Is This Stock a Buy After Soaring by 20% in 1 Day?

This year has been particularly challenging for Sarepta Therapeutics (SRPT), a biotech specializing in rare diseases treatment. The company’s stock has dropped by an impressive 88% so far this year, mainly due to safety concerns surrounding its primary commercial product, Elevidys (which we’ll delve into later).

Conversely, Sarepta’s stocks experienced a surge of approximately 20% within a single day following the announcement of their strategic plan. This strategy has sparked optimism among Wall Street analysts, who are interested to see if it could resolve the company’s existing challenges. So, let’s examine whether this news makes Sarepta’s stocks an attractive investment opportunity.

Sarepta makes a move

Instead of saying: “Sarepta Therapeutics’ Elevidys is a gene therapy for Duchenne muscular dystrophy (DMD), a rare genetic disorder marked by muscle deterioration over time. Unlike other treatments approved by the company, Elevidys addresses the root causes of DMD, making it Sarepta’s most critical and influential approved treatment to date. However, the firm has disclosed not one but two patient deaths that may be linked to Elevidys.”

You could rephrase it as follows: “Sarepta Therapeutics’ drug Elevidys is a gene therapy designed for Duchenne muscular dystrophy (DMD), a rare genetic condition characterized by progressive muscle loss. Unlike other treatments that Sarepta has approved, Elevidys tackles the underlying causes of DMD, making it Sarepta’s most vital and significant treatment recently launched. However, the company has now revealed the unfortunate deaths of two patients who may have been connected to Elevidys.

It’s not shocking at all that Sarepta’s stock value dropped significantly, given that two patients succumbed to liver failure associated with Elevidys this year. Previous studies on Elevidys had pointed out potential liver toxicity issues, but no fatalities were reported until now, as far as we know.

The business is making efforts to set things right. On the 16th of July, it unveiled a series of announcements which significantly increased its share value.

First, it will be cutting expenses, notably by reducing its workforce by 36%.

Following a request from the U.S. Food and Drug Administration (FDA), the labeling for Elevidys will now carry a black box warning for potential cases of acute liver injury and acute liver failure.

In the third point, it’s worth noting that Sarepta Therapeutics’ collection of Duchenne Muscular Dystrophy (DMD) medications, including Elevrys, is still bringing in substantial sales. The company reported a preliminary net product revenue (excluding royalties) of approximately $513 million for the second quarter, with over half, around $282 million, derived from Elevrys alone.

In the second quarter of 2024, the pharmaceutical company announced a total revenue of $362.9 million, which consisted of sales earnings of $121.7 million from Elevidys and additional royalty income of $2.4 million from Elevidys. This indicates an increase of at least 41.4% compared to the same period the previous year, a significant growth that was well-received by investors on Wall Street.

Short-lived gains

However, the narrative underwent a sudden change. On Thursday, July 17, Sarepta Therapeutics’ stocks experienced a surge due to positive news. Yet, on the following day, they reversed their trajectory, nullifying the advance made in the preceding trading session.

It has come to light that a patient who was participating in one of the biotech’s (Sarepta Therapeutics) clinical trials for an experimental drug named SRP-9004, used to combat limb-girdle muscular dystrophy (LGMD), a rare muscle disorder, has unfortunately passed away. Sarepta did not immediately disclose this incident, which occurred last month, to investors, but instead initially shared the information with BioCentury, a research firm specializing in biotechnology.

Here are two important aspects to consider:

1. It’s unfortunate that one of Sarepta Therapeutics’ medications has been linked to liver toxicity problems, which is a significant setback for the company. If this issue were isolated to Elevidys, they might have been able to navigate the challenge by creating new drugs, despite a decline in sales of their primary growth driver due to reduced demand.
2. However, with this latest development casting doubt on their previous plan, it seems their strategy may need to be revised.

Delaying the disclosure of important information doesn’t help build trust among investors regarding the company.

Not worth the risk

Sarepta Therapeutics is no longer focusing on SRP-9004 development, but this doesn’t solve the main issue at hand – their gene therapies are linked to serious liver problems. This could significantly impact doctors’ prescribing habits and patient demand for their products in the long term. However, there’s another twist: Sarepta initially resisted the FDA’s call to halt Elevidys distribution within the U.S., but they have now agreed to comply. Consequently, American physicians and patients are limited in their choices for the time being.

The Food and Drug Administration (FDA) has temporarily halted some of Sarepta Therapeutics’ ongoing gene therapy trials for LGMD. At present, there seems to be little compelling reason to invest in this company. However, if they manage to resolve all their problems, the stock might experience significant growth.

If Sarepta Therapeutics continues to face additional clinical or regulatory hurdles, its shares may become virtually valueless in the near term. It would be prudent for investors to avoid this company, as there are many other promising biotech stocks to explore instead.

2025-07-24 15:10

Sarepta makes a move

Short-lived gains

Not worth the risk

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