Markets

Here's Why Sarepta Therapeutics Dropped 39.4% in August

What happened

Shares of Sarepta Therapeutics (NASDAQ: SRPT) fell more than 39% last month, according to data provided by S&P Global Market Intelligence. The biopharma received a couple of pieces of bad news from the U.S. Food and Drug Administration (FDA) regarding two important drug candidates aimed at treating Duchenne muscular dystrophy (DMD).

First, an FDA database tracking serious side effects flagged SRP-9001 after a boy receiving the drug candidate in a clinical trial saw creatine kinase levels spike. Second, the FDA sent Sarepta Therapeutics a complete response letter (or CRL, which withholds approval for marketing) for Vyondys 53, which investors were hoping could hit the market by 2020.

A finger pointing to a declining stock chart on a tablet.

Image source: Getty Images.

So what

As Motley Fool contributor Cory Renauer explained, Sarepta Therapeutics had big plans for the two drug candidates that drew the ire of the FDA last month. The company's lead drug product, Exondys 51, generated about $182 million in revenue in the first half of 2019. But it can only treat about 13% of individuals with DMD.

Vyondys 53 was being developed to treat a separate 8% of individuals with DMD. Meanwhile, the earlier-stage SRP-9001 can potentially treat all individuals with DMD, which had analysts penciling in peak annual sales potential in excess of $1 billion and labeling Sarepta Therapeutics as a formidable growth stock.

Now what

Investors shouldn't panic. The concerns cited by regulators are par for the course in drug development, can likely be addressed, and are unlikely to completely derail approval chances, considering DMD is a debilitating disease with few (or no) treatment options. Investors should simply view the tumble by shares as a brake on the unchecked enthusiasm that was taking over Wall Street.

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Maxx Chatsko has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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