Why Didn’t Sarepta CEO Chris Garabedian Just Say This?

Disclaimer copied from my previous Sarepta post:

I am very critical of people who pretend to have expertise in subjects which they then go on to demonstrate that they clearly lack expertise in.   There’s a word for these people: charlatans.    Let me be clear: I am no sort of expert in biotech stocks.   I’m not even an *almost* expert in biotech stocks.  If you called me an idiot when it comes to biotech stocks I wouldn’t argue with you.   Now I’m going to write about a biotech stock.

Last night, the fascinating saga of Sarepta Therapeutics’ “battle” with the FDA over approval of their Duchenne Muscular Dystrophy drug, Eteplirsen,  took another twist.   After $SRPT ‘s 8-k earlier in the week made it look like the FDA had again (for possibly the third time!) done a complete 180 on its stance on the possibility of accepting an NDA for Eteplirsen, the Sarepta advocates predictably and understandably made their voices heard to the FDA.    The FDA took the unusual step of responding, in a letter which basically said: hey – we’ve been consistent the whole time.  You’re barking up the wrong tree – it’s Sarepta who hasn’t got their act together.

The market liked the FDA letter for a few reasons.   First, the FDA noted:

“It is important to note that the agency did not find any evidence of fraud at this site, as has been perceived by some.  FDA is concerned that the methods used to measure dystrophin were not adequately robust to support an NDA submission.  Thus, FDA provided Sarepta with detailed recommendations on how to improve these dystrophin analyses, and FDA’s most recent advice was consistent with the advice provided after the April 2014 meeting.”

Indeed, I think that after SRPT’s Oct 27th release in which they made it appear that the FDA had suddenly reversed course again, suspicion of fraud was a non-negligible concern – it would be an understandable catalyst for an abrupt change in FDA position.  More importantly, when one goes back and looks at Sarepta’s statements from April, which were before the May site visit that prompted the comments in the October 27th release, one can see that the FDA has indeed been consistent in its concerns about dystrophin measurement.   From April:

“…the FDA expressed concerns about methodological problems in the assessments of dystrophin and, “remain skeptical about the persuasiveness of the (dystrophin) data” and, as a result, the Agency is “uncertain whether the existing dystrophin biomarker data will be persuasive enough to serve as a surrogate endpoint that is reasonably likely to predict clinical benefit.” However, the Agency further states that if they “were to find the biomarker data to be adequate upon detailed review, however, they would have the potential to support accelerated approval.” To that end, the Agency proposed “a collaborative effort in which we will work to better understand the methods and analyses used for the existing biomarker data,” and “also work together on methods for the collection of additional data that could be more reliable.”

Furthermore, the Agency suggested that “another approach to demonstrating an effect of eteplirsen on dystrophin protein production would be to obtain a fourth muscle biopsy in patients who are continuing in Study 202,” which could serve to enhance the acceptability of an NDA filing and accelerated approval.”

But wait – if you’ve been paying attention to Sarepta, you’ll remember this little press release from August, 2014, where they announced a partnership with Flagship Bioscience to “digitally automate the measurement of Dystrophin.”  That press release HAD to have been an effort to address the concerns that the FDA had voiced in the April minutes, right?  Well then why didn’t $SRPT CEO Chris Garabedian mention that on this week’s conference call?    If he’d only said something like since the FDA’s April minutes and May site visit, we’ve worked to improve and automate our dystrophin measurement by partnering with Flagship Bioscience, which we announced on August 21st,” then perhaps the stock wouldn’t have been decimated this week.   It would have shown that Sarepta was addressing the FDA’s concerns.

Instead, Sarepta’s approach tried to convey the message: “hey, every time we think we’re getting somewhere, these lunatics at the FDA go  and completely change their minds and screw up our process again.”   Last night’s FDA letter was (in my humble opinion, of course) the FDA’s way of saying: “the problem isn’t us.   You’re yelling at the wrong people.  We’ve been consistent the whole time – it’s Sarepta that hasn’t been listening, understanding, or communicating properly with shareholders.”

Still, this FDA reply can be viewed as good news, because it shows that the problem isn’t some Jekyll & Hyde regulator who keeps changing their mind on a whim.  If the issues are on Sarepta’s end, that’s a good thing  – easier to fix.  On the other hand, the FDA it can also be viewed as a public indictment of Sarepta’s management by the FDA.  Again, I think that’s “better” than a loose cannon unpredictable regulator, which is what many Sarepta shareholders seemed to be fearing.

I wanted to rant that it was inexplicable that Sarepta didn’t address the dystrophin measurement issues that the FDA had brought up in the April minutes, but it’s clear to me that their Flagship Biosciences partnership was an attempt to do just that.   Now, the inexplicable part is just why CEO Chris Garabedian failed to explain that simple point that could have done a lot to lessen the stock’s plunge this week.

There’s one more thing that I’d love help on from any informed readers:  in my recent post about Sarepta, I noted that there’s a problem using the DMD Natural History studies as comparisons because those studies average in zero values for boys who lose ambulation and are unable to complete the 6MWT.    I spent yesterday poring over the Pane Study, and I’m trying to figure out if that study did in fact average in the zeroes (it is one of the studies in Sarepta’s own natural history slide).

The Pane study included two important data segments: 1) the % of boys who lost ambulation, and 2) the 6MWT distances for what I *hope* is the remaining set of boys.   If this is indeed the case, it’s much more illustrative than averaging in the zeroes.   Alternatively, if we could confirm that zeroes are averaged in, we could back out the boys who didn’t walk to get “cleaner” 6MWT comps.   I don’t know how to confirm if the 6MWT data includes zeroes for non-ambulatory boys.

Any insights would be appreciated…

 

FDA response to Sarepta

The Thing That’s Bugging Me about Sarepta

Pane Study – DMD Natural History

-KD

I have a very small long position in $SRPT. my position may change at any time

note: in this post, I’ve done some “layman’s interpretation of quotes.”  I hope it’s clear where I am quoting Sarepta and/or the FDA, and where I’m “translating” their quotes as I think they were meant to be read.