10-K: PepGen 2025 Annual Report: DM1 Program Advances Amidst FDA Hold

PepGen Inc. reports on its 2025 fiscal year, highlighting the advancement of its lead DM1 candidate PGN-EDODM1 into Phase 2 trials, despite an FDA partial clinical hold, and the discontinuation of its DMD program.

Summary

• PepGen Inc. is a clinical-stage biotechnology company focused on oligonucleotide therapeutics for severe neuromuscular and neurologic diseases, leveraging its proprietary Enhanced Delivery Oligonucleotide (EDO) platform.
• The company's lead product candidate, PGN-EDODM1 for Myotonic Dystrophy Type 1 (DM1), has completed a Phase 1 study (FREEDOM) and is currently in a Phase 2 study (FREEDOM2).
• The FREEDOM Phase 1 study demonstrated a favorable emerging safety profile and robust, dose-dependent splicing correction in skeletal muscle (12.3% at 5 mg/kg, 29.1% at 10 mg/kg, 53.7% at 15 mg/kg), which management believes is the highest reported in clinical studies for DM1 patients.
• No meaningful functional improvements were observed in DM1 patients after a single dose of PGN-EDODM1 in the FREEDOM Phase 1 study.
• Transient biomarkers associated with tubular insult and albuminuria were noted at 10 mg/kg and 15 mg/kg doses in the FREEDOM study, which resolved without intervention.
• The FDA has placed a partial clinical hold on the FREEDOM2 study due to questions regarding previously submitted preclinical pharmacology and toxicology studies, not related to blinded clinical data from FREEDOM Phase 1.
• Data from the 5 mg/kg cohort of the FREEDOM2 study is expected in Q1 2026, and data from the 10 mg/kg cohort is expected in H2 2026.
• PGN-EDODM1 has received Orphan Drug Designation from both the FDA and EMA, and Fast Track Designation from the FDA.
• PepGen discontinued the development of PGN-EDO51 for Duchenne Muscular Dystrophy (DMD) in May 2025, as it did not achieve target dystrophin levels in the CONNECT1 Phase 2 trial, leading to the wind-down of all DMD-related research.
• The company reported a net loss of $89.7 million for the year ended December 31, 2025, compared to $90.0 million in 2024.
• As of December 31, 2025, cash, cash equivalents, and marketable securities totaled $148.5 million, with an accumulated deficit of $361.1 million.
• The company believes its existing cash, cash equivalents, and marketable securities will be sufficient to fund its currently planned operations into the second half of 2027.
• A shareholder class action lawsuit filed in June 2025 was voluntarily dismissed in November 2025, and a related shareholder demand was withdrawn in December 2025.

Sentiment

Score: 4

Explanation: StockSavvy.ai views this filing with cautious optimism. While the lead candidate PGN-EDODM1 shows promising splicing correction and has received expedited designations, the FDA partial clinical hold and the discontinuation of the DMD program introduce significant uncertainty and highlight the high-risk nature of biotech development. The company's continued reliance on external funding and lack of product revenue also weigh on the sentiment.

Positives

• PGN-EDODM1 demonstrated robust, dose-dependent splicing correction in skeletal muscle (12.3% at 5 mg/kg, 29.1% at 10 mg/kg, 53.7% at 15 mg/kg) in the Phase 1 FREEDOM study, with management noting it as the highest reported in clinical studies in DM1 patients.
• PGN-EDODM1 showed a favorable emerging safety profile in the Phase 1 FREEDOM study, with most adverse events being mild or moderate and transient kidney biomarker changes resolving without intervention.
• PGN-EDODM1 has received Orphan Drug Designation from both the FDA and EMA, and Fast Track Designation from the FDA, potentially expediting development and review.
• The EDO platform has shown successful delivery of therapeutic PMOs to the nucleus in preclinical and early clinical studies, which is critical for its mechanism of action.
• The manufacturing process for EDO therapeutics is fully synthetic, robust, scalable, and cost-efficient, not relying on microbial fermentation or mammalian cell culture.
• The company successfully raised $107.6 million in net proceeds from a public offering in September 2025, strengthening its liquidity.
• Management believes current cash, cash equivalents, and marketable securities of $148.5 million are sufficient to fund operations into the second half of 2027.

