Can Sarepta’s luck be repeated?

A huge surprise for Sarepta Therapeutics (SRPT) investors moonshot the stock price with an instant doubling yesterday. But if you listened to me, you may have not been surprised at all as I predicted this approval of the drug, eteplirsen, over a year ago.  Having said that, it was not a smooth journey at all for SRPT. On the contrary, it was a very turbulent road for it. Simply see how its stock prices have fluctuated in the past few years: Since 2012, the stock has gone from $3 to $45, back to $21, up to $55, back down to $12, up to $40, back down below $12, back to $25, and back to $12 again in May. It got hit especially hard when the FDA advisory board did not recommend to approve the drug early this year. Amazingly now the FDA has approved it under the tremendous political and ethic pressure.

 

So what do you do with your shares if you are the lucky one to have bought it? Well, Duchenne muscular dystrophy is a supper rare disease with only a few thousands of patients in the US. As such, you can bet SRPT will charge a lot for the drug. It has been announced that the treatment will cost $300,000 per year and that is virtually guaranteed that insurance companies will in no ways to deny the reimbursement. So SRPT will be doing quite well moving forward given its size. Technically its long-term trend is quite bullish. But the concern is about its short-term trend. It doubled yesterday and got further pushed up today. I think this has a lot to do with short squeeze. The 2 days of strong rally has pushed the stock to its all time high around $55 and it has been unbelievably overbought at the moment. I can hardly believe it has the strength to simply go significantly higher from here without coming back first. So in the near term, I think SRPT has a high risk of correction towards $40 or so. It would be a good buy for long term if it indeed comes down to that level.

 
So what could be the next one with a similar luck as SRPT? PTLA immediately comes to my mind. As I talked about it a few weeks ago, I think PTLA has a muchbetter chance to get an approval given its good clinical data. That FDA did not ask for an advisory board meeting is  strong evidence for their data quality. I strongly believe that it is just a matter of time for the approval if they don’t mess up with the requested manufacturing information. Technically PTLA is also showing a similar strength as SRPT prior to the approval. I feel quite good about PTLA!