Biotech gamblers crowd high-stakes game for Sarepta

For most biotechs, the sit-down with the FDA after a positive Phase II study is a fairly routine affair designed to point them down the path to a pivotal program. For Sarepta Therapeutics ($SRPT), though, it represents a strategic crossroad rarely seen in this industry. In one direction lies a lengthy Phase III trial, while the other path points straight to a major new market for Duchenne muscular dystrophy, a terrible affliction faced by a small group of boys.

And there's a fortune on the table now as bets are made over which road Sarepta chooses.

Sarepta had its FDA meeting sometime in March. Now the anticipation is growing by the day whether the biotech detected enough encouragement from regulators to file now for an accelerated approval or will be forced to go back to the drawing board to mount a Phase III study. For DMD patients and their families, it's a shot at something meaningful relatively quickly. But for investors, who have doubled the share price of Sarepta in a matter of months, puffing up its market cap to $1.1 billion, it's the biggest gamble of the day. The winners will score big. The losers will likely wish they never heard of the company or its drug eteplirsen.

To see why this program is in the spotlight, you need only burrow into a new Reuters story on Sarepta. Analysts say that an accelerated approval of eteplirsen would usher in a new drug that could fetch anywhere from $350,000 to $450,000 a year, a haul even in the rare disease field, where six-figure prices are now routine. Conservatively, Wedbush's Christopher Marai tells Reuters that would translate into $400 million to $600 million.

What usually is overlooked in these stories, though, is that a win now would allow Sarepta, which reorganized under new CEO Chris Garabedian after he took over the long overlooked AVI, to steal a march on another late-stage DMD drug in development by GlaxoSmithKline ($GSK) and Prosensa. A delay for Phase III--seen as a standard requirement in drug development--would force biotech gamblers to assess the threat that another therapy could make it to the DMD market first.

For now, investors are waiting anxiously to get the verdict sometime later this month. And with a turn of the card, fortunes will be made or lost. And that's well before the FDA even makes up its mind on any potential new drug applications. 

- here's the Reuters story