Sarepta Makes Big Cuts After Patient Deaths. Its Prospects Remain Uncertain.

Sarepta’s gene therapy Elevidys for Duchenne muscular dystrophy is getting a so-called black box warning—the most serious type of warning that the Food and Drug Administration can require for a medication. (Dreamstime)

Major cuts Sarepta Therapeutics announced late Wednesday could keep the company profitable, but the biotech still has a long way to go to win investors back after a disastrous few months.

Sarepta said it would lay off 500 employees, or roughly a third of its workforce, and slash its drug pipeline. At the same time, the company announced raises for a handful of executives.

The stock was up 21.1% on Thursday to $22.25, but is still down 79.2% from its closing price on March 17, the day before it disclosed the first of two patient deaths this year that have imperiled the future of Elevidys, its Duchenne muscular dystrophy gene therapy.

Sarepta, over the past decade, has repeatedly squeezed out controversial Food and Drug Administration approvals for treatments for DMD, a progressive and deadly condition.

Its drugs have brought hope for some patients and their families, but skepticism from many experts, who point to unconvincing data supporting some of the medicines.

This year, Sarepta’s risky approach seems to have caught up with it. Elevidys was set to account for roughly tw0-thirds of Sarepta’s revenue in 2025, according to FactSet estimates from March, and analysts expected the company to earn $3.71 a share on revenue of $3.1 billion.

Those estimates have dropped precipitously since the company disclosed in March and June that two Elevidys patients had died, casting doubt on the future of the medicine. Analysts now expect $2.1 billion in 2025 revenue across the entire company, and anticipate the company losing $3.62 a share.

Sarepta says the new cuts are aimed at keeping the company profitable, and allowing it to pay off a $1.1 loan coming due in 2027. “We will reduce our ongoing spending by about $900 million through 2027, ensuring that even with very modest estimates of forward sales, we remain profitable and cash flow positive and can meet our financial obligations, including maintaining our revolver and addressing our 2027 convertible debt,” the company’s CEO, Doug Ingram, said on a late Wednesday investor call.

The outlook for the company, however, remains uncertain. Sarepta will cut a number of gene therapies from its pipeline, and will instead focus on programs that use siRNA, a different modality, to treat conditions including Huntington’s disease and idiopathic pulmonary fibrosis.

“Despite believing there could be potential for the siRNA platform, it remains at a very early stage,” Cantor Fitzgerald analyst Kristen Kluska wrote late Wednesday of the Sarepta siRNA drugs in development.

Even as it slashes its workforce, some company executives are getting a raise. In a securities filing, the company said Ian Estepan, who had previously served as Sarepta’s CFO, was being named President and Chief Operating Officer, and that his base salary would be “increased to $800,000.” Another executive, Louise Rodino-Klapac, the former chief scientific officer and head of R&D, was named president of R&D and technical operations, and her salary was increased to the same level as Estepan’s.

As for Elevidys, Sarepta says it will add a black box warning to the medicine’s label, the most serious type of warning that the FDA can require for a medication.

The FDA last year expanded the approval of Elevidys to include patients no longer able to walk due to the progression of their condition. Both of the patients who died this year had already lost their ability to walk. Sarepta paused shipments to that category of patients after the second death in June. Now, the company says it has come up with a series of medicines to give non-ambulatory patients so they can safely take the medicine, and is proposing a small trial of the regimen.

Sarepta announced preliminary second quarter results along with the other news, saying total revenue for the quarter was $513 million, just shy of the FactSet consensus estimate of $530 million.

Write to Josh Nathan-Kazis at josh.nathan-kazis@barrons.com and Elsa Ohlen at elsa.ohlen@barrons.com