Why Sarepta Therapeutics Shares Dropped More Than 16% This Week – Motley Fool

Key Points

Shares in Sarepeta Therapeutics (NASDAQ:SRPT) fell more than 16% this week, according to data from S&P Global Market Intelligence. The stock closed last Friday at $448.68 then fell to as low as $376.26 on Wednesday, a day after the company reported earnings. Even after climbing a bit on Thursday (when the stock closed at $86.97 per share), the stock is a lot closer to its 52-week low of $65.30 than its high of $181.83. For the year, the stock is down more than 48%.

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Sarepta is a commercial-stage biopharmaceutical that specializes in targeted, gene-editing solutions to treat rare diseases, particularly Duchenne muscular dystrophy (DMD) and limb-girdle muscular dystrophies (LGMDs).

It had some positive news in its third-quarter report as it reported revenue of $500.4 million through nine months, up 26.7%, year over year, and a net loss of $296.8 million compared to a loss of $364.8 million in the same period in 2020. However, investors were left unimpressed because of continuing concerns over the company's debt. The company's debt-to-equity ratio has risen 224.9% over the past three years.

On top of that, the company announced in October that it planned to sell $500 million worth of stock, diluting its value to investors.

There's plenty of potential for the gene-editing company, which has shown consistent revenue growth the past five years. It has three products to treat the various genetic mutations that cause different forms of DMD. These three gene-based therapies are Exondys; Vyondys; and Amondys. It also has more than 40 therapies in its pipeline. The likely problem with its third-quarter report was that investors were hoping for even better numbers. The company raised its full-year product revenue by $40 million to between $605 million and $615 million, compared to the $540.1 million that it posted last year.

I also think Sarepta's decline has a lot to do with the market's recent disenchantment with biotech stocks. Over the past three months, the sector has declined slightly more than 3%, while the S&P 500 has risen slightly more than 6%.

That's not to say there isn't risk involved with Sarepta. It only has three marketed therapies, and it is still a long way from turning a profit. However, the payoff for the company is a long-term play, so if anything, this might provide an opportunity to narrow the risk by buying the stock at a cheaper price.

This article represents the opinion of the writer, who may disagree with the official recommendation position of a Motley Fool premium advisory service. Were motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Why Sarepta Therapeutics Shares Dropped More Than 16% This Week - Motley Fool