Shares of Sarepta Therapeutics SRPT rose nearly 14% on Tuesday after announcing that it has entered into an exclusive global licensing and collaboration agreement with Arrowhead Pharmaceuticals ARWR.
ARWR Deal Expands Sarepta’s Pipeline
Per the deal terms, Sarepta will acquire exclusive rights to Arrowhead’s seven pipeline programs, which include four in active clinical development and the remaining three in preclinical development. These programs are being developed against a broad range of genetic diseases in muscle, central nervous system (CNS) and rare pulmonary disorders.
Each of the four clinical programs is currently being evaluated by Arrowhead in separate phase I/II studies targeting different diseases. The first is ARO-DUX4, which is being developed as a potential treatment for patients with facioscapulohumeral muscular dystrophy (FSHD), while ARO-DM1 is being developed to treat myotonic dystrophy type 1 (DM1). The remaining candidates, ARO-MMP7 and ARO-ATXN2, are being developed to treat idiopathic pulmonary fibrosis (IPF) and spinocerebellar ataxia 2 (SCA2) indications, respectively.
Arrowhead will remain responsible for the ongoing clinical studies. Once these studies are complete, Sarepta will assume responsibility for the later stages of development.
Sarepta will assume responsibility for three preclinical assets following the completion of the investigational new drug (IND)-enabling activities by Arrowhead. These programs target spinocerebellar ataxia type 1, spinocerebellar ataxia type 3 and Huntington's disease.
As part of this deal, the companies have also formed a discovery collaboration under which Sarepta will select six targets across skeletal muscle, cardiac and CNS areas, and Arrowhead will develop and deliver IND-ready constructs for those targets.
Financial Terms of the Sarepta-Arrowhead Deal
In exchange for acquiring these rights, Sarepta will make an upfront payment of $500 million plus an equity investment of $325 million in Arrowhead’s common stock. The company will also pay $250 million in annual installments over the next five years.
Per Arrowhead, it has the potential to earn an additional $300 million through near-term clinical trial enrollment-related milestone payments. It is also eligible for future milestone payments of up to $10 billion, as well as royalties on product sales.
Sarepta also clarified that it will fund the deal with its existing cash balance and has no plans to raise additional capital. The deal is expected to close early next year, subject to customary rules and regulations.
Other Announcements by SRPT
The company’s president and CEO, Doug Ingram, is set to join Arrowhead’s board of directors.
Alongside the above news, Sarepta also announced that its board of directors has authorized a share repurchase program of up to $500 million of the company’s outstanding common stock over the next 18 months.
SRPT Stock Performance
Wall Street was impressed with Sarepta’s licensing deal. If the deal is successfully closed, it would add potential therapies that not only complement the company’s pipeline of muscular dystrophies but also expand into new indications.
Some analysts also opined that the company financing the deal with the existing cash balance and coming out with a new buyback program illustrates management’s confidence in the commercial potential of its currently marketed therapies, especially the recently approved DMD gene therapy Elevidys.
Year to date, Sarepta Therapeutics’ shares have risen 35.3% against the industry’s 7.9% decline.
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Sarepta’s Strong Commercial Portfolio
Sarepta’s commercial portfolio includes three approved RNA-based PMO therapies — Exondys 51, Vyondys 53 and Amondys 45 — and the one-shot gene therapy Elevidys, all targeting DMD indication.
Currently, Elevidys is the first and only one-shot gene therapy for DMD in the United States. Since its commercial launch last year in June, the gene therapy has demonstrated blockbuster potential. Sarepta has added around $437 million in product sales in the first nine months of 2024. In comparison, the therapy generated over $200 million in sales last year.
Elevidys has been developed by Sarepta in collaboration with pharma giant Roche RHHBY. Sarepta and Roche entered into a licensing agreement in 2019 to develop Elevidys. Per the agreement, RHHBY has exclusive rights to launch and commercialize Elevidys in ex-U.S. markets.
Apart from Elevidys, Sarepta has three other therapies in its commercial portfolio targeting the DMD patient population. Exondys 51 is the first approved disease-modifying therapy for DMD in the United States as well as the company’s first product to receive marketing approval. Exondys 51 recorded impressive sales growth in the past few quarters despite the COVID-19 pandemic. Vyondys 53 and Amondys 45 have also seen strong demand since their launch. Per management, these three drugs have the potential to address nearly a third of all patients with DMD in the United States.
Management is also gearing up to submit a regulatory filing with the FDA next year seeking approval for gene therapy candidate SRP-9003 in patients with limb-girdle muscular dystrophy type 2E/R4 (LGMD2E/R4, or beta sarcoglycanopathy).
Sarepta Therapeutics, Inc. Price
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SRPT’s Zacks Rank
Sarepta Therapeutics currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
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