Executive Summary / Key Takeaways

• Strategic Pivot to DM1: PepGen has decisively shifted its entire focus to its PGN-EDODM1 program for Myotonic Dystrophy Type 1 (DM1) following the voluntary discontinuation of its Duchenne Muscular Dystrophy (DMD) programs due to insufficient dystrophin levels in the PGN-EDO51 CONNECT1 trial.
• Differentiated EDO Platform: The company's proprietary Enhanced Delivery Oligonucleotide (EDO) platform, utilizing cell-penetrating peptides, is the core technological differentiator, aiming for superior tissue uptake and selective targeting of pathogenic RNA in DM1.
• Promising Early DM1 Data & Regulatory Support: Initial Phase 1 FREEDOM-DM1 data for PGN-EDODM1 showed a favorable safety profile and robust, dose-dependent splicing correction, supported by FDA Fast Track and Orphan Drug designations.
• Critical Upcoming Catalysts: Key data readouts for PGN-EDODM1 are anticipated in early Q4 2025 (FREEDOM 15 mg/kg cohort) and Q1 2026 (FREEDOM2 5 mg/kg cohort), which will be crucial for validating the platform's potential in DM1.
• Significant Liquidity & Operational Risks: With a cash runway into Q2 2026 and an accumulated deficit of $324.80 million, PepGen faces substantial doubt about its going concern status, necessitating further capital raises amidst a challenging competitive and regulatory landscape.

The High-Stakes Pivot: PepGen's EDO Platform in a Redefined Landscape

PepGen Inc. is a clinical-stage biotechnology company dedicated to advancing next-generation oligonucleotide therapeutics for severe neuromuscular and neurologic diseases. The company's foundational strength lies in its proprietary Enhanced Delivery Oligonucleotide (EDO) platform, which leverages cell-penetrating peptides (CPPs) to enhance the uptake and activity of conjugated oligonucleotide therapies. This technology is designed to overcome delivery challenges inherent in oligonucleotide-based treatments, aiming for more effective targeting of disease-causing RNA within muscle and neurological tissues.

The biotechnology industry, particularly in rare disease therapeutics, is characterized by intense competition, high research and development costs, and significant regulatory hurdles. PepGen operates within this demanding environment, seeking to carve out a niche with its differentiated EDO platform. Its overarching strategy centers on developing a pipeline of oligonucleotide therapeutic candidates that target the root cause of serious diseases, with a recent, decisive pivot to focus entirely on Myotonic Dystrophy Type 1 (DM1).

This strategic reorientation follows a critical juncture in the company's history. PepGen, initially founded in the UK in 2018 and later reorganized as a Delaware corporation, built its early pipeline around Duchenne Muscular Dystrophy (DMD) and DM1. The company went public in May 2022, raising $122.9 million, and further bolstered its capital in February 2024 with an additional $86.30 million net from ATM sales and a follow-on offering. These capital infusions were intended to fuel its ambitious clinical programs.

The DMD Discontinuation and Its Implications

A significant turning point occurred on May 28, 2025, when PepGen announced the voluntary discontinuation of its PGN-EDO51 program for DMD, along with all related research efforts for exons 44, 45, and 53. This decision stemmed from disappointing results in the 10 mg/kg cohort of the CONNECT1-EDO51 Phase 2 study. While PGN-EDO51 increased exon 51 skipped transcripts to 4.26% (a mean increase of 3.5%), total dystrophin only rose to 0.59% of normal levels (a mean increase of 0.36%). This outcome fell short of the company's target dystrophin levels, despite a generally favorable safety profile.

The discontinuation of PGN-EDO51 is a material event, underscoring the inherent risks of drug development. It has also led to a putative shareholder class action lawsuit filed in June 2025, alleging securities law violations related to statements concerning PGN-EDO51's efficacy and safety. PepGen maintains that these allegations are without merit and intends to vigorously defend the case. This legal challenge adds a layer of operational and financial complexity, potentially diverting management resources and incurring defense costs.

PGN-EDODM1: The New Cornerstone of PepGen's Future

With the DMD programs wound down, PepGen's investment thesis now hinges almost entirely on the success of PGN-EDODM1 for Myotonic Dystrophy Type 1 (DM1). This strategic pivot is a high-stakes bet, but one grounded in the unique mechanism of the EDO platform. Unlike some competing approaches that indiscriminately degrade both pathogenic and normal DMPK RNA, PGN-EDODM1 is designed to selectively target the pathogenic DMPK RNA with the CUG repeat expansion. This selectivity aims to liberate muscleblind-like splicing regulator 1 (MBNL1), which is sequestered by the toxic RNA, thereby correcting downstream splicing events that drive DM1's multi-system pathology.

This technological differentiation is crucial. Preclinical data for PGN-EDODM1 demonstrated robust correction of mis-splicing and myotonia in mouse models, alongside a reduction of toxic foci and liberation of MBNL1 in patient cells. Management believes this selective targeting offers the potential for superior splicing correction at well-tolerated doses, leading to improved functional outcomes for patients. The company's preclinical work suggests that "better than 25%-plus splicing correction" is important for robust changes in myotonia.

