Executive Summary / Key Takeaways

• Strategic Recalibration for Resilience: Sarepta Therapeutics is undergoing a significant strategic restructuring, including a 36% workforce reduction and pipeline reprioritization, aimed at achieving $400 million in annual cost savings by 2026 to ensure long-term financial viability and meet its 2027 debt obligations.
• ELEVIDYS Faces Headwinds, Ambulant Path Cleared: While ELEVIDYS, the company's groundbreaking gene therapy for Duchenne muscular dystrophy (DMD), achieved over $1 billion in sales since its 2023 approval, recent acute liver failure (ALF) events led to a temporary suspension of shipments. The FDA has since recommended resuming shipments for ambulatory patients, though a boxed warning for ALI/ALF is expected, and discussions continue for non-ambulatory patients.
• siRNA Platform Emerges as a Durable Growth Engine: Sarepta is aggressively prioritizing its siRNA platform, bolstered by the Arrowhead Pharmaceuticals (ARWR) collaboration. This platform, featuring proprietary TRiM technology, targets large unmet needs in neurodegenerative and pulmonary diseases, with key preliminary data readouts for FSHD (SRP-1001) and DM1 (SRP-1003) anticipated in the second half of 2025.
• Financial Discipline and Debt Management: The company ended Q2 2025 with $850 million in cash and cash equivalents, and recently refinanced approximately $700 million of its 2027 convertible notes and sold Arrowhead equity, demonstrating proactive management of its balance sheet to support future growth and obligations.
• Competitive Landscape and Technological Moats: Sarepta maintains a strong competitive position in DMD with its PMO and gene therapies, leveraging unique RNA-targeted and AAV technologies. Its expanded siRNA pipeline aims to establish new leadership in broader rare disease markets, differentiating it from rivals through targeted delivery and robust gene knockdown capabilities.

Sarepta's Mission and Evolving Landscape

Sarepta Therapeutics, Inc. (NASDAQ:SRPT), incorporated in 1980, has long been a pioneering force in precision genetic medicine for rare diseases. The company's journey began with its phosphorodiamidate morpholino oligomer (PMO) platform, delivering exon-skipping therapies for Duchenne muscular dystrophy (DMD). EXONDYS 51, VYONDYS 53, and AMONDYS 45, approved between 2016 and 2021, established Sarepta's foundational business, providing disease-modifying treatments for specific DMD mutations. These therapies have demonstrated a laudable safety profile and significant real-world benefits, including increased time out of a wheelchair and improved mortality, forming a robust franchise that continued to grow even amidst new product introductions.

A pivotal moment arrived with the accelerated approval of ELEVIDYS (delandistrogene moxeparvovec-rokl), an adeno-associated virus (AAV)-based gene therapy for DMD, in June 2023, with a broader label expansion in June 2024. This marked Sarepta's entry into the gene therapy arena, aiming to arrest muscle damage and preserve function by restoring dystrophin protein. The launch of ELEVIDYS in 2024 was hailed as the most successful gene therapy launch in history, generating over $1 billion in sales since its initial approval. This success propelled Sarepta to sustainable profitability and positive cash flow in 2024, positioning it as a fully integrated biotech.

However, 2025 brought unforeseen challenges, including patient deaths linked to ELEVIDYS and an investigational LGMD gene therapy, leading to regulatory scrutiny and temporary suspensions of ELEVIDYS shipments. In response, Sarepta initiated a comprehensive strategic restructuring in July 2025, a decisive move to reprioritize its pipeline, enhance financial flexibility, and ensure long-term viability. This recalibration underscores the dynamic nature of the biopharmaceutical industry, where innovation must constantly adapt to evolving scientific understanding, regulatory demands, and market realities.

Technological Edge: Precision Genetic Medicine Platforms

Sarepta's core investment thesis is deeply rooted in its advanced genetic medicine platforms, which offer distinct technological advantages over conventional treatments and many competitors. The company's expertise spans RNA-targeted therapeutics, AAV-based gene therapies, and a burgeoning siRNA platform.

The PMO platform utilizes phosphorodiamidate morpholino oligomer chemistry for exon-skipping. This technology is designed to promote the production of an internally truncated but functional dystrophin protein in DMD patients. Its tangible benefits include a well-established safety profile and real-world evidence demonstrating extended ambulation, reduced contractures, fewer emergency room visits, and improved mortality rates. This robust clinical profile provides a high bar for any potential competitors in the exon-skipping space.

