SRPT Securities Litigation: Legal Risks and the Erosion of Shareholder Value in Biotech

The Sarepta Therapeutics (NASDAQ: SRPT) securities litigation, Dolgicer v. Sarepta Therapeutics, Inc., has become a case study in the intersection of biotech innovation, corporate governance, and investor trust. At its core, the lawsuit alleges that Sarepta and its executives misled investors by downplaying the safety risks of its gene therapy ELEVIDYS, a treatment for Duchenne muscular dystrophy. The fallout—three patient deaths linked to acute liver failure, multiple FDA warnings, and a stock price collapse of over 100% from peak levels—has exposed systemic vulnerabilities in the biotech sector. For investors, the case raises urgent questions: How do legal risks in biotech litigation translate to long-term shareholder value erosion? And what governance reforms are necessary to prevent such crises?

The Legal and Financial Fallout of SRPT's Governance Failures

Sarepta's litigation timeline reveals a pattern of delayed disclosures and regulatory missteps. The company's stock price plummeted by 27% in March 2025 after the first patient death, 7% in April 2025 following EU regulatory scrutiny, and 42% in June 2025 after a second death. By July 2025, a third death triggered another 40% drop. These declines were not merely market reactions but signals of a governance breakdown. The FDA's black box warning and clinical trial suspensions further compounded the damage, eroding confidence in ELEVIDYS's safety and Sarepta's leadership.

The financial toll is stark: Sarepta's return on equity (ROE) hit -56.38% by Q2 2025, while its debt-to-equity ratio climbed to 1.18. Negative operating cash flow and a 100%+ stock price decline from peak levels illustrate the severity of the crisis. For context, would reveal a trajectory of sustained erosion, contrasting sharply with the sector's typically volatile but often resilient performance.

Biotech Litigation Trends: High Stakes, Low Recovery Rates

The SRPT case is emblematic of a broader trend. From 2023 to 2025, biotech securities lawsuits increased by 4.7% annually, with 47 of 222 2024 cases targeting the sector. However, investor recovery remains elusive. Courts have dismissed 59% of biotech securities cases in 2024, often citing insufficient evidence of scienter (fraudulent intent). Even when plaintiffs survive motions to dismiss, settlements are rare, and litigation timelines stretch for years. For example, CytoDyn Inc. saw its stock collapse by 90% in 2024 despite its case being dismissed, illustrating how reputational and financial damage often precede legal outcomes.

Specialized law firms like Robbins Geller and Rosen Law Firm have secured notable settlements—$350 million+ in PSLRA cases—but these successes are outliers. The high dismissal rate underscores the difficulty of proving actionable misstatements in a sector reliant on forward-looking statements and clinical trial optimism.

Governance Lessons for Biotech Investors

The SRPT litigation highlights three critical governance flaws that investors must scrutinize:

1. Transparency in Adverse Events: Sarepta's delayed disclosure of patient deaths and safety risks violated investor trust. Biotech firms must establish protocols for rapid, unambiguous communication with regulators and shareholders.

2. Board Oversight of Risk Management: Sarepta's executives allegedly failed to address known safety concerns, suggesting weak board-level oversight. Investors should prioritize companies with independent governance structures and risk committees.

3. Regulatory Preparedness: The FDA's aggressive response to ELEVIDYS's safety profile demonstrates the agency's growing scrutiny of high-risk therapies. Firms must proactively engage regulators and align clinical trial designs with evolving standards.

Investment Implications and Strategic Recommendations

For investors, the SRPT case reinforces the need for due diligence beyond scientific innovation. Key considerations include:

• Litigation Timelines: The August 25, 2025, lead plaintiff deadline in the SRPT case underscores the importance of monitoring legal milestones. Investors should track these dates to assess potential recoveries or further value erosion.
• Governance Metrics: Evaluate companies with transparent disclosure practices, strong board independence, and robust compliance frameworks. Avoid firms with inconsistent public statements or a history of regulatory warnings.
• Diversification: Biotech's high-risk profile demands portfolio diversification. Allocate capital to firms with multiple therapeutic pipelines and financial resilience to withstand litigation shocks.

Conclusion: Balancing Innovation and Accountability

The SRPT litigation is a cautionary tale for the biotech sector. While innovation drives growth, governance failures can erase decades of value in months. Investors must recognize that legal risks are not abstract—they directly impact stock performance, regulatory standing, and long-term viability. By prioritizing transparency, accountability, and regulatory preparedness, both companies and investors can navigate the volatile biotech landscape with greater resilience.

As the SRPT case moves toward resolution, its legacy will likely shape governance standards in the sector. For now, the lesson is clear: in biotech, scientific promise must be matched by ethical leadership and institutional integrity.