Sarepta Therapeutics: What's Happening With SRPT Stock?
Sarepta Therapeutics stock (NASDAQ: SRPT) experienced a significant turnaround on Wednesday, with shares rising 33% in after-hours trading following the announcement of an extensive restructuring plan, which involves laying off 500 employees — nearly 40% of its workforce of over 1,300. The company also plans to halt several gene therapy programs, including the majority of its limb-girdle muscular dystrophy initiatives. The job cuts and reductions in research programs are expected to result in over $400 million in annual cost savings for Sarepta by 2026.
The favorable market reaction indicates investor relief at management's swift measures to rectify the company's worsening financial situation. With shares down 88% over the past year and trading close to 52-week lows, the $400 million in annual savings will notably enhance Sarepta's previously concerning cash burn rate and should help mitigate its troubling debt-to-equity ratio of 63%.
The restructuring presents an exciting turnaround narrative — reorienting Sarepta from a high-spending, pipeline-heavy biotech into a streamlined organization focused on its Duchenne franchise. Nevertheless, this heightened reliance on Elevidys, which accounted for 43% of Sarepta's total revenues, increases risks should any additional safety issues arise.
SRPT seems significantly undervalued, currently trading at approximately 1x its trailing revenues, a stark contrast to its three-year average price-to-sales ratio of 9x. Analysts' average price target of $48 indicates almost 2x upside potential from the existing $25, contingent on the effectiveness of cost-cutting measures in restoring profitability and stabilizing the core Duchenne business.
However, SRPT represents a high-risk biotech investment characterized by extreme volatility, illustrated by its dramatic price fluctuations from $172 to recent lows around $18. This is further emphasized by its historical underperformance compared to the S&P 500 during significant market declines. For example, during the 2022 Inflation Shock, SRPT plummeted 63.2% (versus the S&P 500's 25.4%) and has not yet bounced back. In the 2020 COVID-19 Pandemic, it fell 54.9% (compared to the S&P 500's 33.9%) but managed to fully recover. Similarly, during the 2008 Global Financial Crisis, SRPT plummeted 85.0% (in contrast to the S&P 500's 56.8%), eventually recovering by 2012. See – Buy or Sell SRPT stock for more details.
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