RGNX Stock On Track For Worst Day In Over Three Months — BofA Says Buy Despite ‘Disappointing’ FDA Hold On Gene Therapy

BofA called the clinical hold on RGX-121 disappointing and a reversal of July’s progress but kept a $15 price target on the stock.

• Regenxbio said earlier on Monday that the FDA placed the hold after spine scans showed small growths or fluid pockets in five boys treated with RGX-121 three to six years earlier.
• The company and partner NS Pharma will review additional imaging and long-term data, as well as the full FDA hold letter, before deciding on next steps, it said.
• CEO Curran Simpson said the findings appear unique to this Hunter syndrome program.

Shares of Regenxbio (RGNX) plunged 27% on Monday after the biotech said that the U.S. