Sarepta Therapeutics Inc.'s new data in Duchenne muscular dystrophy (DMD) ought to have provided relief for investors worried about gene therapy competition from Pfizer Inc., but the stock hardly moved, possibly because Wall Street did not give enough weight to the first functional outcomes data from the North Star Ambulatory Assessment (NSAA) composite endpoint or put too much on the possible toxicity of super-high microdystrophin expression levels in the fourth patient tested.

Shares of Cambridge, Mass.-based Sarepta (NASDAQ:SRPT) closed Thursday at $142.84, down $4.54, as onlookers digested outcomes made public at the 23rd International Congress of the World Muscle Society in Mendoza, Argentina.

Jerry Mendell, with Sarepta's partner for the study, Nationwide Children's Hospital, presented updated phase I/II results in four boys from the gene therapy experiment testing AAVrh74.MHCK7.micro-dystrophin, showing a good safety profile after nine months of follow-up. Immunohistochemical (IHC) characterization turned up a mean 81.2 percent microdystrophin positive myofibers, and the Western Blot (WB) analysis showed a mean 74.3 percent change in microdystrophin levels post-treatment, findings up from the 38 percent measurement in three boys at 90 days, noted Piper Jaffray analyst Edward Tenthoff. The "magnitude and durability are impressive and [the] investigator noted 'close to normal,'" he said in a report. Translation into clinical benefit was noted with improvement in time to function tests, and Sarepta plans to start a pivotal trial in DMD by the end of the year. The gene therapy could address up to 70 percent of DMD boys and could gain accelerated approval in 2020, in Tenthoff's view.

H.C. Wainwright analyst Debjit Chattopadhyay liked the results, too, noting in a report that "the fourth patient clocked in at 160 percent with 96 percent positive fibers by IHC. WB analysis points to a mean increase of 182 percent of normal, which was markedly higher than the already robust numbers reported for the first three patients. Interestingly, functional data for patient four, who incidentally has the shortest follow-up, indicates that more microdystrophin might indeed be better as far as functional outcomes are concerned. Too much of a good thing is not necessarily a bad thing," he said.

Some questioned the high levels of microdystrophin expression vs. normal in the fourth patient, which showed a strong transduction correlated with the functional benefit but raised toxicity concerns. RBC Capital analyst Brian Abrahams didn't fret, saying in a report that his talks with a key opinion leader (KOL) described as "an expert DMD therapeutics researcher whose feedback further supported our view that this is not a worrisome issue." Instinet's Christopher Marai "discussed with several docs preclinical data for Sarepta's gene therapy construct and levels at which microdystrophin causes toxicity." Levels found in nonhuman primates and preclinical models to result in problems were 100 times the normal dystrophin in muscle cells and 50 times that in cardiac cells, he said. The Sarepta dystrophin-production data "will be difficult to top, further pushing Pfizer back in the competitive landscape."

In a report, Marai called Sarepta "a must-own biotech name."

During a conference call with investors, Sarepta's vice president of gene therapy, Louise Rodino-Klapac, said that "every single functional measure is improving" beyond what natural history would suggest. All patients showed significant decreases of serum creatine kinase (CK) levels at last measure, with a mean reduction of CK of over 78 percent from baseline.

It was Marai, guided by KOLs at the meeting, who homed in on the NSAA, a 17-item rating scale that is used to measure functional motor abilities in ambulant children, such as raising the head and hopping on one foot. "We recommend buying Sarepta post this data[set] that highlights a more robust and rapid functional benefit from gene therapy than initially anticipated, sets a high bar for potential Pfizer competition, and portends a rapid phase III trial."

Sarepta CEO Douglas Ingram said during a conference call with investors that "this is not a time for us to take a victory lap" but a time to do longer work and solidly prove the latest findings.

Instinet's Marai pointed to NSAA improvements of +8 at day 270, +8 at day 180, +4 at day 180, +6 at day 90, making for a 33 percent average improvement on the scoring system. "On an annualized basis, the improvement in NSAA is at least double what would be anticipated in this age cohort, where functional changes are evident on NSAA," he said. Based on the experience of KOLs, steroids would yield zero to +2 improvement on the measure over a year, so "the magnitude of improvement is unlikely to be driven by steroids alone."

One-year trial 'what's right for kids,' CEO says

Leerink's Joseph Schwartz said in a report that, "while patient variability as well as enzyme elevations may make some investors cautious, we continue to believe that microdystrophin gene therapies are on track to offer significant benefit in DMD." During the conference call, Sarepta offered striking home videos of gene therapy boys climbing stairs and jumping up from the floor.

CEO Ingram said that "there is a risk here [because] the results are so starkly inconsistent with natural history and improving across all of the time course. We don't want to find ourselves in a position where we over-interpret a small dataset and go for a very short trial and end up disappointing the community, or we create ambiguity. We've got to do what's right for the kids over the long term." Sarepta plans a one-year pivotal trial.

New York-based Pfizer in April started a phase Ib study with its mini-dystrophin gene therapy candidate, PF-06939926, in DMD. The first boy received an infusion of the mini-dystrophin gene on March 22, given under the supervision of principal investigator Edward Smith at Duke University Medical Center. Screening and enrollment of patients is expected to continue at up to four clinical research sites in the U.S., with early data expected in the first half of 2019, once all patients have been evaluated for one full year post-treatment.

In late August, Pfizer ended two studies evaluating myostatin candidate domagrozumab (PF-06252616) for DMD: a phase II safety and efficacy study and an open-label extension study. The phase II experiment did not meet its primary efficacy endpoint, which was to demonstrate a difference in the mean change from baseline in the four-stair climb measured in seconds after one year of treatment with domagrozumab as compared to placebo. Further evaluation of the totality of evidence including secondary endpoints did not support a significant treatment effect, the company said.

Cambridge, Mass.-based Scholar Rock Holding Corp. has a myostatin inhibitor program with SRK-015 to improve muscle strength and motor function in patients with spinal muscular atrophy. Though shares of the company, which went public in May, were clipped when the Pfizer news was disclosed, the pharma giant's news may not have surprised everyone, since domagrozumab was designed to build muscle without dealing with the problem underlying DMD, lack of dystrophin. SRK-015 could work in SMA because corrector therapies such as the approved Spinraza (nusinersen), from Cambridge, Mass.-based Biogen Inc., can attack the root problem, the missing SMN protein, letting SRK-015 follow as a muscle-growth generator. Spinraza increases production of full-length SMN protein by increasing the proportion of SMN2 mRNA transcripts that include exon 7.

Other companies, though, are trying the myostatin strategy in DMD, such as Roche Holding AG, of Basel, Switzerland, which has RG-6206 in phase II/III trials.

Biogen has waded into the myostatin muscle-enhancement pool as well, this summer paying Alivegen Inc., of Thousand Oaks, Calif., $27.5 million up front with potentially $535 million more for phase Ia-stage ALG-801 and preclinical ALG-802.