Sarepta stock catapulted Thursday after the biotech company made a "tough but prudent move," laying off roughly 500 employees and restructuring its business in the wake of two deaths following treatment with its gene therapy, Elevidys.
Leerink Partners analyst Joseph Schwartz called the news "a net positive" for Sarepta Therapeutics.
Elevidys, which treats the muscle-wasting disease called Duchenne muscular dystrophy, will remain on the market. But it will have a warning affixed to its label after two teens died of acute liver failure following treatment. Both boys were non-ambulatory, meaning they could no longer walk.
"We see this update as an important clearing event avoiding worst case scenario of ELEVIDYS being taken off the market," Oppenheimer analyst Andreas Argyrides said in a note to clients. "Current label continues to address the ambulatory population which represents a meaningful market opportunity."
Sarepta stock rocketed 19.6%, closing at 21.98.
Sarepta Stock: Cost-Cutting, Pipeline Refocused
In addition, Sarepta said it would reduce operating expenses to cut $400 million in annual costs. That will include laying off about 36% of its workforce and pausing development of most of its gene therapies for Limb-Girdle Muscular Dystrophy. Instead, Sarepta will focus on its gene-silencing efforts.
Sarepta also preliminarily reported $513 million in second-quarter sales, missing projections for $529 million, according to FactSet. Elevidys brought in $282 million, which also lagged calls for $298 million. The preliminary Elevidys number "indicates decline in Elevidys interest," William Blair analyst Sami Corwin said in a report.
"While management did not provide updated revenue guidance at this time, it stated that future Elevidys revenue could be weaker in the near term, given the recent hesitancy from patients and physicians," she said.
But Sarepta says it only needs to hit $500 million in annual Elevidys sales through 2027 to meet its convertible debt obligations, Corwin said. She has a market perform rating on Sarepta stock.
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