One of Sarepta Therapeutics’ competitors has just been defeated. Will this help stocks?

In biotechnology, it is often difficult to tell whether bad news for one company will be bad news for a competitor, or vice versa. Between using different approaches to developing treatments, working with regulatory frameworks in different countries, and targeting different patient populations within the same market, there is a combination of possibilities that investors will need to untangle before they can build a firm hunch about whether a new event will be benign. There are a lot. or not.

For biotechnology, which mainly deals with rare diseases such as: Sarepta treatment, (SRPT -0.40%) You might think the picture is a little clearer, but it’s not. Let’s analyze a pitfall that one of Sarepta’s competitors has just experienced, and then determine whether this could help or hurt the stock in the coming years.

The competitive landscape may become less

Sarepta’s business is developing and marketing medicines to treat Duchenne muscular dystrophy (DMD), a rare, progressive and ultimately fatal neuromuscular disease that begins to affect patients at a very young age. Sales of four commercialized drugs bring 12-month revenue to $1.1 billion, and with a handful of clinical-stage programs in the pipeline, there could be more growth in the long-term. But this is not the only biotech targeting the DMD market.

PTC treatment (PTCT 1.03%) They make a DMD treatment called Translarna. Translarna received conditional approval in the European Union in 2014 and has since received conditional re-approval several times. But so far, despite repeated attempts to gain approval, there has been no success in getting U.S. regulators to follow suit.

Now, following a statement from the European Medicines Agency (EMA) on January 26, the regulatory committee has voted against renewing the drug’s conditional approval for sale in the EU. To reach a consensus, they cited several different studies, stating: There was insufficient evidence available on the efficacy of the treatment to continue administering it to patients.

If the European Commission ratifies the commission’s vote in a vote in early April, the drug will be taken off the market after failing to change its conditional status to a more permanent one. Considering that the company earned $355 million in 2023 alone, this decision would be disastrous for PTC. But if that happens, could PTC’s downfall help Sarepta?

PTC’s loss, Sarepta’s gain?

Unfortunately for Sarepta’s shareholders, PTC’s fight over Translarna probably won’t help in the short term in any way and may actually create new headwinds.

Simply put, none of Sarepta’s medicines have been approved for sale in the EU, and while that effort is unlikely to stop, regulators at the EMA have rejected several petitions for approval over the years. At least in the short term, PTC will not be able to gain any of the European market share it stands to lose.

Moreover, PTC now has more incentive to get its drugs approved in the United States. The biotech company plans to meet with the Food and Drug Administration (FDA) during the first quarter to discuss resubmitting Translarna’s approval application. The possibility of the two companies sharing a market is technically possible, but not something to be expected.

That said, PTC’s exit from the EU could herald aggressive efforts to compete in the U.S. if the FDA allows it. Nonetheless, despite these potential headwinds, in late June of last year, Sarepta’s DMD gene therapy Elevidys received approval from the FDA. Ahead of its fourth-quarter earnings update scheduled for late February, management reported that sales of the therapy amounted to about $204 million in 2023. More sales are likely to occur in 2024, the first year the treatment is on the market.

So is Sarepta’s stock doomed? No, far from it. If you need to worry about PTC anyway, it will take at least a year to establish itself in the US market with its newest product. At the same time, this doesn’t mean investors should rush to buy.

As brave as the company’s efforts to treat and cure DMD are, the difficult-to-treat disease makes it a difficult niche for a biopharmaceutical business to succeed in, and regulators on both sides of the Atlantic appear to be taking a skeptical stance. After receiving provisional approval. Overall, there are better, less risky biotech stocks to invest in, so pass on this one.