GlaxoSmithKline plc (ADR) (GSK), Sarepta Therapeutics Inc (SRPT): Telecoms Disconnected as These Two Stocks Tumbled

So much for the big correction. Although the Dow Jones Industrial Average didn’t completely regain all the ground it lost the day before, the 157-point jump it did register yesterday marked its second biggest day of the year, bested only by the first day of trading in 2013, when it came roaring out of the gate 308 points higher.

There were only two losers among the index’s components, notably its two telecoms, Verizon Communications Inc. (NYSE:VZ) and AT&T Inc. (NYSE:T), yet the former was down less than half a percent while Ma Bell merely lost a penny. No doubt the market is still mulling the $1.5 billion bid Verizon Communications Inc. (NYSE:VZ) made for the spectrum owned by Clearwire Corporation (NASDAQ:CLWR) at the same time DISH Network Corp (NASDAQ:DISH) offered to purchase Sprint Nextel Corporation (NYSE:S) for more than $25 billion. With T-Mobile still in the mix to buy MetroPCS Communications Inc (NYSE:PCS), there’s suddenly a lot more potentially strong competition on the horizon for the Verizon Communications Inc. (NYSE:VZ)-AT&T Inc. (NYSE:T) hegemony.

Spectrum is the key to it all and was the driver behind Japan’s Softbank making a play for Sprint Nextel Corporation (NYSE:S) and Clearwire Corporation (NASDAQ:CLWR). As I noted yesterday, Verizon Communications Inc. (NYSE:VZ) has been quietly accumulating a lot of spectrum itself, though there remain a lot of regulatory hurdles that might not be so easily cleared.

Putting the cart before the horse
Last week after GlaxoSmithKline plc (ADR) (NYSE:GSK) reported positive data for its “exon skipping” Duchenne muscular dystrophy therapy drisapersen, Sarepta Therapeutics Inc (NASDAQ:SRPT) investors were buoyant over the probability that its own exon-skipping treatment eteplirsen would be favorably received when it came up for FDA review. Yet instead of rolling out the welcome wagon, the regulators asked for more data before they’d approve it for fast-track designation, causing Sarepta Therapeutics Inc (NASDAQ:SRPT)’s stock to fall 13% on the news

“Exon skipping” allows strands of genes, which are sections of DNA containing instructions for the production of one specific protein, to skip over dysfunctional segments and still complete their mission. The drugs from both GlaxoSmithKline plc (ADR) (NYSE:GSK) and Sarepta Therapeutics Inc (NASDAQ:SRPT) are designed to skip over a section called exon 51 with molecular patches that allow the gene to splice itself together to complete the sequencing.

I noted before that there were a lot of assumptions being made to bridge the gap between positive data from one and approval for the other, and as has subsequently played out, that was simply a bridge too far. While many analysts have downgraded the stock as a result of the outcome, at least one believes the FDA inquiry indicates that there’s still a path for fast-track designation, and he increased his price target to $50 a share, a near-50% premium to where the stock now stands.