Credit Suisse Says Sarepta Shares Volatile, Still A Favorite Idea

Shares of Sarepta Therapeutics Inc (NASDAQ: SRPT) soared as high as $63.73 following a controversial decision by the U.S. Food and Drug Administration to approve the company's treatment of Duchenne muscular dystrophy in September 2016.

Since the FDA's announcement, the stock has lost more than half of its value. Some Wall Street analysts are not convinced Sarepta's new drug launch will live up to the Street's expectations.

Alethia Young, a biotechnology analyst with Credit Suisse, commented in a research report on Thursday that despite Sarepta's volatility the stock remains a favorite small cap idea.

Analyst Commentary

The analyst is modeling Sarepta's new drug, which will be marketed as EXONDYS 51 to see revenue of $84 million for the full year 2017, marking a decrease from the analyst's prior projection of $159 million.

Young continued that Sarepta is expected to provide commentary around EXONDYS demand at the upcoming JPMorgan Healthcare Conference on January 10. Moreover, the company's commentary will give better clarity surrounding the drug's launch.

"We think shares could easily move 10–15 percent around the upcoming update," Young stated. "We expect the shares could be volatile until we get more info around the launch. We think that the key debate on the name is around concerns that 2017 expectations are too high. We may get sales or a patient estimate for 4Q16, which is another piece that will help us frame 2017 better."

Bottom line, Young stated that while the revenue revision does represent a "major change" in the company's near-term outlook it doesn't meaningfully affect the stock's outlook. Shares remain Outperform rated with a price target lowered by $2 per share to $66.