Sarepta (SRPT) Q3 Earnings & Sales Miss, Exondys 51 Sales Up

Sarepta Therapeutics, Inc.SRPT incurred an adjusted loss of 56 cents per share in the third quarter of 2018, wider than the year-ago loss of 17 cents as well as the Zacks Consensus Estimate of a loss of 34 cents. The widening year-over-year loss was primarily attributed to significant rise in operating expenses. The adjusted loss excluded one-time items, depreciation & amortization expenses, interest expense and income tax benefit. Including all these items, loss was $1.15 per share compared with loss of 78 cents in the year-ago quarter.

Sarepta's Exondys 51, the first Duchenne muscular dystrophy ("DMD") treatment to gain approval in the United States, continued its strong performance. Sarepta recorded revenues of $78.5 million, up 6.7% sequentially, primarily attributable to increasing demand for Exondys 51. However, revenues marginally missed the Zacks Consensus Estimate of $78.8 million. In the prior-year quarter, Sarepta had earned revenues of $46 million.

Following the earnings release, shares of Sarepta were down 1.6% in after-hours trading due to lower-than-expected earnings and sales. So far this year, Sarepta's shares have rallied 121.1% against a 15.8% decrease registered by the industry .

Operating Expenses

Adjusted research and development (R&D) expenses were $64.2 million in the third quarter, up 104% year over year. The rise was primarily attributable to increased patient enrollment in late-stage studies and higher costs due to pipeline expansion and ramp-up of manufacturing activities.

Selling, general & administrative (SG&A) expenses were $42.5 million, up 91.4% year over year due to higher costs related to global commercial expansion and higher personnel expenses.

Cost of sales were also higher, reflecting royalty payments to BioMarin BMRN per the 2017 settlement and license agreements for exon-skipping technology used in DMD therapies and higher inventory costs due to rising demand for Exondys 51.

New Gene Therapy Collaboration

Subsequent to the quarter, Sarepta entered into agreements to boost its gene therapy pipeline portfolio. In October, it signed a license agreement with French gene therapy focused company, Lysogene related to the development of the latter's central nervous system ("CNS") targeting candidate, LYS-SAF302. The candidate, an AAV-mediated gene therapy, is being evaluated in a phase II/III study for the treatment of Mucopolysaccharidosis type IIIA (MPS IIIA).

The company also signed an agreement with Nationwide Children's Hospital to gain exclusive right to develop the latter's pre-clinical gene therapy candidate, neurotrophin 3, for treating Charcot-Marie-Tooth neuropathies. It also entered into a long-term strategic manufacturing partnership with privately-held Paragon Bioservices for additional commercial manufacturing capacity for its micro-dystrophin gene therapy, which is being developed for treating DMD.

2018 Guidance Maintained

For 2018, Sarepta continues to expect to record revenues of $295 million to $305 million

Pipeline Update

Sarepta is building its DMD pipeline, which will enhance its approved drug portfolio. The pipeline candidates, upon approval, will be eligible to treat a larger patient population than Exondys 51. The company has about eight exon-skipping pipeline candidates, which can treat 75-80% of DMD patients. The company is also developing gene therapies for treating DMD.

Sarepta remains on track to file regulatory application seeking golodirsen's approval in the United States by the end of this year with a potential approval in 2019. The company is also planning to submit a new drug application for its second DMD candidate, casimersen, by mid-2019, if study data confirms preclinical dystrophin expression.

In September, the FDA lifted the clinical hold on the company's micro-dystrophin gene therapy program. The hold on the phase I/IIa clinical study was put by the FDA in July due to the presence of trace amounts of DNA fragment in research-grade third-party supplied plasmid.

In May, the company received a negative CHMP opinion on its marketing approval application, seeking approval of Exondys 51 in Europe. Sarepta will initiate discussion with the European Medicines Agency to decide a path forward for the drug's approval.

Sarepta Therapeutics, Inc. Price, Consensus and EPS Surprise

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

Zacks Rank & Stocks to Consider

Sarepta currently carries a Zacks Rank #3 (Hold). A couple of better-ranked stocks in the biotech sector are Gilead Sciences, Inc. GILD and Amgen Inc. AMGN . While Gilead sports a Zacks Rank #1 (Strong Buy), Amgen carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here .

Gilead's 2018 earnings per share estimates increased from $6.59 to $6.63 and from $6.48 to $6.58, for 2018 and 2019, respectively, in the last 30 days. The company delivered a positive earnings surprise in three of the trailing four quarters, with an average beat of 6.43%.

Amgen's earnings per share estimates moved up from $13.95 to $14.02 for 2018 and remained stable at $14.10 for 2019 in the last 60 days. The company delivered a positive surprise in three of the trailing four quarters with an average beat of 4.29%. Share price of the company has increased 8% this year so far.

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

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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