Market Overview

Morgan Stanley Buys Into Sarepta Amid Sell-Off, Sees $600M Recurring Opportunity In DMD Candidate

Morgan Stanley Buys Into Sarepta Amid Sell-Off, Sees $600M Recurring Opportunity In DMD Candidate

A manufacturing-related hold on Sarepta Therapeutics Inc (NASDAQ: SRPT)’s Duchenne muscular dystrophy candidate catalyzed a recent sell-off. Morgan Stanley sees a buying opportunity in the otherwise-lauded program’s stumble. 

The Analyst

Analyst Matthew Harrison upgraded Sarepta from Equal-weight to Overweight and maintained their $163 price target.

The Thesis

Sarepta has fallen 25 percent off its mid-June, post-data high, but Morgan Stanley is dismissing the pullback.

“We believe the decline has occurred as shareholders transition from mostly short-term to more longer-term oriented investors,” Harrison said in a Wednesday note. (See the analyst's track record here.) 

“Importantly, we do not believe a major bear case has emerged on the prospects for their DMD gene-therapy program.”

A hold on Sarepta’s Phase 1/2 trial is expected to be resolved without delaying a pivotal trial planned to start by the end of the year. Morgan Stanley anticipates drug approval in 2021, but notes that the Food and Drug Administration could accelerate the push to market.

Sarepta’s candidate is seen to lead rivals from Solid Biosciences Inc (NASDAQ: SLDB) and Pfizer Inc. (NYSE: PFE) in both efficacy and timing. Its $600-million recurring market opportunity, which presents a revenue stream that could double Sarepta’s market cap, is not reflected in its valuation, Harrison said. 

“While competition and manufacturing could present headwinds, we believe management will solve any manufacturing hurdles quickly and believe management's lead on competition significantly reduces the competitive threat,” the analyst said. 

New data for the recently acquired limb girdle muscular dystrophy program could also drive upside, according to Morgan Stanley. 

Price Action

Sarepta shares were trading up nearly 7 percent at $124.36 at the time of publication Wednesday. 

Related Links:

Analyst: Solid Biosciences A Solid Buy On Sarepta's Progress

Analyst: Sarepta's DMD Gene Therapy Results 'Dramatic And Far Exceeding Expectations'

Posted-In: David Lebowitz Matthew HarrisonAnalyst Color Biotech Upgrades Price Target Analyst Ratings General Best of Benzinga


Related Articles (PFE + SLDB)

View Comments and Join the Discussion!

Latest Ratings

AAPLWedbushInitiates Coverage On310.0
DHTJP MorganUpgrades0.0
DXCMGoldman SachsUpgrades125.0
ORLYJP MorganUpgrades398.0
View the Latest Analytics Ratings
Don't Miss Out!
Join Our Newsletter
Subscribe to:
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Fintech Focus
Your weekly roundup of hot topics in the exciting world of fintech.
Thank You
for registering for Benzinga’s newsletters and alerts.
• The Daily Analysts Ratings email will be received daily between 7am and 10am.
• The Market in 5 Minutes email will be received daily between 7am and 8am.
• The Fintech Focus email will be received every Friday between 2pm and 5pm.

Mid-Morning Market Update: Markets Open Higher; Apple Tops Q3 Estimates

10 Biggest Price Target Changes For Wednesday