Sarepta Sells Biotech Stake to Raise Cash as Elevidys Troubles Hit Home

The Sarepta Therapeutics headquarters in Cambridge, Mass. The stock has been in free fall. (Cassandra Klos/Bloomberg)

Sarepta Therapeutics disclosed late Wednesday it had cashed out its shares of a smaller biotech, Arrowhead Pharmaceuticals, taking a loss on that investment as it seeks to regain its financial footing.

Shares of Sarepta have been in free fall since safety issues derailed Elevidys, a gene therapy analysts had expected to achieve blockbuster sales. The company has announced significant spending cuts.

That Sarepta chose to sell its Arrowhead shares at a loss, even though the companies continue to collaborate on a handful of experimental medicines, is a sign of the intense pressure the company faces. Sarepta shares were down 1% on Thursday, while Arrowhead shares fell 6.5%.

Sarepta stock had been down 83% this year as of the close of trading on Wednesday.

The company disclosed the deaths of two patients on Elevidys this year, first in March and then in June. In July, the Food and Drug Administration requested that Sarepta stop shipping all doses of Elevidys, before reversing course.

Now, analysts see a dramatically diminished market for Elevidys. Before the deaths, analysts had thought Elevidys would account for the majority of Sarepta’s revenue this year. Current expectations are far gloomier. The consensus forecast among analysts tracked by FactSet is for Elevidys sales of just $900 million this year, down from estimates in late February of $2.1 billion. For next year, analysts expect Sarepta to clock $1.5 billion in total revenue, down from a $4 billion estimate in late February.

Those gloomier prospects are creating cash problems for Sarepta, which has a $1.2 billion convertible note due in September 2027. The company also hopes to maintain access to a $600 million revolving credit facility, which has financial thresholds Sarepta must continue to meet. In July, Sarepta announced major layoffs aimed at keeping the company profitable in order to pay the debt and keep access to the credit facility.

The Arrowhead stock sale represents another effort to shore up Sarepta’s financial position.

Sarepta said it had liquidated its holdings of Arrowhead, a biotech developing treatments based on a technology called RNA interference, or RNAi. The companies announced a licensing agreement last year to collaborate on a number of experimental treatments for muscle diseases.

Sarepta had owned 11.9 million Arrowhead shares, or 9.5% of the company’s shares outstanding, before the sales announced Wednesday. Sarepta said it had sold 9.2 million Arrowhead shares in a block trade for “at least” $174 million, and had transferred 2.7 million shares to Arrowhead to satisfy $50 million worth of a $100 million milestone payment obligation it owed the company.

It paid Arrowhead $50 million in cash to cover the rest of the milestone obligation, which related to progress in a trial of a drug the companies are developing to treat Type 1 myotonic dystrophy.

Leerink Partners analyst Joseph Schwartz wrote early Thursday that the implied $18.78 per share Sarepta received for the Arrowhead shares sold in the block trade amounted to a 31% discount to the price it paid in November 2024.

While taking that loss appears to have been necessary to preserve Sarepta’s cash, Schwartz said it doesn’t inspire confidence about the results of the clinical studies being conducted under the Arrowhead and Sarepta partnership. Promising trial results might well boost the value of Sarepta’s Arrowhead holdings.

“We think the sale of the equity stake is a prudent move and provides the company with a bit more breathing room ahead of the maturity of the 2027 convertible note,” Schwartz wrote. “However, we also wonder if there is any potential readthrough to the upcoming data.”

In its press release late Wednesday, Sarepta CEO Doug Ingram said that the company still has confidence in its Arrowhead partnership. “The sale of our equity investment is a strategic decision to help fund this milestone but does not change our conviction in the utility of the siRNA approach and our confidence in the work Arrowhead is doing to apply this technology across several disease states,” he said.

Write to Josh Nathan-Kazis at josh.nathan-kazis@barrons.com