SMA drugmaker Scholar Rock may jump on upcoming FDA decision, Freedom Broker thinks

Freedom Broker has issued a short-term trade idea to buy shares of biotech company Scholar Rock ahead of a U.S. regulator’s ruling on the registration of its drug for spinal muscular atrophy (SMA). If approved, analysts said, apitegromab could mark a new era in neuromuscular disease therapy and drive a nearly 40% rise in the stock over the next two months.

In a note seen by Oninvest, Freedom Broker recommends investors watch Scholar Rock closely before the FDA announces its decision on its lead drug apitegromab, scheduled for September 22. The analysts set a two-month target price of $45 per share, implying about 38% upside from the August 29 close (U.S. markets were shut on September 1 for Labor Day).

If approved, apitegromab would become Scholar Rock’s first commercialized product and the first biologic therapy designed to block myostatin, a protein that inhibits muscle growth. By blocking myostatin, the drug allows muscle mass to build up.

The treatment was tested in patients with SMA, a neuromuscular disease affecting roughly one in 10,000 newborns. Patients lack the SMN1 protein needed for motor neuron survival, and the backup SMN2 gene is insufficient. Without therapy, the disease causes progressive muscle weakness and can lead to death from respiratory failure.

The results of the third and final stage of clinical trials of apitegromab showed improvement in motor function, the company reported on October 7 of last year. Almost a third of study participants who received the drug showed an increase of more than three points on the motor function assessment scale, versus 12.5% of patients on placebo. This result is considered clinically significant, which allowed Scholar Rock to apply for registration of the drug. On the day the trial results were published, the company’s shares surged almost 362%.

Freedom Broker estimates that, if approved by the FDA, apitegromab will become available to patients in the U.S. as early as this year, and in the EU next year. In an October 2024 note quoted by Barron's, Jefferies analyst Michael Yee wrote that he expects the drug’s sales could eventually hit $1 billion to $1.5 billion a year. 

Freedom Broker points out that Scholar Rock’s drug could potentially be used not only in SMA but also in other neuromuscular diseases, such as Duchenne muscular dystrophy and facioscapulohumeral muscular dystrophy. The company is also testing it for weight loss.  

The first therapy for SMA appeared only in 2016, when Biogen registered Spinraza (nusinersen) in the U.S. Later, Roche introduced Evrysdi (risdiplam). Both drugs work by increasing the amount of SMN2 protein, essentially preventing the disease from progressing and the patient from losing motor function. The third existing drug on the market, Zolgensma from Novartis, is a gene therapy. Novartis also worked on a drug targeting SMN2 function, but abandoned its development.

Scholar Rock shares have surged 250% over the last 12 months but are down more than 24% year to date. According to MarketWatch, all 10 analyst recommendations on the stock are “buy.” The average target price of $50 per share implies 53% upside from current quotes.

The AI translation of this story was reviewed by a human editor.