Sarepta Plunges 9.66%—Will the Biotech Giant Rebound or Crumble?

Summary
• Sarepta (SRPT) slumps 9.66% to $11.635, marking its worst intraday drop since 2020.
• European Medicines Agency rejects Elevidys, Sarepta’s flagship gene therapy, citing efficacy concerns.
• Intraday range spans $11.12 to $12.2948 as traders grapple with regulatory uncertainty.

The biotech sector reeled Thursday as Sarepta Therapeutics’ stock cratered amid a regulatory double whammy. The European Medicines Agency’s rejection of Elevidys—a gene therapy for Duchenne muscular dystrophy—collided with ongoing FDA scrutiny in the U.S., sending shares into a tailspin. With a 52-week high of $150.48 now a distant memory, investors are scrambling to assess the long-term viability of Sarepta’s pipeline.

Regulatory Rejection Sparks Investor Exodus
Sarepta’s 9.66% intraday freefall was triggered by the European Medicines Agency’s (EMA) refusal to recommend Elevidys for EU approval. The CHMP panel cited insufficient efficacy data from clinical trials, despite Roche’s aggressive marketing partnership. Compounding the blow, the FDA’s recent pause on U.S. shipments of Elevidys—linked to three patient deaths—has left the company with no near-term commercial path for its flagship therapy. With Elevidys accounting for the majority of Sarepta’s near-term revenue, the regulatory setbacks have exposed the company’s precarious financial position, including looming debt obligations and licensing payments to Arrowhead Pharmaceuticals.

Biotech Sector Weakness as Amgen Drags Down Index
The biotech sector mirrored Sarepta’s decline, with Amgen (AMGN), the sector’s bellwether, slipping 0.76% on Friday. While Amgen’s drop was driven by broader market rotation rather than product-specific news, its underperformance amplified sector-wide jitters. Sarepta’s collapse, however, remains largely idiosyncratic, as its struggles with Elevidys are not reflective of the broader biotech landscape. Nevertheless, the sector’s mixed performance underscores investor caution ahead of the FDA’s upcoming decisions on gene therapy safety protocols.

Options Playbook: Navigating the Bearish Volatility
• RSI: 36.39 (oversold territory)
• MACD: -3.88 (bearish divergence with signal line at -4.09)
• Bollinger Bands: Lower band at $12.25 (price near 12.24575) suggests potential support
• 200-day MA: $83.67 (far above current price, indicating deep bearishness)

The technicals paint a dire picture for Sarepta, with RSI hovering near oversold levels and MACD signaling a bearish trend. The stock’s price is teetering near the Bollinger Bands lower boundary, hinting at potential support but offering no guarantee of a rebound. The 200-day MA at $83.67 is a distant target, underscoring the magnitude of the selloff.

Top Options Picks:

• SRPT20250801P12 (Put, Strike: $12, Expiry: 2025-08-01):
  • IV: 144.20% (elevated volatility)
  • Leverage: 10.19% (moderate)
  • Delta: -0.50 (sensitive to price drops)
  • Theta: -0.0235 (slow decay)
  • Gamma: 0.1595 (high sensitivity to price moves)
  • Turnover: 26,680 (liquid)
  • Payoff (5% down): $0.58 (max(0, 10.99 - 12))
  Rationale: This put option offers robust downside protection with high gamma, making it ideal for a continued bearish move. The elevated IV ensures the contract retains value even if the decline slows.
• SRPT20250801C12.5 (Call, Strike: $12.5, Expiry: 2025-08-01):
  • IV: 116.28% (moderate volatility)
  • Leverage: 23.43% (high)
  • Delta: 0.388 (moderate sensitivity)
  • Theta: -0.0707 (rapid decay)
  • Gamma: 0.1899 (high sensitivity)
  • Turnover: 22,409 (liquid)
  • Payoff (5% down): $0 (max(0, 10.99 - 12.5))
  Rationale: While the call option’s delta is lower, its high leverage and gamma make it a speculative play for a short-term rebound. However, the 5% downside scenario nullifies its payoff, making it a high-risk bet.

Action Insight: Aggressive short-sellers may consider the SRPT20250801P12 put for a bearish bet, while cautious traders might watch for a potential bounce above $12.50 before engaging the SRPT20250801C12.5 call.

Backtest Sarepta Stock Performance
The backtest of SRPT's performance after a -10% intraday plunge shows mixed results. While the 3-day win rate is 48%, the 10-day win rate drops to 49.76%, and the 30-day win rate further declines to 45.92%. This suggests that SRPT tends to recover relatively well in the short term but faces increasing odds of underperformance as the time horizon extends.

Sarepta’s Crossroads: Survival or Collapse?
Sarepta’s collapse has exposed the fragility of its business model, with Elevidys’ regulatory setbacks creating a perfect storm of financial and operational risks. While the stock’s technicals suggest a prolonged bearish trend, the biotech sector’s mixed performance—led by Amgen’s 0.76% decline—indicates broader market caution. Investors must now weigh the likelihood of a near-term rebound against the company’s deteriorating cash position and looming debt obligations. For now, key levels to watch include the $12.25 Bollinger Bands lower bound and the 200-day MA at $83.67. If Sarepta fails to stabilize above $12.25, the put option SRPT20250801P12 could become a critical short-side tool. As the sector leader Amgen’s modest decline suggests, the biotech space remains volatile—traders must act swiftly to navigate this high-stakes environment.