Sarepta stock faces scrutiny after UBS reiterates buy rating

UBS reiterated a buy rating and $85.00 price target on Sarepta Therapeutics (NASDAQ:SRPT) stock on Monday. The firm maintained its positive stance despite emerging regulatory concerns following a second reported death associated with the company’s Elevidys treatment. According to InvestingPro data, the stock has fallen over 70% year-to-date, currently trading at $19.70 with a market capitalization of $1.98 billion. The stock’s RSI indicates oversold conditions, suggesting potential for a technical rebound.

The rating confirmation came after UBS hosted a call with a former FDA reviewer on Friday, June 13, before the second death was reported. According to UBS, the former reviewer suggested that given some FDA officials had opposed Elevidys’ initial approval, the agency might consider removing the drug from the market. Despite these concerns, analysts maintain a bullish consensus with a 1.78 rating (where 1 is Strong Buy), though 11 analysts have recently revised their earnings expectations downward.

UBS noted that historically, the process of withdrawing an approved drug from the market can be lengthy and involve multiple regulatory steps. This procedural timeline could be significant for investors assessing potential impacts on Sarepta’s revenue projections and development pipeline.

The investment firm also highlighted that the current Health and Human Services Department and FDA leadership under the Trump administration have recently taken "unprecedented actions" in their regulatory approach. This changing regulatory environment adds another layer of uncertainty to Elevidys’ market status.

Sarepta’s Elevidys was approved for the treatment of Duchenne muscular dystrophy, a rare genetic disorder that causes progressive muscle degeneration and weakness, primarily affecting male children. The treatment represents a significant portion of Sarepta’s commercial portfolio and future growth strategy. InvestingPro analysis shows the company maintains strong liquidity with a current ratio of 4.02, though it’s currently burning through cash. Get access to 10+ additional ProTips and comprehensive financial analysis with an InvestingPro subscription.

In other recent news, Sarepta Therapeutics announced its rAAVrh74 viral vector, used in the investigational gene therapy SRP-9003 for limb-girdle muscular dystrophy type 2E/R4, has received platform technology designation from the FDA. This designation is intended to expedite drug development by allowing the use of prior data to support new drug applications. Meanwhile, Sarepta has faced significant challenges with its Duchenne muscular dystrophy treatment, Elevidys, following a second patient death due to acute liver failure. As a result, H.C. Wainwright downgraded Sarepta from neutral to sell, and BMO Capital downgraded it from Outperform to Market Perform, citing increased risks and uncertainties. Piper Sandler also downgraded the stock from Overweight to Neutral, reducing its Elevidys sales forecast due to safety concerns. However, Scotiabank (TSX:BNS) upgraded Sarepta from Sector Perform to Sector Outperform, suggesting that recent negative events are already reflected in the stock’s price and highlighting potential future catalysts. The company is currently working on modifying its immunosuppressive regimen for Elevidys, with plans to involve expert evaluation before seeking FDA approval. Despite these setbacks, Sarepta remains focused on advancing its genetic medicine portfolio for rare diseases.

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