Negatives

• The FDA placed a partial clinical hold on the FREEDOM2 study for PGN-EDODM1, related to preclinical pharmacology and toxicology studies, which may delay enrollment timelines.
• No meaningful functional improvements were observed in DM1 patients after a single dose of PGN-EDODM1 in the FREEDOM Phase 1 study.
• The company voluntarily discontinued the development of PGN-EDO51 for DMD in May 2025 due to not achieving target dystrophin levels in the CONNECT1 Phase 2 trial, representing a significant setback and loss of a pipeline candidate.
• The company has incurred significant operating losses ($89.7 million in 2025) and has an accumulated deficit of $361.1 million as of December 31, 2025.
• The company has never generated revenue from product sales and expects to incur losses for the foreseeable future.
• Interest income decreased from $7.1 million in 2024 to $4.0 million in 2025, primarily due to lower cash balances prior to the 2025 financing.
• The company is highly dependent on the success of its single lead product candidate, PGN-EDODM1, increasing business risk.

Risks

• Substantial dependence on the success of PGN-EDODM1; failure to complete development, obtain approval, or commercialize it would harm the business.
• Significant incurred losses since inception and no products approved for sale, with expected losses for the foreseeable future.
• Need to raise substantial additional funding; inability to do so could force delays, scale-backs, or discontinuation of product development or commercialization efforts.
• Early stage of development efforts, with only two Phase 1 and three Phase 2 clinical trials conducted since inception, meaning commercialization is years away, if ever.
• Potential for substantial delays in commencement, enrollment, or completion of clinical trials, or failure to demonstrate safety and effectiveness to regulatory authorities.
• Undesirable side effects or unexpected adverse properties of product candidates could delay or prevent clinical trials, regulatory approval, limit commercial potential, or result in negative consequences post-approval.
• Reliance on third parties for manufacturing, research, preclinical, and clinical testing, who may not perform satisfactorily, leading to delays and increased costs.
• Dependence on a small number of third-party suppliers for product candidates; loss or insufficient supply from these suppliers could harm the business.
• Significant competition from major pharmaceutical, specialty pharmaceutical, and biotechnology companies, including those with more advanced product candidates or greater resources.
• Potential failure to obtain approval under accelerated approval pathways, which may not lead to faster development or approval and does not increase approval likelihood.
• Inability to obtain and maintain patent protection for the EDO platform, therapeutic candidates, or proprietary technologies, or if the scope of protection is not sufficiently broad, allowing competitors to develop similar products.
• Expected expansion of headcount to support development, regulatory, sales, marketing, and distribution capabilities, which may lead to difficulties in managing growth.
• Future success depends on the ability to retain key executives and attract, retain, and motivate qualified personnel.
• Volatility in the price of common stock, which could result in substantial losses for holders.
• Risks associated with conducting clinical trials outside the U.S., including non-acceptance of data by the FDA or other regulatory authorities.
• Potential for cybersecurity incidents, data breaches, or disruptions to internal IT systems or those of vendors, collaborators, or contractors, leading to business disruption, compromise of sensitive information, or legal liabilities.
• Adverse developments affecting the financial services industry, such as liquidity issues or defaults by financial institutions, could impact business operations and financial condition.
• Effects of future pandemics, epidemics, or outbreaks of infectious diseases could materially and adversely affect business and financial results, disrupting product development.
• Changes in tax laws or regulations or their interpretation may adversely affect business and financial condition.
• Ability to utilize net operating loss carryforwards and certain other tax attributes may be subject to limitations due to ownership changes.
• Exposure to significant foreign exchange risk due to international operations and expenses in various currencies.
• Potential for lawsuits to protect or enforce patents or other intellectual property, which could be expensive, time-consuming, and unsuccessful.
• Risk of claims asserting that employees, consultants, or advisors have wrongfully used or disclosed alleged trade secrets of former employers or claims asserting ownership of the company's intellectual property.
• Intellectual property rights may not address all potential threats, and the degree of future protection is uncertain.
• Reliance on third parties requires sharing trade secrets, increasing the risk of discovery, misappropriation, or disclosure by competitors.
• Increasing use of social media platforms presents new risks and challenges, including impact on trial enrollment, adverse event reporting, and reputational harm.
• Clinical trial and product liability lawsuits could divert resources, cause substantial liabilities, and limit commercialization.
• Failure to obtain or maintain adequate coverage and reimbursement for future product candidates could limit marketability and revenue generation.
• Market opportunity estimates and growth forecasts may prove inaccurate, and business may not grow at similar rates.
• Employees, principal investigators, consultants, and commercial partners may engage in misconduct or improper activities, leading to sanctions, penalties, or reputational harm.
• Laws and regulations governing international operations may preclude development, manufacturing, and sales outside the U.S. and require costly compliance programs.
• Tariffs and other trade restrictions may increase costs and disrupt operations.
• Future acquisitions or strategic alliances could disrupt business and harm financial condition.
• Changes in patent law could diminish the value of patents, impairing protection of product candidates.
• Obtaining and maintaining patent protection depends on compliance with various procedural requirements, and non-compliance could reduce or eliminate protection.
• May not be successful in obtaining necessary rights to product candidates through acquisitions and in-licenses.
• Issued patents could be found invalid or unenforceable if challenged.
• Disclosure controls and procedures may not prevent or detect all errors or acts of fraud.
• Exposure to the risk of securities class action litigation.

