical company. The company focuses on the discovery and development of RNA-based therapeutics for the treatment of rare neuromuscular diseases. The company offers EXONDYS 51, a disease-modifying therapy for the treatment of duchenne muscular dystrophy #DMD , which is a rare genetic muscle-wasting disease caused by the absence of dystrophin. It also develops SRP-4045 and SRP-4053, which are exon skipping clinical product candidates for the treatment of DMD.

While approval for Sarepta Therapeutic’s (SRPT) Exondys 51 in the U.S. was controversial, Oppenheimer said it has resulted in a “high level” of short interest and the company would be a “bargain” if it is acquired. As of May 15th, a total of 11,210,759 shares have been shorted, giving it about 7 days to cover the short positions.


Oppenheimer analyst Hartaj Singh said he thinks Sarepta Therapeutics’ current valuation does not reflect the company’s FY17 guidance for Exondys 51, its treatment for Duchenne muscular dystrophy, and long-term data on slowing progression of the disease. He added an announcement by CEO Ed Kaye saying the company would return focus to the regulatory and scientific side of the business has fueled speculation of a potential deal.

If an acquirer were to target Sarepta, recent biotech deals imply that the company “would be a bargain” just on Exondys 51 worldwide sales potential of $750M and without other exon mutations the company is exploring, the analyst contends.

Singh added that he believes a larger company could achieve return on investment at current valuations solely from the global Exondys 51 franchise.

In addition, he said investors will be able to gain more visibility on the stock through the company’s ongoing earnings update, the release of data on the PPMO platform, and the potential EU approval of Exondys 51 in the first half of 2018. He keeps an Outperform rating on Sarepta with a $76 price target.


Singh notes Sarepta shares are currently trading at a 50%-75% discount to recent takeouts in the biotech space, namely Medivation, Ariad and Actelion (ALIOF). Pfizer (PFE) bought Medivation for $14B in 2016, and earlier this year, Takeda Pharma (TKPYY) acquired Ariad Pharmaceuticals for $5.2B, while Johnson & Johnson (JNJ) purchased Actelion and its rare disease-focused business for $30B.


In May, the Wall Street Journal reported that a Sarepta consultant had worked with parents of sick boys to prepare testimony to convince the Food and Drug Administration to approve #Exondys 51, or #eteplirsen, after trial data for the Duchenne muscular dystrophy treatment proved inconclusive.

An FDA advisory committee, the majority of which didn’t know Sarepta’s involvement with the families, voted against approval 7-6 last year, however that advice was not followed when the agency granted the drug accelerated approval in September, 2016.


Sarepta Therapeutics SRPT rose 0.4% to $31.53 in morning trading. Since September 19, 2016, the date when the FDA granted approval to Exondys 51, Sarepta shares are up about 12%. The stock has a 52-week trading range of $16.52 – $63.73.

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The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.

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