(By Rich Bieglmeier) Sarepta Therapeutics, Inc.
) rolled last week with investors buying up more than 10% of the company's market cap. After traders filed $20.25 million worth of buy tickets last week, they are back on the stock this Monday.
As we write, SRPT is up more than 15% on seven times the daily average volume, with half a day of trading left. It will be a big volume surge for Sarepta; which focuses on the discovery and development of unique RNA-based therapeutics for the treatment of rare and infectious diseases.
On Tuesday, July 24th, management announced that its experimental muscular dystrophy drug eteplirsen met its goal in an extension study. On the news, shares jumped from $3.46 to 8.52, closing bell to closing bell. That's some move – wish we were on it then.
Eteplirsen is Sarepta's lead drug candidate that is designed to address the underlying cause of Duchenne muscular dystrophy (DMD), which affects 1 in 3,500 boys and around 20,000 births per year worldwide. Based on published survival rated, iStock estimates there are roughly 400,000 people who suffer from DMD globally.
Eventually, DMD progresses to complete paralysis and increasing difficulty in breathing due to respiratory muscle dysfunction requiring ventilatory support, as well as cardiac muscle dysfunction leading to heart failure. The condition is terminal, death usually occurs before the age of 30, and there is NO CURE.
Although no official costs for DMD are tracked, as of 2004, the average annual cost was $18,930, ranging from $13,464 at 5 through 9 years of age to $32,541 at 15 through 19 years of age, according to the Center for Disease Control.
At $250 a month (just a guess) and using our other guestimates of potential users, eteplirsen has blockbuster potential; However, as it is with most of these promise stocks, having enough money to operate the business long enough to get the FDA finish line is the key – a.k.a. burn rate. Substantially all of Sarepta's revenue has been derived from research and development contracts with the U.S. government.
As of March 31, 2012, SRPT has cash equivalents of $30.6 million and the management anticipates receiving continued funding from the U.S. government to pursue the development of therapeutics against Ebola and Marburg.
Based on the most recent quarter's results, the mini-biotech should have enough cash to make it at least six more months. For the three months ending March 31, the company spent a little more than $18 million, down from nearly $20 million for the same timeframe in 2011.
While the sand appears to be racing through the top of the hourglass, management says they have enough money to make it at least 12 months, thanks in part to expected payments from the U.S. Department of Defense's Chemical and Biological Defense Program.
It would be a huge disaster for shareholders if SRPT didn't get their taxpayer money. Sooner than later, the company will have to strike a strategic alliance with a pharma or biotech, complete with fat milestone payments. Now that Phase IIb results are public, iStock believes some major players will at least start sniffing.
Overall, it is iStock's view that Sarepta Therapeutics, Inc. (SRPT) is only for your speculative investment dollars. This is an Adam Dunn stock; the ball will either leave the yard in spectacular fashion or strikeout ingloriously.