Options Pop as Sarepta Therapeutics Stock Spirals

Sarepta Therapeutics Inc (NASDAQ:SRPT) is near the bottom of the Nasdaq this morning, down 16.5% to trade at $100.52. Last night, the Food and Drug Administration (FDA) declined to approve the company's golodirsen injection for the treatment of Duchenne muscular dystrophy (DMD), citing risk of infection and kidney toxicity. In a statement, Sarepta CEO Doug Ingram said the company was "very surprised" by the rejection, and will work with the FDA to "find an expeditious pathway forward."

A string of bear notes have ensued, with five brokerages issuing price-target cuts, the lowest coming from H.C. Wainwright, to $160 from $267. Elsewhere, Cantor Fitzgerald dropped its SRPT price target to $175 from $231, saying it expects the stock to "trade down to $90-$100/share today," a region in which "significant risk is priced in for both [of Sarepta's] gene therapy programs."

There's ample room for more bear notes to come through on SRPT. Heading into today, 15 out of 16 brokerages in coverage rated the stock a "buy" or better, with zero "sells" on the books. In addition, the security's consensus 12-month price target of $195.57 was a 62% premium to last night's close at $120.31. 

Now, Sarepta stock is eyeing its lowest close since Dec. 26, and worst single-session percentage drop since June 2016. This just extends the security's recent weakness, with SRPT fresh off a three-week losing streak, and down 34% already this quarter.

Sarepta Therapeutics options volume is running hot as a result of today's price action, too, with 6,505 contracts on the tape already -- 10 times what's typically seen at this point. Speculators appear to be buying to open the weekly 8/23 120-strike call, betting on a big bounce for SRPT stock by expiration at the close this Friday, Aug. 23.