Wedbush downgrades Replimune stock to Neutral after FDA rejection

Investing.com - Wedbush downgraded Replimune Group (NASDAQ:REPL) from Outperform to Neutral and slashed its price target to $4.00 from $19.00 following a Complete Response Letter (CRL) from the FDA. The biotech company, currently valued at $243.6 million, maintains a strong balance sheet with more cash than debt, according to InvestingPro data.

The FDA rejected Replimune’s Biologics License Application for RP1 (vusolimogene oderparepvec) in combination with nivolumab for treating PD-1 refractory melanoma patients. Regulators stated the IGNYTE trial was not "adequate and well-controlled" and cited concerns about patient population heterogeneity. The news sent the stock plummeting to $3.14, significantly below its 52-week high of $17.00.

The agency also indicated design issues with the ongoing confirmatory Phase 3 study (IGNYTE-3) that need addressing, though no safety concerns were raised. Replimune is seeking a Type A meeting with the FDA within 30 days to determine a potential path forward.

The rejection comes despite RP1 plus nivolumab receiving Priority Review in January 2025. The IGNYTE study had shown a 33% objective response rate and median duration of response of 33.7 months in 140 patients with PD-1 refractory melanoma.

Wedbush expressed surprise at the rejection given previous positive FDA interactions, noting that new Center for Biologics Evaluation and Research Director Vinay Prasad may have played a key role in the decision. With rapidly depleting cash reserves and no profitability expected this year, investors can access detailed financial analysis and 8 additional key insights through InvestingPro’s comprehensive research report.

In other recent news, Replimune Group faced a significant setback as the U.S. Food and Drug Administration (FDA) issued a Complete Response Letter (CRL) rejecting the company’s Biologics License Application (BLA) for its RP1 therapy in combination with nivolumab for advanced melanoma. The FDA pointed out issues with the trial design and insufficient evidence of efficacy, specifically criticizing the IGNYTE trial for not being "adequate and well-controlled." This decision has led Cantor Fitzgerald to downgrade Replimune’s stock from Overweight to Neutral. Despite this setback, Barclays (LON:BARC) has maintained its Overweight rating, and BMO Capital continues to rate the stock as Outperform. Both firms have retained their price targets, with Barclays at $17.00 and BMO Capital at $27.00. The FDA’s rejection has put Replimune back to the drawing board, as noted by BMO Capital, but no safety concerns were raised by the agency.

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