Dmitry Vinogradov
Following a sharp rally last week on FDA label expansion for its muscle disorder therapy Elevidys, Sarepta Therapeutics (NASDAQ:SRPT) continued to trade lower in the premarket Wednesday as Citi downgraded the stock based on valuation.
The shares of the Cambridge, Massachusetts-based biotech surged more than 30% on Friday after the FDA label expansion for gene therapy targeted at Duchenne muscular dystrophy (DMD) exceeded Wall Street’s expectations.
Elevidys is marketed by Sarepta (SRPT) in partnership with Roche (OTCQX:RHHBY) (OTCQX:RHHBF), with manufacturing support from Catalent (CTLT).
However, with SRPT shares up more than a third over the past five days, Citi analyst David Hoang downgraded the stock to Neutral from Buy, citing risks to the valuation.
“We see high expectations reflected in consensus numbers, where any volatility in the early launch could translate to downside, given what is now baked into the valuation,” Hoang wrote, noting a fair value of no more than $180 per share for the stock.
However, Citi raised its price target on SRPT to $176 from $172 per share following minor adjustments to its Elevidys forecasts.
Meanwhile, after a review of the cell and gene therapy landscape targeting DMD, Seeking Alpha analyst BioCGT Investor argued on Tuesday that Sarepta (SRPT) is unlikely to face any threats to Elevidy’s monopoly over the next two years.
“In this sense, I think Sarepta’s and Catalent’s revenue driven by Elevidys is not only safe, but it is also poised to grow, given the recently approved label expansion,” the analyst added.