On Tuesday, Sarepta Therapeutics (NASDAQ:SRPT) shares, currently trading at $127.95, saw its price target lowered by H.C. Wainwright to $75 from the previous $80, while the sell rating on the stock was maintained.
According to InvestingPro analysis, the stock appears to be undervalued based on its Fair Value metrics, despite showing a strong 51.53% return over the past year. The adjustment follows Sarepta's recent announcement of a licensing deal with Arrowhead Pharmaceuticals (NASDAQ:ARWR), which includes a range of clinical and preclinical assets.
Sarepta's newly acquired assets from Arrowhead encompass four clinical-stage programs, which are all in Phase 1/2.
These include ARO-DUX4 aimed at treating fascioscapulohumeral muscular dystrophy type 1 (FSHD1) and ARO-DM1 for myotonic dystrophy type 1 (DM1), as well as ARO-MMP7 for idiopathic pulmonary fibrosis (IPF) and ARO-ATXN2 for spinocerebellar ataxia type 2 (SCA2). These programs utilize Arrowhead's Targeted RNAi Molecule (TRiM) platform, designed to knock down genes in specific tissues.
The analyst noted that while RNAi therapeutics have shown success in liver treatments, their effectiveness in other tissues remains to be proven, as no clinical data from the licensed programs is currently available.
The firm expressed a cautious stance, opting to exclude these programs from their valuation model until convincing clinical data demonstrating commercial viability is presented. InvestingPro data shows that Sarepta maintains strong financial health with a current ratio of 3.84 and impressive revenue growth of 48.45% over the last twelve months, suggesting solid operational execution despite development uncertainties.
The report also mentioned Arrowhead's track record of discontinuing certain pipeline assets, including the halting of the ARO-SOD1 program earlier this year. Despite the broadening of Sarepta's pipeline beyond Duchenne muscular dystrophy (DMD), the analyst's focus remains on the launch of Elevidys, which is anticipated to be the primary stock driver. The firm's projections for Elevidys begin to diverge from consensus starting in 2025.
In conclusion, H.C. Wainwright reiterated its sell rating on Sarepta Therapeutics and lowered the price target to $75, citing the need for compelling clinical evidence before incorporating the new programs into their valuation model.
The firm remains watchful of the Elevidys launch as the key factor influencing the stock's performance. InvestingPro subscribers can access 13 additional ProTips and comprehensive analysis through the Pro Research Report, offering deeper insights into Sarepta's financial health, valuation metrics, and growth prospects.
In other recent news, Sarepta Therapeutics has been making significant strides in its business operations. The company has recently entered into a strategic partnership with Arrowhead Pharmaceuticals.
This collaboration, expected to be finalized in early 2025, involves a $500 million upfront payment, a $325 million equity investment in Arrowhead, and an additional $250 million spread over the next five years. The partnership is set to enhance Sarepta's research and development capabilities, adding potentially 13 RNAi programs to its pipeline.
Several financial firms including BMO Capital, Piper Sandler, Needham, Morgan Stanley (NYSE:MS), and Mizuho (NYSE:MFG) have maintained positive ratings on Sarepta's stock, indicating confidence in the company's position and growth potential.
BMO Capital reiterated an Outperform rating, Piper Sandler maintained an Overweight rating, and Needham kept its Buy rating despite a slight decrease in its stock price target from $205 to $202. Morgan Stanley and Mizuho both reaffirmed their $200 price target.
The recent partnership between Sarepta and Arrowhead is seen as a significant move that addresses concerns regarding near-term catalysts and long-term sustainable growth. It includes four clinical stage pipeline programs that cover a range of therapeutic areas including neuromuscular, pulmonary, and central nervous system diseases.
Sarepta Therapeutics also recently released its financial results for the third quarter of 2024, demonstrating its commitment to transparency in communications with investors.
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