Scotiabank upgrades Sarepta stock rating citing favorable risk reward

Scotiabank upgraded Sarepta Therapeutics (SRPT) to Sector Outperform with an $80 price target, citing a favorable risk-reward following recent negative news already priced into the stock. The upgrade is supported by potential catalysts including a more positive regulatory stance, expected Elevidys sales growth in 2H25, and upcoming data readouts for multiple muscular dystrophy programs. Recent developments include FDA platform technology designation for SRP-9003 and Japanese approval for ELEVIDYS in younger patients, with Morgan Stanley and Goldman Sachs reiterating Overweight and Buy ratings, respectively.

Analysis

Scotiabank has upgraded Sarepta Therapeutics (SRPT) to Sector Outperform from Sector Perform, maintaining an $80 price target, predicated on a favorable risk-reward scenario. This upgrade occurs despite the stock having fallen nearly 70% over the past six months, a decline which Scotiabank believes has already priced in recent negative news, including a patient death related to Elevidys and a downward revision of 2025 sales guidance; InvestingPro data suggests the stock is undervalued, with analyst targets ranging from $40 to $137. Key catalysts underpinning the upgrade include the increasingly positive stance of CBER Director Vinay Prasad on rare disease drugs, an anticipated pickup in Elevidys sales in the second half of 2025 against modest market expectations, potentially positive readouts for Duchenne Muscular Dystrophy Type 1 (DM1), Facioscapulohumeral Muscular Dystrophy (FSHD), and Limb-Girdle Muscular Dystrophy (LGMD) this year, and an upcoming Research and Development day later in 2025. Sarepta demonstrates strong liquidity with a current ratio of 4.02 and has achieved revenue growth of 59% in the last twelve months. Recent positive developments further support this outlook: Sarepta's rAAVrh74 viral vector (SRP-9003 for limb-girdle muscular dystrophy) received FDA platform technology designation, aiming to expedite development. The company also released promising ENDEAVOR study data for ELEVIDYS, showing high protein expression and a consistent safety profile, prompting discussions with the FDA for potential label expansion to younger Duchenne muscular dystrophy patients. Furthermore, ELEVIDYS received approval in Japan for children aged 3 to less than 8, its first global approval for this age group, leading Morgan Stanley to reiterate its Overweight rating ($113 target) and Goldman Sachs to maintain its Buy rating ($100 target).

Key Decisions for Investors

• Given Scotiabank's upgrade and the assessment that negative news is already reflected in the share price, investors might view the current valuation as a potentially attractive entry point, particularly following the significant prior stock depreciation.
• Investors should closely monitor upcoming clinical trial readouts for DM1, FSHD, and LGMD, the sales ramp-up of Elevidys, especially heading into the second half of 2025, and any developments regarding the FDA label expansion for Elevidys.
• The recent FDA platform technology designation for SRP-9003 and the Japanese approval of Elevidys represent significant positive regulatory and commercial milestones that could de-risk future developments and offer upside, though the wide range of analyst price targets suggests varying degrees of conviction on the path forward.