Sarepta Therapeutics: Is the Market Overreacting to Elevidys Risks?

The biotech sector has long been a rollercoaster of hope and despair, but few companies have faced such abrupt volatility as Sarepta Therapeutics (SRPT) in recent months. After two patient deaths linked to its Duchenne muscular dystrophy (DMD) gene therapy Elevidys, the stock has been pummeled—plunging nearly 50% since early 2024. Yet beneath the panic, a compelling question emerges: Have investors overreacted to the risks, creating an undervalued opportunity?

The Storm: Safety Concerns and the Selloff

The crisis began in March 2024 with the first reported death of a non-ambulatory DMD patient treated with Elevidys, followed by a second fatality in June 2025. Both cases involved acute liver failure (ALF), a rare but severe side effect of AAV-based gene therapies. The incidents triggered immediate actions:
- Pause of Elevidys shipments for non-ambulatory patients in the U.S. and a halt to the pivotal ENVISION trial, critical for securing full FDA approval for this population.
- Downgrades from analysts, with Piper Sandler slashing its price target to $36 (from $55) and BMO dropping it to $70, citing reduced peak sales estimates and regulatory uncertainty.

The market's reaction was swift and severe. After the second death, shares fell 35% in premarket trading, hitting a nine-year low. By June 2025, SRPT's stock had lost over half its value since late 2023.

Why the Overreaction?

Investors have priced in worst-case scenarios, but three factors suggest the selloff may be excessive:

1. The Financial Foundation Remains Strong

Despite the setbacks, Elevidys has been a revenue juggernaut. In Q4 2024, it generated $384 million—75% of Sarepta's total quarterly revenue—driving full-year 2024 sales to $1.9 billion. Even with the June 2025 pause, the therapy remains available for ambulatory patients, who represent a significant portion of the DMD population. Analysts estimate that ambulatory patients alone could sustain Elevidys sales at $1.2–1.5 billion annually, even if non-ambulatory use is curtailed.

2. A Path Forward Exists with Sirolimus

Sarepta is not passive in addressing ALF risks. The company has developed an enhanced immunosuppressive regimen combining sirolimus with corticosteroids, which preclinical data suggest could mitigate liver toxicity without compromising Elevidys' efficacy. While FDA approval of this protocol is pending, the strategy aligns with safety measures adopted by competitors in the AAV space. If successful, it could resume trials and shipments, restoring Elevidys' growth trajectory.

3. The Pipeline Offers Diversification

Elevidys is not Sarepta's only asset. Its collaboration with Arrowhead Pharmaceuticals—targeting therapies for myotonic dystrophy type 1 and facioscapulohumeral muscular dystrophy (FSHD)—adds promising late-stage candidates. Additionally, a Biologics License Application (BLA) for SRP-9003 (for limb-girdle muscular dystrophy) is expected in 2025. These programs, along with a $600 million credit facility, position the company to weather near-term Elevidys headwinds.

The Investment Case: Is SRPT Undervalued?

At current levels, the stock trades at a 50% discount to its 2023 highs, despite its robust revenue growth and pipeline. Key catalysts to watch include:
- FDA approval of the sirolimus regimen (expected by Q4 2025).
- ENVISION trial updates post-protocol changes, which could reignite Elevidys' commercial momentum.
- Pipeline advancements, such as data from the EMBARK trial or Arrowhead collaborations.

Analysts at Jefferies recently noted that even with reduced Elevidys sales, Sarepta's 2025 revenue could still reach $2.3–2.6 billion, supporting a valuation closer to $60–$70—a significant premium to its current price.

Risks and Caution

• Regulatory hurdles: The FDA's stance on Elevidys remains uncertain, particularly under the new CBER director, Vinay Prasad, who has criticized accelerated approvals.
• Competitor threats: Other DMD therapies, such as Pfizer's Translarna, could erode Elevidys' market share.
• Sirolimus efficacy: If the regimen fails to address ALF risks, Elevidys' prospects could dim further.

Conclusion: A Buy for the Brave?

Sarepta's stock reflects extreme pessimism about Elevidys' future. However, the company's strong financials, a clear path to addressing safety concerns, and a diversified pipeline suggest the downside is limited while upside potential remains substantial. For investors willing to accept near-term volatility, SRPT could offer a compelling risk-reward opportunity—provided the sirolimus strategy succeeds.

Recommendation: Consider a gradual accumulation of shares, with a price target of $60–$70, contingent on positive FDA updates and pipeline progress. Maintain a cautious stance until key catalysts materialize.