Dive Brief:

• Sarepta on Wednesday announced the divestment of its entire equity stake in partner Arrowhead Pharmaceuticals as the company faces the need to make milestone payments of as much as $300 million in coming months.
• Arrowhead agreed to take 2,660,989 shares back to satisfy half of a $100 million milestone payment due to the company in September. Separately, Sarepta sold the remaining Arrowhead stock — 9,265,312 shares — in a private placement that it expects to yield at least $174 million in gross proceeds.
• The cash infusion will help Sarepta cover the looming payment for a study enrollment target that its partner announced on July 28 and said would be due in 60 days. Arrowhead expects to meet a second study recruitment goal by the end of 2025, which would trigger a new $200 million payment from Sarepta.

Dive Insight:

Sarepta reaffirmed its faith in the Arrowhead collaboration signed in 2024 even as it reels from controversy surrounding its Elevidys treatment for Duchenne muscular dystrophy. High hopes for the therapy pushed the company’s shares above $160 in June 2024, but investors have punished the company for a series of setbacks and the stock is now trading at around $20.

The biggest issue for Sarepta is the future of Elevidys. The deaths of two patients who’d received Elevidys, as well as another man in a clinical trial of a different experimental gene therapy, illuminated safety concerns that have threatened uptake. The company also found itself in an unusual confrontation with the Food and Drug Administration when regulators asked the company to stop shipping Elevidys and Sarepta initially refused. Its partner Roche, however, paused some shipments.

The FDA has since allowed Sarepta to resume shipping Elevidys to some patients. But it remains in financial peril. In July, Sarepta laid off more than a third of its staff, saying the move was needed to ensure the company’s “long-term viability.” A few days later, Arrowhead felt compelled to issue a statement saying that if Sarepta failed to satisfy milestone payments, it would take back its intellectual property.

Sarepta also has about $1 billion in debt due in 2027, making it crucial to the company for Elevidys sales to rebound.

The stock sale gives the company “a bit more breathing room” ahead of that debt maturity, though “additional work might be required to ensure enough liquidity,” wrote Leerink Partners analyst Joseph Schwartz in a note to clients Thursday.

Arrowhead says its collaboration with Sarepta could eventually yield $10 billion in payments.