PepGen's Legal Woes: A Cautionary Tale for Biotech Investors

Investors in biotech stocks are no strangers to volatility, but few cases in recent memory have been as dramatic as PepGen Inc.'s (NASDAQ: PEPG) freefall. After touting its experimental Duchenne muscular dystrophy (DMD) drug, PGN-EDO51, as a breakthrough, the company now faces a class action lawsuit alleging securities fraud—and its stock has cratered 73% from its March 2024 peak. Let's dissect the risks, the opportunities (if any), and what you should do if you're still holding shares.

The Fraud Claims: Valid or Hype?

The lawsuit, filed by law firms including Levi & Korsinsky, alleges PepGen misled investors in three key ways:

1. Overstated Efficacy: PepGen claimed PGN-EDO51 could produce dystrophin—a protein critical for muscle function—at levels sufficient for FDA approval. But interim data revealed only 0.61% dystrophin production, far below the 1% threshold investors were promised. This triggered a 32% stock drop to $11.43 in July 2024, as seen in the chart below:
   

2. Flawed Clinical Trials: The Phase 2 CONNECT2 study faced safety red flags, leading to an FDA clinical hold in December 2024. Health Canada later halted dose escalation in the parallel CONNECT1 trial after kidney function declines. Worse, PepGen admitted in May 2025 that the CONNECT2 study was never dosed, rendering its data moot.

3. Omissions of Risk: Investors weren't fully warned about the drug's failure to meet dystrophin targets or the FDA's skepticism. By May 2025, PepGen abandoned PGN-EDO51 entirely, citing a lack of “meaningful clinical benefit.”

The evidence here is damning. PepGen's own data undermined its claims, and the FDA's actions signal regulatory distrust. This isn't just a lawsuit—it's a collapse of confidence in the drug's viability.

The Stock's Bleak Outlook—And One Tiny Silver Lining

PepGen's stock has been a disaster for investors who bought during the alleged fraud period (March 2024–March 2025). From its $40+ peak in early 2024, shares now hover near $1.44—a 96% drop from the peak. The August 8, 2025 deadline to join the class action is critical for these holders. Here's why:

• Class Action Urgency: Levi & Korsinsky, a firm with a 20-year track record securing hundreds of millions for shareholders, is leading the case. Their success in past lawsuits (ranked in ISS's Top 50 Report for seven years) means this isn't a frivolous claim. If you bought shares between March 7, 2024, and March 3, 2025, contact them immediately.
• PepGen's New Gamble: The company has shifted focus to its myotonic dystrophy type 1 (DM1) program, PGN-EDODM1, which showed 29% splicing correction in early trials. However, this is a tiny market with no guarantees. Even if successful, PepGen's credibility is shattered, and investors may not trust future claims.

Investment Recommendations

1. For Current Shareholders:
2. Join the Class Action: The August 8 deadline is non-negotiable. Levi & Korsinsky's contingency fee model means no upfront costs.

3. Sell Now: Unless you're a long-term biotech contrarian, this stock is a landmine. Even DM1's potential won't offset the damage done.

4. For New Investors:

5. Stay Away: PepGen's pipeline is now riding on a single unproven drug. With a market cap below $100 million post-lawsuit, the risks far outweigh the rewards.

6. For All Investors:

7. Diversify: Biotech's high-risk nature demands diversified portfolios.
8. Demand Transparency: Follow companies that publish full trial data, not just cherry-picked highlights.

Final Take: A Warning for the Bulls

PepGen's story is a masterclass in the dangers of overhyped biotech narratives. When a drug's efficacy crumbles and regulators push back, the fallout is swift—and irreversible. This isn't just about one company; it's a lesson in due diligence.

The stock's valuation is now a shell of its former self, and the class action deadline is a lifeline for those burned by PepGen's promises. Don't let pride keep you holding the bag. Act now—or lose even more.

This article is for informational purposes only. Always consult a financial advisor before making investment decisions.