Shares of Sarepta Therapeutics (SRPT) are sharply higher following the announcement that the U.S. Food and Drug Administration extended its review of the company's eteplirsen for the treatment of Duchenne muscular dystrophy. While SunTrust and Piper Jaffray's analysts remain bearish on the prospects for the drug to get accelerated approval, Oppenheimer analyst Christopher Marai sees this delay as a positive sign, expecting approval soon.

DECISION POSTPONED: Sarepta Therapeutics announced that the FDA has notified the company that they are continuing the review and internal discussions related to its pending New Drug Application for eteplirsen and will not be able to complete their work by the Prescription Drug User Fee Act goal date of May 26. The FDA has also said that they will continue to work past the PDUFA goal date and strive to complete their work in as timely a manner as possible. Sarepta is seeking accelerated approval of its eterplirsen for the treatment of Duchenne muscular dystrophy, which received a negative vote from an FDA Advisory Committee on April 26.

REJECTION STILL EXPECTED: SunTrust analyst Edward Nash views this morning's rally in Sarepta's shares after the FDA failed to meet its eteplirsen goal review date as unwarranted. The FDA was also unable to complete the review of BioMarin's (BMRN) Duchenne muscular dystrophy treatment by the action date, but eventually issued a Complete Response Letter, or CRL, Nash pointed out to investors. He believes today's development should not be viewed as indicative for a favorable decision by the agency and continues to expect the FDA to reject eteplirsen.

WORST-CASE SCENARIO AVOIDED: Despite the FDA's announcement, Piper Jaffray analyst Edward Tenthoff still believes eteplirsen will not be approved based on the negative dystrophin analysis in FDA briefing docs and panel votes. The delay, however, does avoid the worst-case scenario of an immediate CRL for the Duchenne muscular dystrophy treatment, Tenthoff told investors. The analyst also recalled BioMarin's drisapersen case back in December with the FDA issuing a CRL in January. Tenthoff reiterated an Underweight rating and $6 price target on Sarepta's shares.

EXPECTING APPROVAL SOON: Oppenheimer's Marai does not expect this delay to be significant, given the unmet need, and sees an approval soon. However, the analyst noted that in oncology cases with close negative panel votes, PDUFA delays of up to 6 months have occurred. Recently, it appears delays tend to be preferable to CRL's in cases of high unmet need where data supports a positive benefit/risk, Marai pointed out, adding that this delay may provide time for Sarepta and FDA to negotiate a compromised label. Oppenheimer has an Outperform on Sarepta's shares.

PRICE ACTION: In afternoon trading, Sarepta's stock has advanced more than 19% to $22 per share.