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* FDA questions drug trial design, says approval applicationpremature
* FDA suggests company may need to do larger trial
* Analysts say there's almost no chance of an early approval
* At least three brokerages downgrade stock
* Stock drop wipes off $750 mln of Sarepta's market value (Adds details, analyst comment; updates share price)
By Esha Dey
Nov 12 (Reuters) - Sarepta Therapeutics Inc lostmore than 60 percent of its market value after it was advised bythe U.S. health regulator to find new ways to test its flagshiptreatment for a rare muscle disorder.
The U.S. Food and Drug Administration (FDA), citing new dataand the failed trial of a competing drug, said the design andgoals of Sarepta's current trial might not be sufficient to winmarketing approval for its drug.
Sarepta's shares fell 62 percent, wiping more than $750million off the company's market value and making the stock thebiggest percentage loser on the Nasdaq on Tuesday afternoon. Atleast three brokerages downgraded the stock.
"Everything I thought could have gone wrong has gone wrong -and then more stuff has gone wrong," said Chad Messer, ananalyst at investment banking and asset management firm Needham& Co, who downgraded Sarepta's stock to "hold" from "buy".
Sarepta is developing the drug, eteplirsen, as a treatmentfor Duchenne muscular dystrophy (DMD), a degenerative disorderthat hampers muscle movement and affects one in 3,600 newbornboys.
Investors had been betting on a breakthrough.
Before Tuesday's fall, Sarepta's stock had more than doubledsince October 2012, when data from a mid-stage trial showed thateteplirsen significantly improved walking ability in DMDpatients.
But the FDA has now suggested that eteplirsen be testedagainst a placebo in a new, and potentially larger, trial,Sarepta said on Tuesday.
A placebo-controlled trial, it said, would be better thancurrent trials in removing bias in walking ability that might besusceptible to individual effort or patient care.
"...It seems worthwhile to consider selection of otherendpoints and/or populations for the next trial of eteplirsen,"Sarepta said it was told by the FDA in a meeting last week.
In its remarks, the FDA cited the recent failure of thetrial of a rival drug, drisapersen, being developed byGlaxoSmithKline and Prosensa Holding NV.
That drug, like eteplirsen, works by increasing theproduction of a protein called dystrophin, the lack of which isthe chief cause of DMD.
It failed to show a statistically significant improvement inthe distance that DMD patients could walk in six minutescompared with placebo in a late-stage trial in September.
Prosensa's shares, which had lost about 85 percent of theirvalue since the announcement of drisapersen's trial failure,were up 19 percent on Tuesday.
DOWNGRADES
Sarepta, previously known as AVI Biopharma, has gone morethan three decades without bringing a drug to market. Analystshad previously said that they expected the company to ask foreteplirsen's approval to be accelerated.
Sarepta said the FDA request would delay the initiation ofdosing in a confirmatory study until at least the second quarterof 2014. A follow-up meeting with the regulator to discuss theconfirmatory study design is scheduled this month.
"The likelihood of an accelerated approval at this point isvery low. It seems like a long shot to me that the FDA is goingto reverse position," said Edward Tenthoff, analyst at PiperJaffray.
Tenthoff, who cut his price target on the stock to $20 from$58, said he expected the FDA to require a confirmatory studywith a two-year follow-up, which could delay the potentialapproval of eteplirsen to late 2017 or early 2018.
Both Tenthoff and Needham & Co's Messer said the FDA andSarepta would probably need to agree a new endpoint for trials,given the regulator's concerns about the six-minute-walk trial.
"They thought they will be able to file early on limiteddata," said Messer. "The FDA is not only saying forget aboutthat, they probably also cannot do a full filing, and now it'seven questionable as to what the next study has to look like."
Janney Capital Markets also downgraded Sarepta's stock to"sell" from "neutral," while Leerink Swann cut its price targetto $17 from $44.
Sarepta's shares were down 62 percent at $14.06 in earlyafternoon trading. (Editing by Robin Paxton)