The AAV Gene Therapy platform, exemplified by ELEVIDYS, delivers a micro-dystrophin gene via an AAVrh74 vector. This vector is distinguished by its differentiated safety profile and high transduction efficiency, enabling the therapy to arrest muscle damage and preserve function in DMD patients. Sarepta is actively innovating in manufacturing, planning a transition to suspension manufacturing for ELEVIDYS. This initiative aims for a significant improvement in cost of goods sold (COGS), with projections of upwards of 5 times more yield efficiency and eventual gross margins significantly over 90%. A bridging study is slated to commence in 2025, with a full transition to suspension manufacturing targeted for 2027. This operational enhancement is critical for scaling global supply and improving profitability.

The siRNA platform, significantly bolstered by the collaboration with Arrowhead Pharmaceuticals, leverages the "targeted RNAi molecule" (TRiM) technology. This platform employs proprietary tissue-targeting ligands to achieve deep and durable target gene knockdown, overcoming delivery challenges often associated with RNA therapies and enabling penetration into traditionally difficult-to-reach areas like the central nervous system (CNS). Preclinical data for SRP-1001 (FSHD) demonstrated robust muscle penetration and significant dose-dependent DUX4 mRNA knockdown, effectively reducing downstream DUX4-related gene expression. In mouse models, it showed both prophylactic potential and the ability to reverse existing DUX4 expression. SRP-1003 (DM1) achieved an impressive 80% knockdown of DMPK mRNA in nonhuman primates and corrected mis-splicing by up to 60% in a DM1 mouse model. For SRP-1004 (SCA2), preclinical results highlighted robust ATXN2 knockdown in key nonhuman primate brain regions, including the cerebellum, frontal cortex, and cervical spinal cord. Furthermore, SRP-1005 (Huntington's disease) showed successful subcutaneous delivery of siRNA across the blood-brain barrier, resulting in up to 80% Huntington protein knockdown in deep brain regions like the cortex and striatum in both mouse and non-human primate models. These quantitative preclinical results underscore the platform's potential for best-in-class efficacy and broad applicability across neurodegenerative and pulmonary indications.

These technological differentiators are not merely scientific achievements; they form the bedrock of Sarepta's competitive moat. The PMO platform's established efficacy and safety, the AAV platform's transformative impact in DMD, and the siRNA platform's precision and delivery capabilities collectively contribute to higher average selling prices, lower long-term manufacturing costs, and a strong market positioning in rare diseases. This technological leadership is crucial for sustaining financial performance and driving long-term growth by addressing unmet medical needs with potentially superior therapeutic options.

ELEVIDYS: A Transformative Therapy Under Scrutiny

The launch of ELEVIDYS has been a story of both unprecedented success and unexpected challenges. Following its expanded label approval in June 2024, ELEVIDYS generated $384.2 million in Q4 2024, contributing to $821 million in full-year 2024 sales. In Q1 2025, sales reached $375 million, representing a 180% year-over-year increase. However, Q1 2025 sales fell short of expectations due to administrative hurdles, a severe flu season, and patient hesitancy following a reported patient death from acute liver failure (ALF) in March 2025.

This tragic event, inconsistent with the prior experience of over 800 patients treated, prompted intense regulatory scrutiny. A second ALF-related death in June 2025 led Sarepta to voluntarily suspend commercial shipments of ELEVIDYS to non-ambulatory patients in the U.S. Subsequently, in July 2025, at the FDA's request, all ELEVIDYS shipments in the U.S. were temporarily paused. The FDA, however, swiftly recommended lifting the pause for ambulatory patients on July 28, 2025, allowing shipments to resume for this population. Discussions with the FDA are ongoing regarding a boxed warning for acute liver injury (ALI) and ALF for ELEVIDYS, which Sarepta has agreed to for the ambulatory label. For non-ambulatory patients, Sarepta is proposing a sirolimus immunosuppression regimen, based on expert panel recommendations and preclinical data, to mitigate liver-related risks. This protocol will be tested in a clinical trial (Cohort 8 in Study 103) to gather requisite safety data.

The operational challenges extend beyond safety concerns. Administrative processes for gene therapy, from start form to infusion, are complex, taking one to one-and-a-half months longer than initially estimated due to rigorous screening and logistical requirements. An imbalance in site capacity also exists, with top treatment centers often booked for up to a year, necessitating efforts to enhance engagement and utilization of other qualified sites. Despite these headwinds, management asserts that the fundamental market opportunity for ELEVIDYS remains unchanged, and the therapy's positive risk-benefit profile, supported by extensive clinical data in over 800 patients, remains strong.

Diversification & Future Growth: The siRNA and LGMD Pipeline

In response to the ELEVIDYS challenges and to fortify its long-term financial position, Sarepta announced a strategic restructuring in July 2025. This plan includes a 36% workforce reduction (approximately 500 employees) and a significant pipeline reprioritization, targeting $400 million in annual cost savings by 2026. The PPMO development program (SRP-5051) was discontinued due to long-term safety concerns (persistent hypomagnesemia) and the evolving DMD landscape, with the FDA indicating that an accelerated approval pathway was not open for its current profile.

