When Sarepta announced back in November that there would not be an AdCom panel for their SRP-9001 gene therapy for DMD, it was a little surprising but generally viewed as positive.  When Sarepta announced in March that the FDA reversed course, and an AdCom would be held (it is set for May 12), it was a larger surprise and confused many about the reversal.  Was this a positive or negative change?  A recent press report of the bureaucratic dispute inside the FDA provides some context for the whiplash and could have some important implications (or not), as we will see later.

I have a rule of thumb that when politics get involved in biotech one should be quite cautious as it adds a layer of uncertainty and unpredictability that cannot be modelled very well.  Science is difficult in and of itself and even if one assumes a completely rational process at the FDA, it remains a fact that nothing is 100% clear and opinions can reasonably differ.  We can interpret the data ourselves and handicap the odds that others will share similar views and come up with a risk/reward opinion that maximizes one’s chance to make a profitable investment decision but what happens when you deposit politics on top of the uncertainty of science?

Bureaucratic politics spoils the water in ways that make rational analysis difficult if not impossible.  It is challenging enough to analyze simply on the science but layering bureaucratic politics and personal bias in the situation means that no one has an edge on what may or may not happen.  This article has a good overview of the bureaucratic model versus the rational even if it is not related to biotech, but it gives a good sense of how it adds to uncertainty.  I think part of investing is knowing when you cannot get an edge on the situation; my line is when bureaucratic politics enters the equation (to be fair it always plays a rule, and it is likely more the scale of that involvement).

So, what do we know about the situation at the FDA and Sarepta?  Peter Marks, the Director of CBER, seems positively inclined to accelerated approval.  While I think we should be cautious about reports in the press as they might have their own agenda and bias, Peter Marks made an argument about accelerated approvals of gene therapies at a recent MDA conference and the report about his views seems fairly consistent.  I think it is a reasonable assessment that Peter Marks has a positive view about the accelerated approval process for Sarepta.

The report suggests that the lower-level employees were disinclined to even initially review the application and Marks intervened to start the review process.  The review, however, appeared ready to reject the application and Marks pushed for the AdCom as a way to save the accelerated approval.  There is then the role of Wilson Bryan, who has recently left the FDA, who might have played a role in leading the push against accelerated approval.  This story explains the changing guidance of no AdCom to AdCom and implies that the addition of the AdCom is a way to increase the odds of accelerated approval.

So, of all of the speculation, what can we actually know?  Really nothing, outside of the fact that there is political infighting at the FDA over this application.  The fact that people went to the press (even if anonymous) is a very clear signal that there is bureaucratic politics at work.  Even if one does not believe that article, the fact that it happened means politics has been involved and this is my main takeaway.  One can debate the details of the infighting and the validity of the alleged positions at the FDA, but it is very clear that there is internal strife. (For example, see this article that goes back to 2016.)

What does this mean now for accelerated approval?  Uncertainty.  As I noted at the top, when politics gets involved, it adds a layer of uncertainty that I do not think anyone has an edge on predicting the outcomes.  Can Peter Marks intervene and create a set of briefing documents that are good for Sarepta, or will the briefing documents represent the more negative views of the application?  Both are possible.  How will the panelists (who I believe will be putting in a good faith effort to evaluate the merits of the science and application) respond to the science and what might be political pressure?  A complete unknown at this point.

There is also a wild card at work as well, which is the phase III EMBARK data coming in the second half of 2023.  This is probably the biggest threat to the accelerated approval from the AdCom perspective.  Why?  If we assume that the panel is scientists making a good faith effort but who also understand this is tied into political infighting, would they not simply lean towards waiting for phase III data?  Scientists tend to like more data as opposed to less and pushing the decision until later in the year with more data might be the middle road that balances all the competing interests.

The EMBARK study, however, is also why most of this does not matter in the medium term.  The EMBARK data will drive the long-term potential of the gene therapy dramatically more than anything that happens at the AdCom or the accelerated approval process.  What happens if there is a CRL and the EMBARK data comes back quite strong?  Then clearly Sarepta applies for full approval and gets it and has a commercial winner on their hands.  The launch would be delayed but it would still be strong in this scenario.  What if the accelerated approval is granted and the EMBARK data are weak?  Either the therapy is removed from the market or payor pushback is such that the commercial potential is severely limited.

Given the importance of the EMBARK data and its proximity to this accelerated approval decision, this is why I think it might sway some to push for waiting for the data.  That being said, this is political, and anything is possible and so I am going to wait for this to settle and the EMBARK data to be announced and analyze the situation at that point.  Getting ahead of politics is a risk I do not like but ultimately, I still think this is all noise as we get a much more robust read of the gene therapy efficacy by the end of the year and can review the situation at that point when there is significantly less uncertainty.

It may be a reflection of my own bias about not wanting to handicap bureaucratic politics and my desire to have as much data as possible, but I think it is the EMBARK data that really matters.  The accelerated approval drama will certainly drive the short-term price action in the stock but the long-term valuation of Sarepta will be driven by the EMBARK data and so that is my focus.

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