Future Outlook

The company anticipates expanding the application of its EDO technology to additional severe diseases with significant unmet need. It expects to report data from the 5 mg/kg cohort of the FREEDOM2 study in Q1 2026 and from the 10 mg/kg cohort in H2 2026. The company believes that robust splicing correction with PGN-EDODM1 has the potential to lead to meaningful functional improvements with repeat dosing over time. It intends to open the FREEDOM-OLE study in all geographies where FREEDOM2 is open. The company will need to raise substantial additional capital to advance PGN-EDODM1 beyond initial FREEDOM2 data readouts, including funding a large Phase 3 pivotal trial and securing secondary source suppliers for drug substance.

Management Comments

• "We believe PGN-EDODM1 was observed to have a favorable emerging safety profile and robust splicing correction in a dose-dependent manner across the 5, 10 and 15 mg/kg dose cohorts including the highest splicing improvement ever reported in clinical studies in DM1 patients."
• "No meaningful functional improvements relative to placebo were seen after a single dose."
• "As part of our ongoing dialogue with the FDA, we are submitting additional analyses, including the recently unblinded FREEDOM data, and are committed to working with the FDA to address these questions as quickly as possible."
• "We expect to report data from this cohort [FREEDOM2 5 mg/kg] in the first quarter of 2026."
• "We expect to report data from this cohort [FREEDOM2 10 mg/kg] in the second half of 2026."
• "We believe that EDO peptides have the potential to promote endosomal escape and facilitate the robust delivery of cargo oligonucleotides to the cell nucleus."
• "Our results from the FREEDOM clinical study in DM1 patients, including the highest level of splicing correction ever reported, indicate the importance of identifying the right clinical indications for developing the EDO platform."
• "Although our single-dose studies have not demonstrated improved functional outcomes in DM1 patients, we believe such data showed positive early trends in some functional outcome measures and, accordingly, we believe that more doses of PGN-EDODM1 at the optimal maximum tolerated dose over a longer treatment period can potentially provide improved functional benefit for patients with DM1."
• "We believe that our existing cash, cash equivalents and marketable securities will be sufficient to fund our currently planned operations into the second half of 2027."