The restructuring pivots Sarepta's focus towards high-impact programs, particularly its burgeoning siRNA platform, acquired through an exclusive global license and collaboration agreement with Arrowhead Pharmaceuticals, effective February 2025. This collaboration, which involved an upfront payment of $500 million and a $325 million equity investment in Arrowhead (later partially sold for $174 million in gross proceeds and a $151 million reduction in future milestone payments), is expected to be a durable growth engine. The siRNA pipeline includes:

• FSHD (SRP-1001/ARO-DUX4): For facioscapulohumeral muscular dystrophy, aiming to reduce DUX4 protein production. Preliminary data focusing on safety, DUX4 mRNA knockdown, and DUX4-regulated gene expression are expected in H2 2025.
• DM1 (SRP-1003/ARO-DM1): For type 1 myotonic dystrophy, designed to suppress DMPK in skeletal muscle. Preliminary Phase I data, including DMPK knockdown and mis-splicing correction, are anticipated in H2 2025, with a potential launch in 2029.
• SCA2 (SRP-1004/ARO-ATXN2): For spinocerebellar ataxia type 2, targeting ATXN2 protein in the CNS. A Phase I study is underway.
• Huntington's Disease (ARO-HTT/SRP-1005): Aims to reduce Huntington protein levels in the brain via subcutaneous injection. A Clinical Trial Application (CTA) filing is expected by the end of 2025, with trial initiation in H1 2026.
• IPF (SRP-1002/ARO-MMP7): For idiopathic pulmonary fibrosis, designed to silence MMP7.
• Pre-clinical and Discovery Programs: Including therapies for SCA1, SCA3, and up to six new discovery targets in muscle or CNS.

In parallel, Sarepta continues to advance its LGMD gene therapy pipeline, leveraging the AAVrh74 vector used in ELEVIDYS. SRP-9003 for LGMD2E (beta-sarcoglycanopathy) is on track for BLA submission in H2 2025, with a potential launch in 2026. This program, along with SRP-9004 (LGMD2D, launch 2027) and SRP-9005 (LGMD2C, launch 2028), represents a significant opportunity, collectively estimated to be about 25% of the DMD ELEVIDYS market opportunity. While most other LGMD programs were deprioritized in the restructuring, Sarepta intends to seek partnerships to advance them.

Financial Resilience Amidst Headwinds

Sarepta's financial performance in recent periods reflects both the rapid growth of its commercial products and the impact of strategic investments and recent challenges. For the six months ended June 30, 2025, total revenues reached $1.36 billion, a 75% increase over the same period in 2024. Product net revenues were $1.12 billion, driven by ELEVIDYS sales of $656.8 million (a 157% increase year-over-year) and PMO sales of $467.8 million (a 0.7% increase). Collaboration and other revenues surged to $231.3 million, primarily due to a $63.5 million milestone from ELEVIDYS approval in Japan and $112 million from a Roche (RHHBY) option expiry.

Despite strong revenue growth, the company reported a net income of $250.6 million for the six months ended June 30, 2025, compared to $42.6 million in the prior year. However, operating loss was $184.8 million, largely due to a substantial increase in R&D expenses, which totaled $977.8 million for the six months, including a $583.6 million acquired in-process R&D expense from the Arrowhead Pharmaceuticals collaboration. Selling, general, and administrative (SG&A) expenses were $271.5 million.

As of June 30, 2025, Sarepta held $850 million in cash and cash equivalents, an increase of $203 million from Q1 2025. Total cash, cash equivalents, restricted cash, and investments stood at $850.3 million. The company's long-term debt was $1.14 billion, including $1.15 billion in 1.25% convertible senior notes due September 15, 2027. To proactively manage these obligations, Sarepta recently refinanced approximately $700 million of these notes and sold a significant portion of its Arrowhead Pharmaceuticals equity investment, reducing future milestone payments. The company also secured a $600 million revolving credit facility in February 2025, with no outstanding amounts, and is committed to maintaining its financial covenants (minimum trailing 4-quarter EBITDA of $172 million).

The strategic restructuring aims to reduce annual operating expenses (excluding one-time collaboration milestones) to a range of $800 million to $900 million starting in 2026, down from the Q1 2025 guidance of $1.2 billion to $1.3 billion. This aggressive cost management, combined with a conservative "stress test" revenue floor of $1.4 billion annually from its Duchenne franchise ($500 million from ambulant ELEVIDYS and $900 million from PMOs), is designed to ensure Sarepta remains profitable, cash flow positive, and capable of meeting its financial obligations.

