Is Sarepta Therapeutics Stock A Buy?

Sarepta Therapeutics Inc (NASDAQ:SRPT) is a biotechnology company that made big gains in 2020 only to lose half its valuation by January 2021. JPMorgan even double downgraded it from outperform to underperform after clinical trial data was underwhelming. It’s a common story in an industry that hinges on government approval.

So, is Sarepta Therapeutics stock a Buy after its share price got pummeled?

The most recent obstacle may be more of a speed bump than roadblock. It already has two approved treatments – Exondys 51 and Vyondys 53. Combined sales in the third quarter of 2020 grew by 23 percent year-over-year from the same quarter in 2019. The company is expected to generate close to $600 million in sales.

For investors, it’s best to check the temperature on Sarepta Therapeutics to determine if its stock will remain in a coma or spring to life and double up on investors willing to take a risk while it’s down.

Sarepta Therapeutics 101

Sarepta Therapeutics is Cambridge, Massachusetts-based biopharmaceutical company halfway between clinical stage and commercial stage. It was founded in 1980 as Antivirals Inc. and made headlines when it started development on severe acute respiratory syndrome (SARS) treatments in 2003.

It won several contracts, including one with the U.S. Department of Defense to work on rare disease research.

By February 2019, the company had an experimental gene therapy for boys born with Duchenne muscular dystrophy (DMD). The disease only affects boys because it’s attached the male gene, and boys born with it are typically wheelchair-bound within 12 years of birth.

The treatment introduces micro-dystrophin into muscle cells to help DMD patients with their muscle recovery. Without it, every movement damages muscles and leaks creatine kinase into the bloodstream. By reducing the creatine levels, the boys are able to live a healthier, longer, and more fulfilling life.

Its pipeline now includes over 40 programs to treat a wide variety of ailments, such as multiple sclerosis, Rett syndrome, cardiomyopathy, and Dravet syndrome.

Gene therapy, RNA technologies, and gene editing are at the forefront of medical technology. But that carries risk, as the pandemic and vaccine race showed how some portions of the public will always be wary of such treatments.

And the most recent clinical trial data (along with the company’s lack of Operation Warp Speed COVID-19 grants) leaves investors wondering if it’s worth buying.

Is Sarepta Therapeutics Stock A Buy?

Sarepta Therapeutics has a market capitalization under $7.0 billion after crashing in January 2021. Share prices fell below $85.00 by the middle of the month, treading dangerously close to their 52-week low of $78.06 during the share price crash.

It lost $393 million during the first nine months of 2020, despite generating $395 million in revenue during that period. Some analysts wonder if it has the cash management capabilities to complete a roadmap within its pipeline.

And because it lacked clear clinical efficacy data, it failed to prove itself worthy of a COVID-19 research grant, despite having a 17-year head start into SARS research. This led to chronic losses as investors continue holding on for one of its treatments to work.

The company still entered the 2020 holiday season holding $1.8 billion in cash and investments, which gives it plenty of time to continue research and development through clinical trials and partnerships.

Immediately after its share price dip, it announced a partnership with Genevant Sciences to develop a lipid nanoparticle (LNP) gene editing treatment for neuromuscular diseases. It’s good news to see them moving forward, but there are still lingering questions about its existing FDA-approved treatments.

This has some investors pondering whether it’s safe to buy the dip.

Is Sarepta Therapeutics Stock Risky?

The biggest risk to Sarepta Therapeutics is its track record. So far, it does have two successfully approved treatments, but there’s still a lot of time left to determine long-term efficacy. As explained above, boys with DMD could go up to 12 years before ending up in a wheelchair.

Because it takes so long, the real efficacy of the FDA-approved DMD treatments still hasn’t been proven. It could face serious legal battles if it’s proven ineffective.

And the elephant in the room remains that the company didn’t have a COVID vaccine anywhere in its pipeline. Its SARS research should’ve proven effective, as it’s in the same RNA category that successful treatments from Moderna (MRNA) and Pfizer (PFE) used.

As if these red flags weren’t enough to scare investors away, the company’s cash burn rate is a forest fire when it should be a bit lighter.

Clinical trials can be years-long processes involving big expenses, and the company needs to maintain liquidity if it wants to stay in business, much less compete with everyone else.

Sarepta Therapeutics Has A Slew Of Rivals

Sarepta Therapeutics has a lot of competitors in its bioscience realm. This includes Ionis Pharmaceuticals (IONS), Alnylam Pharmaceuticals, Corcept Therapeutics, and Gilead Sciences (GILD). It also faces competition from major companies like Pfizer, Moderna, and Bristol Myers Squibb (BMY) if it proves its treatments successful.

Until then, it’s more of a henchman than a main boss. It depends on partnerships with larger companies to complete much of its supply chain.

The company’s rivals already won when they received their COVID-19 grants from OWS. This gave them a leg up in liquidity for an entire year. Things didn’t get better when its DMD clinical results were underwhelming.

Overall, Sarepta Therapeutics took a beating, but it can still rise up to win if it proves efficacy.

Is Sarepta Therapeutics Stock A Buy: Conclusion

Sarepta Therapeutics is a biotechnology company focused on gene and RNA therapies, along with gene splicing. It was a pivotal company in the fight against SARS in 2003, but it has fallen since then.

Only two of its treatments passed through clinical trials, and even those haven’t fully confirmed they work long term.

Investors flooded away from the company in January 2021 and took half its market value with them. Those who are still bullish on the company’s chances can get a great deal, so long as they don’t experience any further bad news in 2021.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.