Shares of Scholar Rock (SRRK 0.10%) shot 364% higher on Monday, Oct. 7, 2024. The market was reacting to surprisingly positive news regarding the clinical-stage drugmaker's lead candidate, apitegromab.
If you're like the vast majority of individual investors, you've never heard of Scholar Rock, apitegromab, or the muscle-wasting disease it could treat. Here's a quick look at the results that excited savvy biotech investors to see if the stock can continue climbing.
NASDAQ: SRRK
Key Data Points
Scholar Rock's surprising success
Apitegromab is an antibody that binds to another protein called myostatin, which normally works to limit muscle growth. It's being tested in the phase 3 Sapphire trial, which enrolled nonambulatory patients with type 2 and type 3 spinal muscular atrophy (SMA).
SMA is a genetic disorder that leads to a loss of motor neurons, which isn't great for the muscles they're attached to. Spinraza from Biogen and Evrysdi from Roche can prevent motor neurons from quitting, but they don't do anything to help rebuild muscle.
The Sapphire study enrolled 156 patients ages 2 through 12 plus a smaller exploratory group ages 13 through 21. Patients were already receiving standard care with either Spinraza or Evrysdi.
Adding apitegromab to standard care improved patient scores on the expanded Hammersmith functional motor scale (HFMSE) by 1.8 points on average for patients ages 2 through 12 who received either 10 mg or 20 mg per day of the oral suspension. This was the primary endpoint investigators set out to achieve.
Apitegromab also outperformed on a key secondary endpoint. After 12 months, 30.4% of patients improved by three or more points compared to just 12.5% of the placebo group.
Apitegromab could generate blockbuster sales
The reported improvements on the HFMSE scale might not seem like a big deal when you consider the maximum score is 66 points, but it's significant. For SMA patients who've lost motor function, just two points could mean the difference between standing unassisted for a few seconds or immediately collapsing in an uncoordinated heap.
Spinraza has been losing market share to Evrysdi, but it's still on pace to generate about $1.6 billion in top-line revenue for Biogen this year. Evrysdi is on pace to produce about $2 billion in top-line revenue for Roche this year. As a companion therapy for SMA, annual sales of apitegromab could pass $1 billion at their peak.
Wall Street is especially bullish for apitegromab and Scholar Rock because SMA isn't the only thing that can lead to muscle wasting. Analysts are particularly interested in potential combinations with anti-obesity medications such as tirzepatide, which Eli Lilly markets as Zepbound for obesity and Mounjaro for diabetes.
Tirzepatide launched in 2022 as a diabetes treatment, and sales have already achieved an annualized run rate of $17.3 billion despite its association with muscle loss. If adding apitegromab to tirzepatide and similar incoming drugs becomes standard practice, annual sales could reach several billion.
What's next for Scholar Rock
Scholar Rock intends to submit applications for marketing authorization of apitegromab as an SMA treatment to the U.S. Food and Drug Administration (FDA) and the European Medicines Agency in the first quarter of 2025.
Assuming the FDA accepts the impending application, a previously granted fast-track designation could speed up the review process from 10 months to six. In other words, Scholar Rock could start recording sales of its lead candidate as an SMA treatment by the end of next year.
Acceptance of an application for review and an approval decision aren't the only catalysts that could push Scholar Rock stock a lot higher in 2025. In the second quarter, the company expects to report top-line data from the phase 2 Embraze trial.
Embraze is enrolling about 100 patients who would like to weigh less and giving them either Wegovy from Novo Nordisk or Zepbound. Half will either receive apitegromab or a placebo. If the average loss of lean body mass is significantly higher in the placebo group, this stock could soar much further than it already has.
Time to buy?
At recent prices, Scholar Rock boasts a $2.5 billion market cap. This is an appropriate valuation for a company likely to earn approval for an SMA treatment late next year. That said, this stock's present valuation isn't pricing in any success for the Embraze trial.
Scholar Rock is a high-risk stock best avoided by most individual investors. If you have an extremely high tolerance for risk, though, adding some shares to a well-diversified portfolio could be a smart move right now.
