What happened

Shares of Orphan-drug specialist Sarepta Therapeutics (NASDAQ:SRPT) fell by 12.1% in July, according to data from S&P Global Market Intelligence. The bulk of this drop can clearly be attributed to the clinical hold placed on its experimental gene therapy for Duchenne muscular dystrophy (DMD) by the Food and Drug Administration (FDA) late in the month, but the drugmaker's stock was already showing signs of weakness leading up to this material event.

Put simply, this clinical hold -- which reportedly resulted from a third-party plasmid supply issue -- was arguably the straw that broke the camel's back. Prior to this news, after all, Sarepta's shares had risen by as much as 176% for the year and appeared to be in bubble territory based on the company's enormous price-to-sales ratio, which stood at over 46 at one point in late June.  

Chalkboard chart showing a positive trend turning negative.

Image source: Getty Images.

So what

This double-digit pullback isn't particularly surprising, given that a decent chunk of Sarepta's monstrous gains this year have been due to its gene therapy program for DMD. As a reminder, the drugmaker's shares shot up by more than 67% in a single day upon announcing extremely preliminary results for this platform back in June. 

Now what

The good news is that Sarepta should have little difficulty getting this clinical hold removed soon. After all, the FDA halted the program simply due to the detection of a trace amount of a DNA fragment in research-grade plasmid material. That's an easily correctable hiccup and Sarepta seems to think so as well. The biotech doesn't even think this minor clinical setback will end up impacting its plans to begin dosing for this gene therapy's next trial by year's end. 

That being said, Sarepta is still one of the most expensive biotech stocks out there, even after last month's healthy pullback. That doesn't mean that Sarepta's stock isn't a worthwhile long-term buy, but this biotech certainly isn't an outright bargain at these levels. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.