Is Sarepta Therapeutics Inc. (NASDAQ:SRPT) about to go bankrupt?
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Sarepta Therapeutics Inc. (NASDAQ:SRPT), a giant in the biotechnological sector could soon find itself running short of cash or cash equivalents which could hinder the progress of the company and not allow it to reach its strategic goals. However, since the entire biotech sector’s valuation is based on the potential of a drug development pipeline, it is open to a lot of different interpretations.
Financial specialists also stress over money matters within the biotech industry more than some other industries in light of the fact that it can take decades before an organization has the capacity to produce regular cash flow. This is because most biotech firms never get to clinical trials or the commercialization stage. At the end of the day, there’s a genuine shot of a biotech stock using up cash on the off chance that it doesn’t have adequate assets to help pay for operations while it is innovating.
Sarepta Therapeutics (NASDAQ:SRPT) announced at the end of the second quarter that it had $284.2 million in cash or cash equivalents and investments. A rise of $19.3 million was observed from the end of the last fiscal year. It is however important to keep in mind that Sarepta (NASDAQ:SRPT) had priced 2.65 million shares at a cost of $38 per share generating a revenue of $94.5 million. However since the net increase was observed to be only $19.3 million, Sarepta (NASDAQ:SRPT) has used $75.2 million in cash in its first two quarters.
Sarepta (NASDAQ:SRPT) has been developing a lot of drugs recently, most commonly for diseases such as Ebola, dengue and most notably DMD (Duchenne muscular dystrophy). It is also trying to get one of its newly developed drugs eteplirsen approved by the cornered authorities so that it can be sold from the mid of next year. If eteplirsen is approved by the food and drug Administration it will help Sarepta (NASDAQ:SRPT) improve its cash flows.
Although its sales won’t make Sarepta (NASDAQ:SRPT) profitable anytime soon, it will slow down the rate at which cash is being consumed by the company in its drug development phase. It is expected that if everything goes according to plan, $200-$250 million could be generated in revenue for the company and the company would be in profit safely by 2017.
However, if eteplirsen is not approved by the food and drug administration, things could turn disastrous for Sarepta (NASDAQ:SRPT). The remaining drug-developing deadline would become useless if the medicine is rejected. However if the FDA require additional testing, it could further cost Sarepta (NASDAQ:SRPT) a lot more money than they had initially projected.
In these times of uncertainty, they could turn probably to a large pharmaceutical company for help as a licensing partner such as GlaxoSmithKline (NASDAQ:GSK) or continue to generate cash from the stock market by issuing new priced shares, otherwise they could very soon run out of cash.