Biotech stock crashes 50% after disclosing bad news from the FDA

Shares of Sarepta Therapeutics crashed 50% in pre-market trading on Tuesday after the company disclosed some bad news from the Food and Drug Administration (FDA).

In a statement, the company said an FDA advisory committee did not recommend the approval of its drug eteplirsen, developed for a disease called Duchenne muscular dystrophy, or DMD.

“The advisory committee voted 3 — 7, with three abstentions, against finding substantial evidence based on the clinical results of the single historically controlled study (Study 201/202) that eteplirsen is effective for treatment of DMD (FDA Question #7),” the company said.

The disease is a rare disorder that affects one in every 3,500 to 5,000 males worldwide. It gradually but severely damages muscles, leading to premature death.

The FDA is not bound by panel recommendations, but considers them when reviewing new drug licence applications.

As with many pharma companies, investors make a hit-or-miss bet based on the possible success of a few key drugs that are in the pipeline. And so, if the prospect of any future earnings from the drug comes into doubt, they dump the shares of the company they had bet on.

Sarepta shares were halted for news pending, and fell 50% after trading resumed around 7:10 a.m. ET. Through Monday’s close, the stock had lost 61% this year.

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