1 of Sarepta Therapeutics' Competitors Just Got Hammered. Will It Help the Stock?


In biotech, it’s often difficult to tell whether bad news for one company will also be bad news for a competitor, or vice versa. Between using different approaches to therapy development, working with regulatory regimes in different countries, and targeting different patients within the same market, there are many combinations of possibilities that investors need to disentangle before even building a solid hunch about whether a new event will be benign or not.

For a biotech that’s primarily concerned with rare diseases, like Sarepta Therapeutics, (SRPT -0.40%) one might assume that the picture is a bit clearer, but that isn’t the case. Let’s analyze the pitfall that one of Sarepta’s competitors just experienced, and then determine whether it’s something that could help or harm the stock over the next few years.

The competitive landscape might get less so

Sarepta’s line of business is to develop and sell medicines that treat Duchenne muscular dystrophy (DMD), a rare, progressive, and ultimately fatal neuromuscular disease that starts affecting patients when they’re very young. With sales of its four commercialized medicines, its trailing-12-month revenue is $1.1 billion, and its pipeline features a small handful of clinical-stage programs, so in the long term there may be more growth on the way. It isn’t the only biotech targeting the market for DMD, however.

PTC Therapeutics (PTCT 1.03%) makes a therapy for DMD called Translarna. Translarna was conditionally approved in the European Union in 2014, and has subsequently been conditionally reapproved multiple times. But so far it has not succeeded in getting U.S. regulators to follow suit despite repeated attempts at securing an approval.

Now, per a communique by the European Medicines Agency (EMA) on Jan. 26, a committee of regulators has voted against renewing the drug’s conditional approval for sale in the E.U. To arrive at that consensus, they cited several different studies, stating that the available evidence of the therapy’s efficacy was insufficient to continue its administration to patients.

If the European Commission votes in early April to ratify the committee’s vote, the drug will be taken off of the market, having conclusively failed to convert the conditional status into a more permanent one. Given that the company brought in $355 million in 2023 alone, the decision would be a disaster for PTC. But could PTC’s downfall be a boon for Sarepta if it happens?

PTC’s loss, Sarepta’s gain?

Unfortunately for Sarepta’s shareholders, PTC’s struggles with Translarna will probably not be helpful in any way in the near term, and they could actually cause a new headwind to develop.

In short, none of Sarepta’s medicines are approved for sale in the E.U., and while its efforts on that front are unlikely to stop, regulators at the EMA have rejected its petitions for approval on several occasions over the years. It won’t be able to capture any of the European market share that PTC could lose, at least not in the near term.

What’s more, PTC now has all the more incentive to try to get its drug approved in the U.S. The biotech is planning to meet with the Food and Drug Administration (FDA) sometime in the first quarter to discuss resubmitting its application for Translarna’s approval. The prospect of the two companies sharing the market is not something to bank on, though it is technically a possibility.

In other words, PTC’s ejection from the E.U. could portend aggressive efforts to compete in the U.S., if the FDA allows it to do so. Nonetheless, regardless of this potential headwind, in late June last year Sarepta’s gene therapy for DMD, Elevidys, notched an approval from the FDA. In advance of its Q4 earnings update scheduled for late February, management reported sales of that treatment brought in roughly $200.4 million in 2023. Even more sales are likely for 2024, the therapy’s first full year on the market.

So is Sarepta’s stock doomed? No, far from it. If anything, it’ll have at least a year to get established in the U.S. market with its newest product before it has to worry about PTC, if it ever needs to worry at all. At the same time, that doesn’t mean investors should be rushing to buy it.

As valiant as the company’s efforts to treat and cure DMD are, DMD is a difficult disease to treat and thus a difficult niche for a biopharma business to succeed in, and regulators on both sides of the Atlantic appear to be on the skeptical side, even after granting temporary approvals. Overall, there are better and less risky biotech stocks to invest in, so give this one a pass.



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