The company's experimental DMD gene therapy study did not reach its main goal
The shares of Sarepta Therapeutics Inc (NASDAQ:SRPT) have nearly halved this morning, down 49.8% at $84.90 at last check, after the company's experimental gene therapy to treat Duchene muscular dystrophy (DMD) did not meet the main goal of its study. As a result, no less than 13 analysts chimed in with price-target cuts, including J.P. Morgan Securities, which downgraded the stock to "underweight" and cut it price target to $96. The analyst said there were "simply too many questions as well as concerns" for the program.
This enormous bear gap has SRPT trading at its lowest level since last March -- a far cry from its Dec. 22, all-time high of $181.83. What's more, Sarepta stock just dropped below its 320-day moving average -- a trendline that has captured several pullbacks over the past few months -- for the first time since April.
Coming into today, analyst sentiment was quite optimistic. Just two of 15 in coverage considered SPRT a "hold," compared to 13 "buy" or better ratings. Meanwhile, the 12-month consensus price target of $143.15 represents a whopping 68.2% premium to its current perch.
While short interest has begun to unwind, bears are still firmly in control. Shorts shed 9.1% in the last reporting period, but the 7.91 million shares sold short still make up 10.7% of the stock's available float, or over two weeks of pent-up buying power at the stock's average pace of daily trading.
Drilling down to today's options activity, more than 9,000 calls and 6,000 puts have already cross the tape, which is 19 times the average intraday amount. Most popular by far is the monthly February 120 put, followed by the January 2021 70-strike put, where new positions are being opened.