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Sarepta (SRPT) Q2 Loss Narrows, Ups Exondys 51 Sales View

Sarepta Therapeutics, Inc.SRPT reported narrower-than-expected loss in the second quarter of 2017. The biotech also increased its 2017 sales outlook for Exondys 51, a treatment for Duchenne muscular dystrophy (DMD) and its only marketed drug. Shares were up almost 15% in after-hours trading.

So far this year, Sarepta’s shares are up 24.2%. This compares favorably with 10.5% increase registered by the Zacks classified Biomed/Genetics industry during this period.

Narrower Loss

Sarepta incurred a loss of 65 cents per share in the second quarter of 2017, narrower than the year-ago loss of $1.35 as well as the Zacks Consensus Estimate of a loss of 92 cents.

Loss per share excludes restructuring costs and gain from asset sale but includes the impact of share-based compensation expenses.

Quarterly Details

Sarepta received a huge boost with the FDA’s approval of Exondys 51, its only marketed drug and also the first DMD treatment to gain approval in the U.S. The drug is under review in the EU. In the second quarter, Sarepta recorded revenues of $35 million, up 115% sequentially, primarily attributable to sales of Exondys 51. Revenues beat the Zacks Consensus Estimate. In the prior-year quarter, Sarepta had recognized no revenues.

Adjusted research and development (R&D) expenses were $34.6 million in the second quarter, down 16.4% year over year, due to lower manufacturing expenses owing to the capitalization of inventory following the approval of Exondys 51 by the FDA. This was partly offset by increased expenses in preclinical studies on PPMO platform and other follow-on exons and increased patient enrollment in ongoing clinical studies. However, it excludes a one-time payment of $22 million to Summit Therapeutics plc SMMT for completing enrolment in a phase II study evaluating utrophin modulator, ezutromid.

Adjusted selling, general & administrative (SG&A) expenses were $25.4 million, up 92.1% year over year, due to increased legal fees and commercial initiatives, compensation and other personnel expenses.

Both R&D and SG&A expenses exclude the impact of restructuring costs and share-based compensation expenses.

Subsequent to the quarter in Jul 2017, Sarepta launched a Managed Access Program along with UK-based Clinigen to ensure availability of Exondys 51 to DMD patients in certain geographies outside the U.S. The company also appointed Douglas S. Ingram as its new President and CEO. Moreover, it also signed a gene therapy research collaboration agreement with Genethon to jointly develop treatments for DMD.

Earlier this week, the company announced that it hassettled a global patent litigation with BioMarin Pharmaceutical Inc. BMRN regarding the exclusive license on a patent pertaining to exon skipping technology used in DMD therapies. If Sarepta hadn’t settled with BioMarin, the latter could have prevented Sarepta from commercializing Exondys 51 in several jurisdictions.

Outlook

Based on sales trends witnessed in the second quarter, Sarepta updated its guidance for Exondys 51 sales to $125 million to $130 million in 2017, higher than its prior guidance of $95 million. The Zacks Consensus Estimate for 2017 sales is pegged at $103.51 million.

The biotech company raised its outlook for Exondys 51 for 2017 based on increasing market penetration, start forms from physicians and additional new patients in the second quarter.

Meanwhile Sarepta is looking to build its own DMD pipeline beyond Exondys 51 by developing other exon-skipping treatments. Sarepta has about seven exon-skipping candidates in its pipeline that could treat 75%–80% of the DMD population. The company expects to present dystrophin data from 4053-101 study by the end of 2017.

Sarepta Therapeutics, Inc. Price, Consensus and EPS Surprise

Sarepta Therapeutics, Inc. Price, Consensus and EPS Surprise | Sarepta Therapeutics, Inc. Quote

Zacks Rank & Stock to Consider

Sarepta Therapeutics carries a Zacks Rank #3 (Hold).

A better-ranked stock in the health care sector is Vertex Pharmaceuticals Incorporated VRTX, sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Vertex’s earnings estimates increased from 43 cents to 50 cents for 2017 and from $1.28 to $1.38 for 2018 over the last 30 days. The company posted positive earnings surprises in three of the four trailing quarters with an average beat of 406.25%. The company’s shares are up 116.8% so far this year.

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