Biotech

Bhavneesh Sharma

Top 20 Ranking (28.2% Avg Return) --TipRanks

Shorting Solid Biosciences Stock (SLDB)

Solid Biosciences (SLDB) stock was up 43% on Friday after an upgrade to Buy by Chardan Capital’s analyst Gbola Amusa. Amusa upgraded the stock from Neutral to Buy based on an update on two patients dosed in a Phase I/II study of its AAV based gene therapy SGT-001 in treating Duchenne Muscular Dystrophy, DMD. The analyst also mentioned that "SGT-001 has certain advantages over the leader in DMD gene therapy space, Sarepta Therapeutics (SRPT) like lower manufacturing cost and more scalable manufacturing". The analyst also mentioned Sarepta in a negative way mentioning that "it utilizes less-scalable adherent processes that may limit supply and may mean that Sarepta’s gene therapy could cost more per patient to manufacture". The analyst raised the price target on the stock to $10 (from $7.50). The stock closed on Friday at $8.81 after 43% pop (with intraday high at $9.03).

Here is what Tipranks has to say about Amusa’s performance on Solid Biosciences stock.

Meanwhile, insiders have been selling the stock all year, including the management. I pay more attention to management selling. Some institutional investors like Cormorant Asset management sold all the stake.

(Source: Insidercow.com)

It is important to note here that Solid Biosciences stock is heavily shorted since its gene therapy showed safety concerns and FDA placed a clinical hold on its DMD gene therapy trials. Short-covering could largely explain the pop in the stock price seen on Friday.

I had published a ‘Sell’ rating in my initiation article after the stock's IPO in February 2018. In my article summary given below, I highlighted the safety issues of the company’s DMD gene therapy program and also considered the stock overvalued based on the lead in DMD gene therapy by other companies like Sarepta and Pfizer (Sarepta meanwhile has merged as a clear winner in DMD gene therapy field over Pfizer).

(Source)

 

The safety concerns in early trials were proven true eventually. The stock reached a high of $35/share after the IPO and subsequently collapsed after FDA placed a clinical hold on its gene therapy trials due to safety concerns reaching an all time low of $4.03/share.

 

(Source)

Safety concerns were also seen this year in the preliminary data from the ongoing Phase I/II IGNITE trial for SGT-001 in DMD after signs of immunogenicity as seen by an increase in serum bilirubin and thrombocytopenia were seen, both of which were considered related to the gene therapy.

 

 

(Source)

In the latest corporate update released this month, Solid Biosciences also dropped the placebo arm in its ongoing Phase I/II IGNITE trial (mentioning that they were doing it to ‘expedite’ enrollment) though rival Sarepta is running the gold standard randomized, placebo-controlled trial for its microdystrophin DMD gene therapy (already dosed 24 patients in SRP-9001-102 trial). Notably, Solid Biosciences is also using the AAV9 vector and Pfizer’s DMD gene therapy showed safety concerns as well using the same vector due to high immunogenicity (Sarepta is using AAVrh74 vector in DMD gene therapy trials).

The company also amended the protocol capping the patient weight in IGNITE trial to 25 kg, so they are not enrolling patients with a higher weight, limiting the target population of DMD patients. The apparent reason appears due to a limitation on the company’s ability to scale manufacturing for SGT-001.

 

(Source)

Meanwhile, the company’s issues with non-transparency continue. There is no webcast of Q2 earnings call on its website released on August 14 this year (which is a standard with biotech companies) for more details on the latest changes in its DMD gene therapy program (apparently only Mr. Amusa was provided access to it). The last corporate presentation is dated March 2019 and has not been updated.

I am not optimistic on the prospects of Solid Biosciences’ DMD gene therapy program and consider the future probability of safety issues resulting in repeat FDA clinical hold as high. Also, with Sarepta showing better safety profile in its DMD gene therapy program, already having a commercial team in place which is identifying and accessing DMD patients (due to its approved product Exondys and soon to be approved Golodirsen, I consider it the best name in DMD gene therapy space (I am not going to talk about an agenda going on in some biotech media to bash Sarepta).

Disclaimer:

This article represents my own opinion and is not a substitute for professional investment advice. It does not represent a solicitation to buy or sell any security. Investors should do their own research and consult their financial advisor before making any investment. Investing in equities, especially biotech stocks has the risk of significant losses and may not be suitable for all investors. While the sources of information and data in this article have been checked, their accuracy cannot be completely guaranteed. Shorting stocks is risky and may not be suitable for all investors.

I am short SLDB with timeframe of 1-2 years. Long SRPT.

 

Bhavneesh Sharma covers biotech as one of the original contributing analysts at FATRADER. A market expert with a medical degree and MBA, he is ranked among the top 15 financial bloggers and top 100 overall financial experts (including Wall Street analysts) on TipRanks.
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