Sarepta Therapeutics Inc
I was asked to comment on Sarepta Therapeutics Inc ($SRPT).
This stock has not been on-model (in the channel) since 2017 and I don’t have a repository of saved charts prior to 2019. Here is the earliest dated chart we have on the server.
Back in 2019, those events were “yellow.” Yes. I realize that is not yellow. But, regardless. This code has changed in the last 6 years so I can’t be certain the current code would still mark them “yellow.”
I’ve said numerous times that I highly recommend you keep a journal. I use Twitter and Chat for this purpose. It is helpful to be able to go back in time and both Twitter and our Chat are searchable.
Other than some alert notifications this stock has never been of interest to us internally save one note discussing an industry report on outflows. I have linked the article here.
Here is the chart from that date.
And the chart from 30 days later. So that note, at least for ($SRPT) would have been well timed for a short.
Publicly, I posted a chart to Twitter showing the code predicted a likely bad event in October 2023.
The code has tripped ∆Liquidity only three times since 2022. In July 2022, which preceded a 100% move. In late November 2023, which follows the 40% drop-off in discussed in the above Tweet and also preceded a 100% move and then just recently right before the company announced restructuring. A ~25% move followed that news.
Sarepta has not tripped our Accumulation/Consolidation code since 2022. I infer from this that no one has been buying this stock other than dip buying and all the price action has just been shorting and covering. That brings us up to present day.
That’s the background.
As I see it, there are two possibilities.
a) The drug is a blockbuster and various market participants want to buy but don’t want to pay a lot and retail haven’t been selling.
b) The company is lying and has been lying to everyone not just retail. In this case, there might be bag holders at every income level.
I don’t see a lot of evidence for bag holding hedge funds in the institutional data. These firms are not “smart money.” The Vanguard Group, BlackRock, FMR (Fidelity), these are money managers, i.e “dumb money.”
But, there is precedent for both possibilities. CymaBay Therapeutics was almost forced into bankruptcy pre-IPO because a third party was hoping to get the drug on the cheap from the court. The full history of this company is in Chat.
We purchased this stock when it fell through the channel in 2019. (Historic charts are down scaled to save space on the server)
And, as you can see the return was pretty spectacular. Cymabay Therapeutics ($CBAY) was one of our biggest wins.
More recently there was Clovis Therapeutics. The full details of ($CLVS) are beyond my word limit here but basically there was a death in a trial in late 2015. The stock cratered. What followed is easy to see from the chart. It rebounded to over $100. This was one of our greatest mistakes as we had $35 Calls and sold them around $45 and then watched as the stock continued to run from beach house money to buy an island money.
I always advocate for people wanting to learn the market to read the DoJ and SEC indictments. Here is a reading list of digests so you can understand exactly what was going on with Clovis.
https://www.change.org/p/clovis-oncology-securites-fraud-by-ceo-patrick-mahaffy-and-convertible-note-holders
https://www.drugdeliverybusiness.com/clovis-forks-over-20m-to-settle-sec-charges-that-it-misled-investors/
What do I think is going on with Sarepta?
Well if I put my hedge fund manager hat on, I would have started shorting after the first death was announced and just sat on the stock. After the company announced restructuring, if I had in my pocket details about the third death I would have leaked that to the press instead of covering. If the company was not going to disclose there is really no reason for that information to come out until after the stock bounced.
That seems conspiratorial but I’ve read documents filed with the SEC by company CEOs talking about their cat and I’ve read so many SEC charges against CEOs and fund managers that I almost feel this is more of a certainty than speculation.
Journalists love scoops. Well timed scoops drive traffic.
The CEO of Anthropic AI (which isn’t even public) just fired their CEO for liking Coldplay so I have to assume similar action will be taken to remove the leadership of Sarepta and then a quiet period while the board performs an internal investigation.
If the board does’t do this I’d be very suspicious. That wouldn’t be a sign of trust more a sign you want at least one person between you and the hangman’s noose.
If they do take these actions then the stock is likely to fall farther as people wait. For $CLVS during this waiting period the stock fell from $35 to ~ $14. Which is where Shaun and I bought our equity and options positions. (These are price adjusted. I just know when we bought on the chart and where we sold.)
Since Sarepta has decent revenue it isn’t exactly the same scenario here. Clovis fell into the channel in 2016 (no chart) and 2020. Companies with revenue tend to not fall below EM2.
For Sarepta, we would be monitoring for signs of a liquidity change before we would even consider making a trade. Until then there are 100s of other trades to be made that are less about gambling.
Here are some links about drugs removed from the market due to fraud.
https://en.wikipedia.org/wiki/Valdecoxib
And, information on charges made and settled.
http://news.bbc.co.uk/2/hi/business/8234533.stm
And, information on the prevalence of fraud in clinical trials.
And here are the charts of two companies with drugs in trials on DMD.
Another drug to tread DMD near approvals but a different pathway is Deramiocel.
As always, if you think there are spelling errors update your dictionary to the latest version. Happy speculation!
— AJ
We can be found on Twitter.
Or in Chat.
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