Industry Context

StockSavvy.ai notes that PepGen operates in the highly competitive biopharmaceutical industry, characterized by rapid technological evolution. The company's focus on oligonucleotide therapeutics for rare neuromuscular and neurologic diseases positions it against both established pharmaceutical giants and specialized biotech firms. The discontinuation of the PGN-EDO51 program for DMD highlights the inherent high risk in drug development, particularly for novel approaches. The partial clinical hold by the FDA on the FREEDOM2 study for PGN-EDODM1 underscores the stringent regulatory environment and the challenges faced by companies developing new drug modalities, even with Fast Track and Orphan Drug designations. The ongoing litigation and regulatory scrutiny in the broader healthcare sector, including drug pricing and data privacy, further complicate the operating landscape for companies like PepGen.

Comparison to Industry Standards

• PGN-EDODM1's observed splicing correction levels (up to 53.7% at 15 mg/kg) are stated to be the 'highest ever reported in clinical studies in DM1 patients,' suggesting a potentially superior biological activity compared to other DM1 candidates.
• Competitors in DM1 development include: Avidity Biosciences, Inc. (acquired by Novartis) with del-desiran (AOC 1001) in Phase 3; Dyne Therapeutics with z-basivarsen (DYNE-101) in Phase 1/2 with a registrational expansion cohort; Entrada Therapeutics, Inc. and Vertex Pharmaceuticals with VX-670 in Phase 2; and Arrowhead Pharmaceuticals, Inc. and Sarepta Therapeutics with ARO-DM1 in Phase 1/2.
• PepGen's EDO platform, utilizing cell-penetrating peptides (CPPs), aims to overcome oligonucleotide delivery challenges, a common hurdle for ASOs and siRNAs, as exemplified by Sarepta's EXONDYS 51 (eteplirsen) for DMD, which had relatively low tissue and cell penetration.
• PepGen's approach for DM1 (disrupting MBNL1 sequestration) is differentiated from competitors targeting DMPK knockdown/degradation, which may avert potential haploinsufficiency risks.

Management Changes

Corporate Governance

Legal Proceedings

• A putative shareholder class action, 'Johnny Karam v. PepGen Inc., et al.,' filed on June 9, 2025, in the U.S. District Court for the Eastern District of New York, alleging material misrepresentations/omissions related to PGN-EDO51, was voluntarily dismissed on November 18, 2025.
• A putative shareholder demand based on substantially similar allegations was received on September 29, 2025, and subsequently withdrawn on December 1, 2025.

Related Party Transactions

• The company holds an exclusive, royalty-bearing, sublicensable license agreement (OUI/MRC License) with Oxford University Innovation Limited (OUI) and Medical Research Council (MRC) for its EDO peptides, linkers, and conjugates.
• A patent procurement milestone payment of £10,000 (adjusted per retail price index) was made to the Licensors in 2024.
• The company is obligated to pay OUI sub-single to low, single-digit percentage royalties on net sales of licensed products exceeding a threshold of £20 million to £30 million.
• Entities affiliated with RA Capital Management, L.P. (RA Capital) owned 29.2% of the company's outstanding common stock as of December 31, 2025.
• Two members of the company's board of directors, Dr. Joshua Resnick and Habib Dable, are affiliated with RA Capital.
• The company paid $46,000 to RA Capital in 2025 and $45,500 in 2024 for Dr. Resnick's board service, as he is obligated to transfer cash compensation to RA Capital.
• Dr. Christopher Ashton, previously employed by Oxford Science Enterprises (an OUI affiliate), resigned from the board effective September 30, 2024. The company paid $36,875 to OSE in 2024 for his board service.

