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Structure of Summit deal is beneficial to Sarepta, Wedbush believes

Tuesday, October 4, 2016 13:09
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Sarepta Therapeutics Inc’s (NASDAQ:SRPT) deal with the UK’s Summit Therapeutics (NASDAQ:SMMT) is a low-risk/high-reward option for the US company, according to Wedbush Securities.

Sarepta will contribute to the development of Summit’s potentially breakthrough treatment for Duchenne muscular dystrophy (DMD), a muscle wasting disease that affects boys, in return for European rights and a Latin America option.

Summit is testing two formulations of its lead candidate ezutromid in the proof of concept study.

Ezutromid is a utrophin modulator and acts as a potential disease-modifying treatment for all patients regardless of their underlying dystrophin gene mutation.

“Its proof-of-concept study is open label with MRI as a primary endpoint; muscle biopsy data at 24 weeks are expected in 2Q/3Q 2017. A placebo controlled study is slated to begin later next year. Beyond ezutromid, Summit is working with its Oxford collaborators on next-generation utrophin modulators; Sarepta has rights to both ezutromid and its pipeline,” Wedbush noted.

Sarepta will pay a US$40mln up-front fee to Summit. It will also pay a clinical milestone of US$22mln when the last patient is dosed in ‘PhaseOut DMD’. The phase II trial of ezutromid, on or after April 2017 with the potential for an additional US$20mln in development milestones for ezutromid and US$65mln for the pipeline, US$150mln in regulatory milestones for ezutromid and US$225mln for its pipeline with US$330mln in sales milestones by product.

After December 2017, Sarepta will contribute 45% to research & development costs with a committed minimum spend prior to the end of 2019.

“In our view, this deal structure is beneficial to Sarepta, with a commitment to development only after proof-of-concept data are obtained,” Wedbush said.

The broker reiterated its ‘outperform’ rating and US$66 price target for Sarepta.

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