The PGN-EDODM1 program has gained significant regulatory momentum. In September 2023, the FDA granted Orphan Drug Designation, and in February 2024, it received Fast Track designation for DM1. These designations facilitate development and expedite review, potentially accelerating patient access. The Phase 1 FREEDOM-DM1 study, a multinational single ascending dose (SAD) trial, has shown promising early results. Initial data from the 5 mg/kg and 10 mg/kg dose cohorts, reported in February 2025, revealed a favorable emerging safety profile and robust, dose-dependent splicing correction, with a mean mis-splicing correction of 29% at the 10 mg/kg dose. This led to the conclusion of dose escalation in FREEDOM with the 15 mg/kg cohort.

Competitive Landscape and Differentiators in DM1

The DM1 therapeutic landscape is becoming increasingly competitive, with several companies pursuing various approaches. Key competitors include Avidity Biosciences (RNA) (AOC 1001, Phase 3 antibody-linked siRNA), Dyne (DYN) (DYNE-101, Phase 2 antibody-conjugated antisense oligonucleotide), Entrada Therapeutics (TRDA) and Vertex (VRTX) (VX-670, Phase 2 peptide-conjugated PMO), and Arrowhead Pharmaceuticals (ARWR)/Sarepta (SRPT) (ARO-DM1, Phase 1/2 conjugated siRNA). Other players like Arthex Biotech (ATX-1, microRNA) and those in gene editing (Vertex, Astellas (ALPMY), Kate Therapeutics/Novartis (NVS)) are also active.

PepGen's EDO platform aims to differentiate PGN-EDODM1 through its selective targeting mechanism and enhanced delivery. While competitors like Avidity and Dyne also use conjugation strategies, PepGen's specific peptide chemistry and selective RNA targeting are positioned as potentially offering a superior efficacy and safety profile. However, many competitors, particularly larger pharmaceutical and biotechnology companies, possess significantly greater financial resources, more established regulatory track records, and broader commercial infrastructures. For instance, BioMarin (BMRN) and Sarepta, while not directly competing with an approved DM1 product, have extensive experience in rare disease commercialization and robust revenue streams, which PepGen currently lacks. Wave Life Sciences (WVE), a more direct competitor in oligonucleotide therapies, also has established partnerships and a diversified pipeline.

PepGen's financial performance reflects its early-stage, R&D-intensive nature. For the six months ended June 30, 2025, the company reported a net loss of $53.30 million, an increase from $46.40 million in the prior year period. Research and development expenses rose to $43.77 million from $39.80 million, driven by manufacturing costs, personnel, and clinical trial activities, including wind-down costs for the discontinued DMD programs.

General and administrative expenses also increased to $11.48 million from $10.43 million. The company has not generated any revenue from product sales since its inception and has an accumulated deficit of $324.80 million as of June 30, 2025.

Outlook and Critical Path Forward

PepGen's financial runway is projected to extend into the second quarter of 2026, supported by its cash, cash equivalents, and marketable securities of $74.70 million as of June 30, 2025. However, the company explicitly states "substantial doubt exists about its ability to continue as a going concern" for one year from the 10-Q filing date (August 7, 2025), highlighting the urgent need for additional capital.

Future funding will be critical to advance PGN-EDODM1 and other early-stage research programs, such as PGN-EDO53 (which was previously commencing IND/CTA-enabling studies in 2024 before the DMD program wind-down).

Upcoming data readouts for PGN-EDODM1 are paramount. The company expects to report safety, 28-day splicing, and functional benefit data from the 15 mg/kg cohort of the FREEDOM Phase 1 trial in early Q4 2025. Furthermore, data from the 5 mg/kg cohort of the FREEDOM2 Phase 2 study is anticipated in Q1 2026. These results will be crucial in validating the EDO platform's potential in DM1 and attracting the necessary capital or partnerships to sustain operations.

The regulatory environment also presents complexities. The U.S. Supreme Court's July 2024 decision on FDA deference, potential changes to Orphan Drug Act policies, the sunsetting of the Rare Pediatric Disease Priority Review Voucher program, and the uncertainty surrounding the Trump administration's drug pricing policies all introduce additional risks that could impact development timelines, approval pathways, and commercial viability. Geopolitical risks and trade restrictions could also affect supply chains and R&D costs.

Conclusion

PepGen stands at a pivotal juncture, having made the difficult but necessary decision to discontinue its DMD programs and fully commit to PGN-EDODM1 for DM1. This strategic pivot, while concentrating risk, also focuses the company's differentiated EDO platform on a disease with high unmet medical need and promising early clinical signals. The core investment thesis now rests on the EDO platform's ability to deliver superior, selective RNA targeting in DM1, translating into meaningful clinical benefits.

However, the path ahead is fraught with significant challenges. The "going concern" warning underscores the immediate need for substantial additional funding, which will be heavily influenced by the upcoming clinical data readouts for PGN-EDODM1. PepGen's ability to execute on its clinical milestones, secure further capital, and effectively navigate a competitive and evolving regulatory landscape will determine whether its high-stakes bet on the EDO platform in DM1 can ultimately deliver transformative value for patients and shareholders alike.