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A Sarepta-Like Run Might Be Coming On PTC Therapeutics

Summary

SRPT has rebounded since a negative FDA briefing document on eteplirsen crashed the stock by more than half in January.

PTCT also declined significantly shortly after SRPT as the FDA refused to file Translarna but has shown some life recently as UK's NICE recommended the drug.

With current sales, lower burn rate, more cash, and substantially lower enterprise value, PTCT offers a superior risk-to-reward profile for those who wish to speculate on DMD drugs.

Both SRPT and PTCT have large short interest which could be fuel for a major short squeeze upon positive regulator feedback for each company's respective drug.

Much like how SRPT has doubled from its lows, I believe PTCT can move into the $12 to $15 range in the weeks leading up to the EMA decision.

As two companies that are developing treatments for Duchenne muscular dystrophy [DMD] as their lead drug candidates, Sarepta Therapeutics, Inc. (NASDAQ:SRPT) and PTC Therapeutics, Inc. (NASDAQ:PTCT) have both had obstacles to overcome in 2016. The degenerative nature of DMD puts both of these companies on the radar for speculative long and short biotech traders. DMD is a death sentence for the boys and young men afflicted with this disorder and the compassionate view for healthcare regulators to take would be to approve these drugs as soon as possible, when under normal circumstances the body of evidence obtained in studies proving the drugs' efficacy would fall short.

Sarepta's eteplirsen has received criticism due to the very small sample size of its clinical trial data of only 12 patients while PTCT's Translarna for nonsense mutation Duchenne muscular dystrophy [nmDMD] has received criticism for its Phase 3 trial showing statistical significance only at a sub-group level. Bears on either company believe that there is insufficient evidence to prove that the drugs work and regulator opinions will require further data for marketing approval while bulls on either company believe that the drugs should be marketed as soon as possible on compassionate grounds because the sooner something is available the better and any improvement to the quality of life for these patients is better than absolutely nothing.

The share prices of SRPT and PTCT have had similar roller coaster rides in 2016

While SRPT and PTCT offer different treatments for different subsets of the disorder, the companies have had very similar paths in the past several months due to scrutiny by the FDA. SRPT collapsed 55% on January 15 after an FDA briefing document challenged the company's claim over eteplirsen's ability to improve muscle function in patients. The stock bottomed out at around $11 over the following weeks, or as low as $500 million in market cap and $300 million in enterprise value.

Despite the negative tone from the briefing document, the stock has since doubled off of its lows as SRPT forges ahead along with support from the medical community. Speculative money is jumping back into the stock as an FDA Advisory Committee Meeting to review the New Drug Application [NDA] for eteplirsen is coming up on April 25 and the PDUFA date for eteplirsen is on May 26.

On February 23, PTCT collapsed 62% after it received a Refuse to File letter from the FDA on its New Drug Application [NDA] seeking clearance of Translarna. The FDA stated that the Phase 3 ACT DMD trial was negative and did not provide substantial evidence of effectiveness while also criticizing the company's proposal of a post-hoc...


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