Layoffs and key therapies boost investor confidence! Biotechnology company Sarepta surged after hours

According to Zhitong Finance APP, biotechnology company Sarepta Therapeutics (SRPT.US) surged over 35% in after-hours trading on Wednesday, with the increase nearing 60% at one point. This was due to the company's announcement of layoffs exceeding one-third of its workforce and confirmation that its gene therapy for treating fatal muscle diseases will continue to be marketed with an additional warning about the risk of liver failure.

On Wednesday, Sarepta announced a strategic restructuring and cost-saving measures. The biotechnology company, which focuses on treating rare diseases, infectious diseases, and other conditions, stated that as part of a comprehensive reorganization, it will lay off 500 employees and suspend several drugs in its research and development pipeline. The company indicated that this move is expected to save approximately $400 million annually. Sarepta added that the layoffs will help the company maintain access to a $600 million revolving credit facility and generate cash flow to assist in repaying convertible bonds maturing in 2027.

It was reported that in March of this year, Sarepta announced the first treatment-related death associated with its gene therapy Elevidys for Duchenne muscular dystrophy (DMD). A 16-year-old male patient developed acute liver failure (ALF) after treatment and ultimately passed away. Three months after reporting the first patient death, in June, Sarepta issued another announcement indicating a second death case due to ALF related to Elevidys.

At the request of the U.S. Food and Drug Administration (FDA), Sarepta agreed to add a warning about the risk of liver failure to the label of its gene therapy Elevidys. A black box warning is the most severe safety warning for drugs, indicating the potential for serious or fatal complications.

During a conference call with analysts, Sarepta executives stated that this warning label seems to have addressed the FDA's concerns about using the gene therapy in children who are still able to walk. Sarepta mentioned that the company is still in communication with the FDA regarding another group of patients—those who are unable to walk. The company has suspended shipments to these patients and proposed researching a new immunosuppressive regimen for them to reduce liver risks.

Sarepta CEO Douglas Ingram stated during the conference call, "Regarding whether Elevidys will continue to remain on the market as a therapy, I think the answer is very clear, yes." Oppenheimer analyst Andreas Argyrides noted that this black box warning avoided the "worst-case scenario," which would have been the withdrawal of Elevidys from the market