Sarepta Therapeutics: Valuation Risk and Litigation Loom Over ELEVIDYS Fallout

The biotech sector thrives on hope—hope for breakthrough therapies, regulatory approvals, and life-changing outcomes for patients. But when hope collides with reality, the fallout can be catastrophic. For Sarepta Therapeutics (SRPT), the once-celebrated gene therapy ELEVIDYS has become a symbol of risk, not revolution. A string of safety concerns, regulatory scrutiny, and now a major securities class action lawsuit have sent the stock plummeting and left investors questioning whether Sarepta's valuation can recover. Here's why this scandal could redefine the company's future—and what it means for shareholders.

The ELEVIDYS Timeline: From Breakthrough to Breakdown

ELEVIDYS, approved in 2023 for non-ambulatory Duchenne muscular dystrophy (DMD) patients, was Sarepta's crown jewel. But its promise unraveled in 2024–2025:
- March 2025: A patient died from acute liver failure (ALF) linked to ELEVIDYS, triggering a 27% stock selloff.
- June 2025: A second ALF-related death emerged, sparking a further 42% plunge.
- June 2025: The FDA launched an investigation, and investors filed a class action lawsuit alleging Sarepta hid risks to prop up its stock.

By June 19, 2025, SRPT's shares had lost 77% of their 2022 peak value. The stock now trades at levels not seen since the therapy's early development phase—a stark reminder of how quickly fortunes can reverse in high-stakes biotech.

Legal Risks: The Class Action Threat

The lawsuit (Dolgicer v. Sarepta) accuses the company of misleading investors about ELEVIDYS' risks, including:
1. Downplaying ALF Risks: Sarepta allegedly failed to disclose that non-ambulatory patients—a key demographic—were at risk of fatal liver toxicity.
2. Flawed Trial Protocols: Investors claim the company designed trials to avoid detecting severe side effects.
3. Overstating Regulatory Certainty: Sarepta allegedly exaggerated its ability to secure approvals, ignoring red flags from regulators.

If the plaintiffs prevail, Sarepta could face massive financial penalties, settlements, or legal fees. Even if it wins, the litigation's drag on resources and investor confidence could persist for years. For a company whose market cap is now $1.5 billion (down from $7 billion in 2022), the costs of defending this lawsuit are material.

Valuation: Can Sarepta's Stock Recover?

Sarepta's valuation is now a function of two variables:
1. ELEVIDYS' Future:
- Best Case: The enhanced immunosuppressive regimen (using sirolimus) is approved, mitigating liver risks. ELEVIDYS could regain its market position, especially if the FDA lifts restrictions.
- Worst Case: The therapy's label is significantly limited, or the FDA requires costly post-marketing studies. Competitors like Roche's SRP-9001 (co-developed with Sarepta) might overshadow ELEVIDYS.

1. Pipeline Diversification:
2. Sarepta's other programs, like SRP-9003 for limb-girdle muscular dystrophy, offer hope. But these therapies are early-stage and unlikely to offset ELEVIDYS' losses in the near term.

Analysts are already revising their outlooks. In May 2025, Piper Sandler cut its price target to $25 from $70, citing the “high regulatory and litigation risk.” Meanwhile, Sarepta's price-to-sales (P/S) ratio has collapsed to 1.5x—far below peers like Vertex Pharmaceuticals (VRTX) at 6.3x. However, without earnings or near-term revenue catalysts, a P/S multiple may not stabilize the stock.

Investment Considerations: Proceed With Caution

• Short-Term Risks: The stock is vulnerable to FDA decisions, trial updates, and legal milestones. The June 24 FDA communication and the unresolved class action (with a lead plaintiff deadline of August 25) are critical catalysts.
• Long-Term Potential: If Sarepta can resolve safety issues and secure label adjustments without major restrictions, the therapy's $2 billion peak sales potential (pre-scandal estimates) could still justify a rebound. However, the company's credibility with investors and regulators is now in tatters.
• Alternatives: Investors seeking exposure to DMD therapies might favor companies like PTC Therapeutics (PTCT) or Roche, which face fewer regulatory overhangs.

Final Take: A Buy for Risk Takers, a Sell for the Prudent

Sarepta's stock is a high-risk, high-reward proposition. While its valuation is deeply discounted, the legal and regulatory hurdles are existential. For bulls, the $17.46 price tag (as of June 19) represents a “distressed” bid on a once-promising pipeline. For bears, the company's history of optimistic guidance and the FDA's increasingly cautious stance on gene therapies suggest more pain ahead.

Recommendation: Avoid new positions unless you can stomach a 50% downside. Wait for clarity on the sirolimus regimen's FDA approval, the lawsuit's resolution, and a revised financial plan. Until then, Sarepta remains a cautionary tale of biotech's razor-thin margins between triumph and tragedy.