PepGen shares gain 5% on earnings beat despite FDA trial hold
Clinical-stage biotech reports narrower loss and $148.5M cash position as regulator requests additional preclinical data
PepGen shares rose 5.3% on Wednesday, reaching $6.76, after the clinical-stage biotechnology company reported fourth-quarter earnings that beat analyst expectations while disclosing a partial clinical hold on a key trial for its experimental myotonic dystrophy treatment.
The company posted a loss of $0.27 per share for the fourth quarter of 2025, significantly narrower than the consensus estimate of a $0.57 loss, according to the company's 8-K regulatory filing. PepGen's net loss narrowed to $18.3 million from $22.2 million in the year-earlier quarter, reflecting improved operational efficiency as the company advances its oligonucleotide therapeutics pipeline.
However, the U.S. Food and Drug Administration placed a partial clinical hold on the FREEDOM2-DM1 Phase 2 multiple ascending dose trial for PGN-EDODM1, PepGen's lead candidate for myotonic dystrophy type 1. The regulatory action stems from FDA questions regarding previously submitted preclinical pharmacology and toxicology studies, though the agency raised no concerns about blinded clinical data from the Phase 1 FREEDOM study.
The partial hold prevents enrollment of new U.S. patients in the FREEDOM2 trial, though the study continues internationally. PepGen has received regulatory clearance to initiate the FREEDOM2 study in South Korea, Australia, and New Zealand, while dosing for the 10 mg/kg cohort is ongoing in the United Kingdom and Canada following a Data Safety Monitoring Board recommendation for dose escalation.
"We are actively engaged with the FDA to address their questions and are submitting additional analyses, including recently unblinded FREEDOM data," the company said in a statement. "We remain confident in the potential of PGN-EDODM1 based on the clinical data we have generated to date."
Despite the regulatory setback, PepGen ended the quarter with $148.5 million in cash and equivalents, which management said provides a runway into the second half of 2027. The company expects to report data from the 5 mg/kg cohort in the first quarter of 2026 and from the 10 mg/kg cohort in the second half of the year.
Analysts maintain a bullish outlook on PepGen, with a median price target of $10.86, representing 61% upside from current levels, according to market data. The stock has surged more than 660% over the past 12 months from its 52-week low of $0.88, though it remains well below its 52-week high of $7.80 reached earlier this year.
PepGen, headquartered in Cambridge, Massachusetts, focuses on developing oligonucleotide therapeutics for serious neurological and neuromuscular diseases. Myotonic dystrophy type 1 is a rare, progressive genetic disorder that affects muscle function and currently has no approved disease-modifying treatments.
Institutional investors hold 92.8% of PepGen's shares, indicating strong institutional support despite the stock's volatility. The company's market capitalization stands at approximately $449 million.
The partial clinical hold represents the latest regulatory challenge for the biotechnology sector, which has faced increased FDA scrutiny on preclinical data packages in recent years. However, investors appeared to take comfort in the specific nature of the FDA's questions, which focus on preclinical studies rather than human safety data from ongoing trials.