Liver Safety Concerns for Elevidys Trigger Selloff—Is This a Contrarian Buy for Gene Therapy's Future?

The recent announcement of a second liver-related fatality in patients treated with Sarepta Therapeutics' gene therapy Elevidys (SRPT) sent the company's stock plummeting 37% in premarket trading on June 6, 2025. The tragedy, occurring in a non-ambulatory patient with Duchenne muscular dystrophy (DMD), has reignited concerns about the risks of gene therapy's rapid rise. Yet, for investors willing to look beyond the headlines, this could represent a contrarian opportunity to buy into a transformative technology at a discounted valuation.

The Safety Concerns: A Temporary Setback or Fatal Flaw?

Elevidys, approved in 2023 for DMD patients under 5, uses an adeno-associated virus (AAV) vector to deliver a functional copy of the dystrophin gene. While it has shown promise in slowing disease progression in ambulatory patients, two cases of acute liver failure (ALF) in non-ambulatory patients have raised alarms. Both fatalities occurred in older patients, who may have weaker immune systems or preexisting conditions, prompting Sarepta to suspend shipments for non-ambulatory commercial patients and pause its pivotal ENVISION trial.

The company's proposed solution—a revised immunosuppressive regimen including sirolimus—is backed by preclinical data and is under review by an independent panel of experts. If approved, this could mitigate the ALF risk, allowing Elevidys to resume use in this critical patient subset. The FDA has concurred with the pause and is actively collaborating with Sarepta, suggesting regulatory cooperation rather than outright rejection.

The Market Reaction: Overreacting to Near-Term Risks?

The stock's 37% premarket drop to $22—after a 3% decline the prior day—reflects investor panic over Elevidys' commercial viability. reveals a volatile trajectory, with this latest dip erasing much of 2025's gains. Yet, the selloff may overstate the threat.

First, ambulatory patients, the primary target of Elevidys' current label, remain unaffected by the safety measures. Second, while the ENVISION trial's pause delays potential full FDA approval, Sarepta's collaboration with regulators suggests a path forward. Third, the liver toxicity appears linked to non-ambulatory patients' unique physiology, not the therapy itself.

The Case for Long-Term Potential: Gene Therapy's Unfulfilled Promise

Duchenne muscular dystrophy affects roughly 30,000-50,000 boys worldwide, with no cure. Elevidys' ability to halt disease progression in young patients makes it a rare beacon of hope. Even with the current setbacks, the market for DMD therapies is projected to grow to $3 billion by 2030, driven by gene therapy's potential to replace lifelong treatments like corticosteroids.

Sarepta's leadership in this space is unmatched. Its rivals, such as Roche's SRP-9001 and Pfizer's pep vosertide, face their own hurdles, including efficacy questions and manufacturing complexity. Meanwhile, Sarepta's pipeline includes next-generation AAV therapies targeting broader patient populations.

The enhanced immunosuppressive regimen, if successful, could not only salvage Elevidys but also establish a safety template for future gene therapies. The broader gene therapy field, valued at over $20 billion annually, is still in its infancy. Setbacks like Elevidys' are inevitable in such a high-risk, high-reward sector—but they also create buying opportunities for those willing to endure volatility.

Risks to Consider

The contrarian thesis hinges on several assumptions:
1. Regulatory Approval: The FDA must greenlight the new regimen and allow ENVISION to resume. Delays could further strain Sarepta's cash reserves.
2. Competitor Progress: If rivals like Roche leapfrog Elevidys with safer or more effective treatments, Sarepta's window could close.
3. Mechanism of Toxicity: If the ALF is linked to the AAV vector itself—a risk shared by all gene therapies—broader skepticism could follow.

Investment Considerations

For investors, Sarepta's current valuation offers an intriguing entry point. At $22 pre-announcement, the stock trades at roughly 4x its 2024 revenue of $244 million, a significant discount to peers like BioMarin (6x) or uniQure (7x). However, this assumes Elevidys can recover its commercial momentum.

A prudent strategy might involve:
- Position Sizing: Allocate a small percentage of a portfolio to SRPT, given its high risk.
- Trailing Stops: Protect gains if the stock rebounds but limit losses if further setbacks occur.
- Watch Competitors: Monitor Roche's SRP-9001 data, as its success or failure could shift the competitive landscape.

Conclusion: A Volatile Ride, But the Destination Looks Bright

Gene therapy is still in its adolescence, and Sarepta's Elevidys is a reminder that innovation comes with growing pains. The liver deaths are a legitimate concern, but they are not an indictment of the therapy's core value. For investors with a multi-year horizon, the discounted price and Sarepta's scientific resolve create an asymmetric opportunity: limited downside if the company navigates the crisis, but substantial upside if Elevidys—and gene therapy more broadly—fulfills its potential.

In biotechnology, breakthroughs often follow breakdowns. This could be one of them.