I have been an investor for Sarepta for many years and was able to navigate the wild swing quite successfully. Recently I sold at $40 twice and was able to send a strong warning about the negative briefing document to my subscribers before the recent collapse. I bought back my positions not long ago at around $10–13/share. This is what I think may happen in the next two months.
Why was I able to make so many correct calls? I have been an investor in Sarepta for years and have a deep understanding of its situation. Let's talk about a few commons myths or mistakes that investors made in the past few years.
Myth: FDA is a solid team that works together.
"The trading will be wild depending on the briefing document."
Fact: There are differences within the FDA, sometimes contentious. Last year, the FDA directors overwrote the objection to approve flibanserin despite of the negative opinions from the division reviewers. This is a perfect example. My understanding is that eteplirsen was disliked by the Peripheral and Central Nervous System (PCNS) division for a long time. The reviewers, headed by Dr. Ronald Farkas, disliked historical controls. You can find their point of views in many talks they gave in the past years. However, a new law has passed. The FDA Safety and Innovation Act (FDASIA) was passed in 2012 and FDA management has the responsibility to implement the new law. That is part of the reason Sarepta was allowed to file the new drug application (NDA).
Myth: FDA will do the "right thing" and reject the weak candidate based purely on science regardless of the "crying moms."
Fact: Lobbying does influence the FDA. In the recent approval of flibanserin, the women's group lobbying efforts reportedly played a key role in the approval process. You can Google the stories about the flibanserin approval and how lobbyists impacted it. In Sarepta's case, the lobby efforts were overwhelming. One hundred and nine members of Congress sent a letter to the FDA demanding the eteplirsen approval! My understanding is that other letters, authored by senators, are heading to the FDA soon as well.
Going forward for Sarepta, what do we expect? First, I see there is a good chance that we will receive another negative briefing document in early April. It is hard to imagine the FDA division will change much in a couple of months. My rough estimate is that we will have 70–80% chance of another negative briefing document, but we will have 70–80% chance of approval at the end. I believe eteplirsen has a much stronger case than flibanserin for two reasons: 1) it is life-and-death situation, and 2) it is only a conditional approval, but not a full approval as for flibanserin.
"I have always been a believer of eteplirsen."
In terms of trading, since I strongly recommended my subscribers load up Sarepta from $10–13/share recently, I am actually advising everyone to trim some here close to $20. We have a good chance to see another negative briefing document and have another buying opportunity. As long as the FDA allows ADCOM to vote on the approval of eteplirsen, I believe we will have a very good chance to see the positive results. There is a possibility that the FDA division will tune down the negativity in the new briefing document (i.e., it is still negative, but less negative). It should be viewed as positive. I will have to read through the new briefing document first.
Sarepta is a heavily shorted stock. Even on a slightly positive briefing document, the shorts may be forced to cover. The trading will be wild depending on the briefing document.
Finally, I have been investing in Sarepta for many years. I have always been a believer of eteplirsen despite the doubts of the FDA. I supported the Jett Foundation and lobbied my congressmen. I am planning to travel to College Park to attend the ADCOM on 4/25. I wish to witness the history! I sincerely hope we will have the long-awaited good news for these DMD boys this summer!
Chen Lin writes the popular stock newsletter What Is Chen Buying? What Is Chen Selling?, published and distributed by Taylor Hard Money Advisors, Inc. While a doctoral candidate in aeronautical engineering at Princeton, Chen found his investment strategies were so profitable that he put his Ph.D. on the back burner. He employs a value-oriented approach and often demonstrates excellent market timing due to his exceptional technical analysis.
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Chart provided by Chen Lin.
1) Chen Lin: I own, or my family owns, shares of the following companies mentioned in this interview: Sarepta Therapeutics stocks and call options. I personally am, or my family is, paid by the following companies mentioned in this interview: None. My company has a financial relationship with the following companies mentioned in this interview: None. I was not paid by Streetwise Reports for this article. Comments and opinions expressed are my own comments and opinions. I determined and had final say over which companies would be included based on my research. I am responsible for the content of the interview.
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