Biotech stocks rise following Prasad exit from FDA

Shares of several biotech names are on the rise on Wednesday after Vinay Prasad, a top regulator at the Food and Drug Administration, reportedly left the agency amid the controversy over how he handled Sarepta Therapeutic’s (SRPT) gene therapy. Leerink sees the news as positive for sentiment on genetic medicine approvals in rare disease.

PRASAD EXIT: Vinay Prasad is said to have stepped down as Director of the FDA’s Center for Biologics Evaluation and Research just three months after being appointed at the head of the division overseeing biological products including vaccines, blood and gene therapies. This comes on the heels of political backlash over his handling Sarepta Therapeutics’ gene therapy. Of note, FDA Commissioner Marty Makary and Prasad had requested Sarepta to stop shipping Elevidys, its treatment for Duchenne muscular dystrophy, following three patient deaths. This led some to criticize the agency for overstepping. On Monday, the FDA reversed the course abruptly and allowed Elevidys back on the market, with Prasad said to leave the agency the following day.

POSITIVE FOR GENETIC MEDICINE: Commenting on the news, Leerink says that with a replacement likely to lean further toward “right to try” than Prasad, it sees this as positive for sentiment on genetic medicine approvals in rare disease. For vaccines, the “MAHA”/RFK Jr. policy agenda remains firmly ascendant, making this news neutral to net-negative for that space, Leerink adds. Net-net, the firm views this development as a positive for rare disease and genetic medicines, negative for vaccines, and unclear for oncology.

NEW UNCERTAINTY: Stifel says that “reading the tea leaves from the reporting,” it seems like he was probably pushed out via higher political pressures after the recent saga with Sarepta. It’s entirely possible that this ends up being good for certain areas within biotech, argues the firm. While Prasad in recent public forums remained vocal around FDA flexibility, it was very much too-be-determined to what degree that would be put into practice and, Sarepta situation aside, Stifel says it has seen a string of CRLs at CBER that have some investors questioning the “realness” of other companies’ reportedly flexible regulatory agreements. However, the net negative here is near term, this creates significant uncertainty. Prasad was quickly elevated even beyond head of CBER and appeared to be Makary’s right-hand man in shaping FDA policy. With Prasad out, it is very uncertain who will be his replacement and who in HHS will have a voice in the process, the firm adds.

Overall, the departure of Prasad, a past critic of FDA and regulatory flexibility, including surrogate endpoints and accelerated approvals— less than 3 months into his tenure — marks another pivot in leadership for CBER, raising new uncertainty around the regulatory landscape for biologics, Barclays says in a research report to investors. Near term, the firm expects investors will pay close attention to stocks with upcoming regulatory milestones, including PDUFA dates, and/or alignment decisions on accelerated approval pathway. Of note, Replimune (REPL) was recently issued a complete response letter for its BLA for RP1 in combo with nivo for PD-1 refractory melanoma patients, due to issues around trial design and evidence of efficacy. This was especially surprising to Barclays given its Breakthrough Therapy Designation and prior alignment on confirmatory trial design. It remains unclear at this time if and how this leadership shift will impact Replimune’s recent FDA decision and path forward for RP1.

RALLY: BMO Capital analyst Evan Seigerman views the exit of Vinay Prasad, director of the FDA’s CBER, as a positive for the biopharma sector. A new director will likely be “more permissive of innovation” than what the firm has seen to date,” it tells investors in a research note. BMO expects Replimune to rally meaningfully on the news. The firm says, however, that it remains uncertain whether Replimune’s denial of RP1 will be reconsidered with a new CBER director.

PRICE ACTION: In morning trading, shares of Replimune are up over 85%, Capricor Therapeutics (CAPR) is up almost 18%, Rocket Pharmaceuticals (RCKT) is up about 8%, Sarepta Therapeutics is up more than 15%, UniQure (QURE) is up about 11.5%, and Biohaven (BHVN) is up almost 21%.