Sarepta Therapeutics, Inc. (SRPT) got a major boost in June after Pfizer, Inc. (PFE) presented data on its new Duchenne Muscular Dystrophy (DMD) gene therapy drug at the annual Parent Project Muscular Dystrophy (PPMD) conference. Pfizer’s drug left two patients in the hospital after they experienced severe side effects. Some analysts and financial bloggers believe that these results have SRPT perfectly positioned for sustainable long-term growth.
So which stock should investors pick?
Sarepta Has the Superior Treatment
Sarepta is one of the leading commercial-stage biopharmaceutical companies, specializing in the treatment of rare diseases including DMD. DMD is a genetic disorder primarily affecting boys that causes progressive muscle degeneration and weakness.
The company’s data looked stronger than PFE’s not only in terms of safety but also with respect to the level of transparency. Sarepta released Western Blot data showing that its treatment meets the accepted standards for dystrophin quantification, the only measure that’s present in every study. Pfizer on the other hand left this information out.
SRPT’s other DMD treatment, Exondys 51, is already on the market and is the only DMD drug of its kind that’s commercially approved. Annual sales for the treatment totaled $301 million, up 95% from last year. As the drug doesn’t have any competition, it’s likely that sales will only continue to grow. This drug alone is expected to generate $400 million in revenues for 2019.
The FDA is expected to approve SRPT’s new golodirsen drug for a different subgroup of patients with DMD on August 19. Not to mention the company acquired five new gene therapy candidates for $165 million in February. One of these therapies has already shown promising results for the treatment of Limb-Girdle Muscular Dystrophy.
Pfizer Has Been Falling Behind
Pfizer was attempting to break into the DMD treatment space, but the findings presented at the PPMD conference were disappointing. In a six-patient study, two different dosages of the gene therapy were given to boys between the ages of 6 to 12 years old. Side effects from the drug put two out of the six boys in the hospital. Experts also said that all measures of expression looked worse than SRPT’s and generally unsafe.
This is not the first time the pharmaceutical giant has failed to produce an effective DMD treatment. In August 2018, Pfizer dropped its domagrozumab (PF-06252616) DMD candidate based on poor safety and efficacy test results.
The company’s loss of exclusivity for its pain medication, Lyrica, as well as the controversy surrounding drug pricing isn’t helping the situation. Share prices are down 3% year-to-date, with analysts expecting -5% earnings growth for the current quarter.
What are the Analysts Saying?
With strong results from existing treatments and the possibility of new treatments becoming available, the future is looking bright for SRPT.
Morgan Stanley analyst, Matthew Harrison, agrees with that sentiment. On July 9, he reiterated his Buy rating and raised his price target from $165 to $220. “Sarepta's DMD gene therapy is positioned to be the first to market, taking a majority share of the ~$20B prevalent population in the US and expanding internationally with a significant lead. Based on our proprietary analysis we believe investors underappreciate the magnitude of Sarepta’s best-in-class efficacy compared to Pfizer,” he said.
On July 1, another top analyst, Brian Abrahams, maintained his Buy rating while increasing the price target from $188 to $220. “Based on our analysis of PFE's initial DMD gene therapy results - incorporating the on-site sentiment from KOLs and patients - we see SRPT as the clear leader in this space and are increasing our out-year DMD share/penetration estimates,” he said.
The results are in, and SRPT is the clear winner. The stock boasts a ‘Strong Buy’ analyst consensus, with 12 buy ratings vs just 1 hold over the last three months. The average price target is $215, suggesting 40% upside potential.
Analysts are not as optimistic about Pfizer. The stock has a ‘Moderate Buy’ analyst consensus and $47 price target, suggesting 9% upside.