Stakeholder Impact

• Shareholders face potential dilution from future equity offerings and stock price volatility. The FDA partial clinical hold and the discontinuation of the DMD program could negatively impact investor confidence. The stock option repricing is intended to retain employees but could be viewed as dilutive.
• DM1 patients may benefit from the continued development of PGN-EDODM1, a novel therapeutic for a disease with no approved treatments. However, the FDA partial clinical hold and the lack of functional improvements in single-dose Phase 1 trials introduce uncertainty regarding the therapy's timeline and ultimate success.
• Employees are impacted by the company's growth plans, equity incentive programs, and the stock option repricing designed for retention. The discontinuation of the DMD program may have affected employees involved in that area.
• Regulatory authorities, particularly the FDA, are actively scrutinizing the company's clinical programs, as evidenced by the partial clinical hold, which requires the company to address specific concerns.
• Third-party suppliers and manufacturers are critical to the company's operations, and their performance and compliance directly affect development timelines and product availability.
• Creditors may view the company's ongoing losses and need for additional financing as a risk factor, potentially influencing future lending terms.

Next Steps

• Submit additional analyses, including unblinded FREEDOM Phase 1 data, to the FDA to address questions related to the partial clinical hold on FREEDOM2.
• Work with the FDA to resolve the partial clinical hold on the FREEDOM2 study as quickly as possible.
• Report data from the 5 mg/kg cohort of the FREEDOM2 study in Q1 2026.
• Report data from the 10 mg/kg cohort of the FREEDOM2 study in H2 2026.
• Continue dosing the 10 mg/kg cohort in the FREEDOM2 study.
• Potentially initiate a third cohort at a higher dose (12.5 mg/kg) in FREEDOM2, based on DSMB and company evaluation of safety data.
• Open the FREEDOM-OLE study in all geographies where FREEDOM2 is open.
• Continue to build and develop the EDO platform technology to expand into new therapeutic areas.
• Potentially explore strategic collaborations for certain geographies, targets, or programs to maximize the value of the EDO platform.
• Identify additional research programs and product candidates.
• Establish manufacturing sources and secure supply chain capacity for PGN-EDODM1, particularly for an anticipated Phase 3 pivotal trial and secondary source suppliers.
• Seek marketing approvals for any product candidates that successfully complete pivotal clinical trials.
• Obtain, expand, maintain, defend, and enforce the intellectual property portfolio.
• Potentially establish a sales, marketing, and distribution infrastructure if products receive marketing approval.
• Continue to attract and retain key research and development or management personnel.
• Continue to implement and improve managerial, operational, and financial systems to manage growth.
• File definitive proxy statement relating to its 2026 Annual Meeting of Stockholders.
• File amended and restated employment agreements for James McArthur, Noel Donnelly, and Paul Streck as exhibits to the company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2026.

Key Dates

Recommendation

StockSavvy.ai recommends a "hold" for PepGen Inc. The company's lead candidate, PGN-EDODM1, shows promising biological activity in splicing correction for DM1, a disease with high unmet need and expedited regulatory designations. However, the recent FDA partial clinical hold on the Phase 2 study and the discontinuation of the DMD program introduce significant clinical and regulatory uncertainty. While the company has sufficient liquidity into H2 2027, future capital raises will be necessary, and the path to profitability remains long and uncertain. Investors should await further clarity on the FDA hold and the functional outcome data from the FREEDOM2 study before making new investment decisions.

Keywords

Myotonic Dystrophy Type 1, DM1, PGN-EDODM1, Enhanced Delivery Oligonucleotide, EDO platform, Oligonucleotide therapeutics, Clinical-stage biotechnology, Phase 1 clinical trial, Phase 2 clinical trial, FDA partial clinical hold, Orphan Drug Designation, Fast Track Designation, Duchenne Muscular Dystrophy, DMD, PGN-EDO51, Drug development, Biopharmaceutical, SEC filing, 10-K, Financial results, Clinical trials, Biotech investment, Rare diseases, Gene therapy, RNA splicing, MBNL1, Cell-penetrating peptides, CPP, PMO, Intellectual property, Regulatory approval, Capital raise, Liquidity, Corporate governance, Risk management