Sarepta Rallies Despite FDA 'Boxed Warning' on Gene Therapy
Investors focus on regulatory clarity and preserved market for Elevidys as shares climb over 5%, shrugging off severe liver injury risk.
Shares of Sarepta Therapeutics surged more than 5% on Friday in a paradoxical rally after U.S. regulators imposed their most stringent safety alert, a 'Boxed Warning,' on the company's cornerstone gene therapy for Duchenne muscular dystrophy (DMD).
Investors looked past the negative headline, focusing instead on the regulatory clarity that the decision provides for Elevidys, a treatment that represents the core of Sarepta's commercial strategy. The stock closed at $18.81, up 5.56% for the day, as the market appeared to treat the Food and Drug Administration's long-awaited decision as a 'sell the rumor, buy the news' event that removes a significant overhang of uncertainty.
The FDA's action was nonetheless severe. The agency updated the drug's label to include a Boxed Warning for "acute serious liver injury and acute liver failure, including fatal outcomes," according to the official announcement. Furthermore, the FDA narrowed the therapy's indication, restricting its use to ambulatory patients aged four and older and removing its approval for non-ambulatory individuals following reports of fatal adverse events.
For many biotech companies, such a warning can be devastating, often erasing billions in market value. However, in Sarepta's case, the market had been bracing for a potentially worse outcome, such as a broader restriction or even a market withdrawal. With the core market of ambulatory DMD patients preserved, investors were seemingly relieved that the scope of the commercial impact was now defined.
Sarepta's management moved quickly to frame the update as a collaborative step forward. In a statement, the company noted the decision would ensure that families and healthcare providers have the necessary information to make treatment decisions. "Completion of the safety labeling change for ELEVIDYS will ensure that families and healthcare professionals have clear information... to help understand these updates and guide treatment decisions," said Louise Rodino-Klapac, Ph.D., Sarepta's head of research and development, in the company's press release.
Wall Street's reaction largely echoed the market's bullish interpretation. Analysts at Mizuho upgraded Sarepta from 'Neutral' to 'Outperform,' signaling confidence that strong underlying demand and favorable insurance coverage for Elevidys would continue to drive growth despite the new restrictions, as reported by Benzinga. This view suggests the addressable market, while smaller, is now more secure.
Elevidys is a one-time gene therapy designed to treat the underlying genetic cause of Duchenne muscular dystrophy, a progressive and fatal muscle-wasting disease. The therapy has been a source of high hopes for patients and investors alike, representing a frontier in genetic medicine.
Looking ahead, Sarepta has signaled it is not abandoning the non-ambulatory patient population. The company announced plans to begin a study of an enhanced immunosuppressive regimen aimed at mitigating the liver injury risk. If successful, Sarepta could potentially seek the FDA's concurrence to resume dosing in this group, though any such path would be subject to rigorous regulatory scrutiny. For now, investors are betting that clarity, even when accompanied by a stark warning, is a price worth paying.