Competitive Dynamics and Strategic Positioning

Sarepta operates in a highly competitive biopharmaceutical landscape, particularly within rare diseases and DMD. Its primary direct competitors include BioMarin Pharmaceutical Inc. (BMRN), PTC Therapeutics, Inc. (PTCT), and Vertex Pharmaceuticals Incorporated (VRTX), all vying for market share in genetic therapies.

Sarepta's competitive advantages are rooted in its specialized technology and deep expertise in DMD. Its PMO platform offers a proven, laudable safety profile and real-world efficacy that sets a high bar for rivals. ELEVIDYS, as the first and only approved disease-modifying gene therapy for DMD, provides a significant first-mover advantage. The company's AAVrh74 vector, with its differentiated safety and high transduction efficiency, underpins its gene therapy programs, including LGMD. The newly prioritized siRNA platform, with its TRiM technology and proprietary tissue-targeting ligands, is designed for best-in-class efficacy in challenging indications like neurodegenerative diseases, aiming to achieve robust and durable gene knockdown.

Comparing Sarepta to its rivals reveals nuanced positioning. While BioMarin Pharmaceutical Inc. offers a diversified rare disease portfolio with strong revenue growth and positive profitability (TTM Gross Profit Margin 80%, Operating Profit Margin 17%, Net Profit Margin 15%), Sarepta's focus on DMD has historically provided a more targeted, albeit narrower, market leadership. PTC Therapeutics, Inc. also competes in RNA-based DMD therapies, but Sarepta's gene therapy and advanced siRNA pipeline offer potentially more robust and curative approaches. Vertex Pharmaceuticals Incorporated, a powerhouse in cystic fibrosis, is expanding into gene editing and therapies, posing a threat with its strong financial health (TTM Gross Profit Margin 86%, Operating Profit Margin -2%, Net Profit Margin -5%) and R&D scale.

Financially, Sarepta's TTM Gross Profit Margin of 78.85% is comparable to BioMarin Pharmaceutical Inc. and Vertex Pharmaceuticals Incorporated, but its TTM Operating Profit Margin of -0.04% and Net Profit Margin of -2.34% reflect the significant R&D investments and recent challenges, contrasting with BioMarin Pharmaceutical Inc.'s positive profitability. Sarepta's P/S ratio of 0.74 is notably lower than BioMarin Pharmaceutical Inc.'s 4.38, PTC Therapeutics, Inc.'s 4.30, and Vertex Pharmaceuticals Incorporated's 9.41, suggesting a potential undervaluation if its strategic pivot and pipeline execution prove successful. The company's debt-to-equity ratio of 1.00 is higher than BioMarin Pharmaceutical Inc.'s (0.11) and Vertex Pharmaceuticals Incorporated's (0.11), highlighting a need for disciplined financial management, which the recent refinancing and restructuring address.

Sarepta's strategy of deep partnerships, such as with Roche for ex-U.S. ELEVIDYS rights and Arrowhead Pharmaceuticals for siRNA, enhances its global reach and R&D capabilities, allowing it to compete effectively against larger, more diversified players. However, its historical reliance on a limited product portfolio has exposed it to higher regulatory and commercial risks, as evidenced by the ELEVIDYS safety events. The strategic pivot to a broader siRNA pipeline aims to mitigate this by diversifying its therapeutic areas and leveraging its technological moats in new, high-value markets.

Conclusion

Sarepta Therapeutics stands at a critical juncture, having achieved monumental successes with its Duchenne muscular dystrophy therapies while simultaneously confronting significant safety and regulatory challenges. The company's history as a pioneer in RNA-targeted therapeutics and its groundbreaking launch of ELEVIDYS underscore its scientific prowess and commercial execution capabilities. However, recent acute liver failure events associated with ELEVIDYS and an investigational LGMD therapy have necessitated a decisive strategic recalibration.

The core investment thesis now hinges on Sarepta's ability to execute its strategic restructuring, which prioritizes its promising siRNA platform and the LGMD 2E gene therapy program, while diligently managing the ELEVIDYS label and patient access. The robust preclinical data for its siRNA assets, demonstrating deep and durable gene knockdown with targeted delivery, positions this platform as a potent future growth driver. Coupled with proactive financial management, including debt refinancing and cost savings from workforce reductions, Sarepta aims to fortify its balance sheet and ensure long-term viability. While the path ahead for ELEVIDYS, particularly for non-ambulatory patients, requires careful navigation with regulatory bodies, the company's commitment to scientific rigor and patient safety remains paramount. Investors should closely monitor the preliminary data readouts for the siRNA programs in late 2025, the progress of the LGMD 2E BLA submission, and the ongoing discussions with the FDA regarding ELEVIDYS, as these will be critical indicators of Sarepta's success in transforming current challenges into sustained leadership in precision genetic medicine.