Analyst: Drug Stock's 60% Sell-Off Could Be a Buying Opportunity

Leerink believes SRPT stock will benefit from its sector peers

Mar 15, 2018 at 10:03 AM
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Shares of Solid Biosciences Inc (NASDAQ:SLDB) began trading publicly back on Jan. 26, opening at $25.50, well above their initial public offering (IPO) price of $16. And while SLDB stock went on to hit a record high of $33.74 on March 2, it's plunged 62.9% this morning to trade at $9.74 -- earlier hitting an annual low of $9.52 -- after the U.S. Food and Drug Administration (FDA) placed a clinical hold on the drugmaker's Duchenne muscular dystrophy (DMD) treatment.

Leerink, meanwhile, said that while the unexpected regulatory hold appears to be a "knee-jerk reaction," it could create a buying opportunity for SLDB shares. The covering analyst maintained their "outperform" rating and $36 price target.

What's more, the brokerage firm said Sarepta Therapeutics Inc (NASDAQ:SRPT) could benefit from tailwinds as more companies enter the DMD gene therapy treatment pool. After opening at a nearly 17-year high of $84.11 this morning following a price-target hike to $95 from $76 at SunTrust Robinson, SRPT was last seen trading up 0.9% at $83.04. The stock is still up 160% year-over-year, and recently broke above a trendline connecting higher highs since last April.

Against this backdrop, SRPT stock's put options are pricing in exceptionally low volatility expectations compared to its call counterparts at the moment. Specifically, Sarepta Therapeutics' 30-day implied volatility skew of negative 66.4% ranks in the 1st percentile of its annual range.
 

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