Sarepta (SRPT) Deal with Summit Removes a Competitive Threat and Increases its Takeover Attractiveness - RBC

October 4, 2016 9:01 AM EDT
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Price: $42.12 -5.43%

Rating Summary:
    16 Buy, 9 Hold, 1 Sell

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    Up: 23 | Down: 24 | New: 8
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RBC Capital analyst Simos Simeonidis said he likes Sarepta Therapeutic (NASDAQ: SRPT) EU/LatAm partnership with Summit (NASDAQ: SMMT), as it removes a potential competitive threat with just $40M for access to competitor's drugs. He also said it makes the Sarepta more attractive as a takeover.

"Buying into this early-stage potential competitor protects the downside, allows participation in the upside, makes Sarepta even more attractive M&A candidate," he said. "Summit's small molecule utrophin modulator ezutromid is too early in development (some early data will be available around mid-2017) and we have very little visibility into its efficacy or safety (see back of our report for exhibits with the available data). However, we like Sarepta's move of spending a relatively small amount ($40M) to access this theoretical competitor, primarily because it eliminates/diminishes the potential overhang that would be created should this agent produce positive data in 2017. In the event that ezutromid becomes an actual drug, Sarepta owns EU and (for just another $5M) Latin American rights, allowing the company to participate in the upside. In addition, this would add to Sarepta's attractiveness to an acquirer that would be interested in having access not only to the first commercial product for DMD, but potential follow-on products in the space."

The firm maintained an Outperform rating and price target of $108 on SRPT.

For an analyst ratings summary and ratings history on Sarepta Therapeutic click here. For more ratings news on Sarepta Therapeutic click here.

Shares of Sarepta Therapeutic closed at $60.95 yesterday.

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