Market Watch US4 Oct 2016 20:06
Summit Therapeutics’ collaboration with an until recently little-known biotech company caused its stock to more than double Tuesday, bringing it to as much as $17.41, the highest price in its year-and-a-half as a publicly traded company.
The eye-popping move was buoyed by recently-christened biotech darling Sarepta Therapeutics Inc. SRPT, +0.33% which analysts turned unequivocally bullish on after its Duchenne muscular dystrophy drug scored a controversial approval from the Food and Drug Administration in mid-September, making it the rare disease’s first approved treatment.
The two companies’ $40 million license and collaboration agreement, announced Tuesday morning, was a “smart move: a small price to pay to buy into (potential) competition” and a way to sweeten the pot for an eventual acquisition of Sarepta, said RBC Capital Markets’ Simos Simeonidis.
Under the agreement, Sarepta gains European rights and an option to license Latin American rights on Summit’s SMMT, +82.17% DMD pipeline, including its lead DMD drug. Summit and Sarepta will also share research and development costs, and Summit can qualify for up to $522 million in milestone payments.
Analysts have speculated about Sarepta’s purchase since the company’s Exondys 51 became the first approved treatment for the rare DMD disease, over significant internal opposition at the FDA and after significant championing by patients and their families.
The disease, which primarily affects males, typically begins affecting patients early in life and kills them before the age of 30. DMD is estimated to affect one in every 3,500 to 5,000 males globally.
Read: At $300,000 a year, Sarepta’s new drug is considered a steal
Noting that Summit’s lead drug candidate is “too early in development (some early data will be available around mid-2017) and we have very little visibility into its efficacy or safety,” Simeonidis said that it was a positive move for Sarepta nonetheless.
See: Sarepta’s controversial Duchenne muscular dystrophy drug was contested right up to approval
Sarepta was able to spend “a relatively small amount ($40M) to access this theoretical competitor... it eliminates/diminishes the potential overhang that would be created should this agent produce positive data in 2017,” he said. What’s more, “this would add to Sarepta’s attractiveness to an acquirer that would be interested in having access not only to the first commercial product for DMD, but potential follow-on products in the space.”
Should Summit’s lead candidate ezutromid eventually gain approval, it “could act as a foundational therapy applicable to all DMD patients,” Janney analyst Debjit Chattopadhyay said, in contrast with Sarepta’s Exondys 51, which should treat about 13% of DMD patients.
Read: Sarepta stock jumps 82% on approval of controversial Du
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