Shares of Sarepta Therapeutics (SRPT – Free Report) have risen 23% in the past year, significantly outperforming the industry’s 15.7% decline, as shown in the chart below. During this timeframe, the stock has also outdone the broader Medical sector but slightly underperformed the S&P 500 Index. SRPT’s shares are trading above the 50-day moving average.
SRPT Stock Performance
Image Source: Zacks Investment Research
The surge in the stock price can be attributed to the encouraging sales performance of Sarepta’s Duchenne muscular dystrophy (DMD) gene therapy Elevidys.
Let’s delve into the company’s strengths and weaknesses to gain a better understanding of how to play the stock amid the price surge.
Elevidys: A Key Contributor to Sarepta’s Revenue Growth
Currently, Elevidys is the first and only one-shot gene therapy for DMD in the United States. A progressive and degenerative disorder, DMD leads to weakness and wasting away of the body’s muscles. Since its commercial launch in June 2023, the gene therapy has demonstrated blockbuster potential.
Though the therapy was initially approved in the country with a confined label for use in ambulatory DMD patients aged four to five years, it added more than $200 million to Sarepta’s top line in 2023. Last June, the FDA expanded Elevidys’ label to treat all DMD patients aged four years and older, regardless of ambulation status. The approval significantly expands the therapy’s targeted population. In the first nine months of 2024, Sarepta generated more than $400 million, driven by this expanded label.
Elevidys has been developed by Sarepta in partnership with pharma big-wig Roche (RHHBY – Free Report) . Per a licensing deal signed in 2019, RHHBY has exclusive rights to launch and market Elevidys in ex-U.S. markets. Sarepta started recording royalty revenues from ex-U.S. sales of the therapy in the third quarter of 2024. During the quarter, Sarepta received $9.5 million from Roche as royalty revenues.
For 2025, management anticipates net product revenues in the range of $2.9-$3.1 billion, two-thirds of which are expected to come from Elevidys sales.
Sarepta’s Pipeline Beyond DMD Encouraging
Building on the success of Elevidys, Sarepta is now focusing on expanding its pipeline beyond the DMD space. To reinforce its leadership in gene therapies, management is currently prioritizing the advancement of multiple innovative gene therapies targeting a broader range of muscular dystrophies.
Last month, Sarepta reported that it has completed enrolment and dosing in the late-stage EMERGENE study on gene therapy candidate SRP-9003 in patients with limb-girdle muscular dystrophy (LGMD) type 2E/R4 (LGMD2E/R4, or beta sarcoglycanopathy). Data from this study is expected in the first half of 2025. If this data is positive, Sarepta intends to submit a regulatory filing seeking accelerated approval for SRP-9003 in the given indication before this year’s end.
Sarepta is also evaluating another gene therapy candidate, SRP-6004, in the early-stage NAVIGENE study for treating ambulatory patients living with LGMD type 2B/R2 (LGMD2B/R2, or dysferlinopathy). Last month, Sarepta announced that it has started a clinical study on gene therapy candidate SRP-9004 in LGMD type 2D. Management is also on track to start a clinical study on another gene therapy, SRP-9005, for LGMD type 2C, in early 2025. Both studies are designed to support the FDA’s approval under the accelerated pathway.
In November, Sarepta signed a multi-billion dollar deal with Arrowhead Pharmaceuticals to acquire the latter’s seven pipeline programs. This deal not only complements the company’s existing pipeline of muscular dystrophies but also expands into new indications across the central nervous system and rare pulmonary disorders. In return, SRPT will make an upfront payment of $500 million plus an equity investment of $325 million in Arrowhead’s common stock. ARWR is eligible to receive milestone payments of more than $10 billion as well as royalties on product sales.
SRPT’s Dependence on a Single Target Market: A Woe
Although Sarepta has four FDA-approved treatments/therapies in its portfolio, all of them are solely focused on one segment — DMD. The majority of the revenues are generated by Elevidys, which accounted for more than one-third of the company’s total revenues in the first nine months of 2024. Any setback to the therapy’s sales will hurt the company’s prospects. Also, Elevidys sales are cannibalizing the sales of the company’s other three drugs.
SRPT Stock Valuation & Estimates
The company is trading at a premium to the industry. Going by the price/sales ratio, the stock currently trades at 7.73, trailing 12-month sales value, higher than 1.96 for the industry.
Image Source: Zacks Investment Research
Estimates for Sarepta Therapeutics’ 2024 earnings per share (EPS) have risen from $1.48 to $2.17 in the past 60 days. Over the same timeframe, EPS estimates for 2025 have declined from $10.35 to $10.04.
Image Source: Zacks Investment Research
How to Play the Stock?
Although Sarepta trades at a premium when compared to the industry, we would recommend investors to add this Zacks Rank #3 (Hold) stock to their portfolio, considering Elevidys’ strong commercial potential. While the company’s entire commercial portfolio, which targets only one segment, might seem concerning to some investors, management’s plans to diversify beyond DMD seem encouraging.
Sarepta’s recently announced $500 million buyback program and the decision to finance the Arrowhead deal with existing cash also highlight management’s confidence in the commercial potential of its currently marketed products and upcoming product launches.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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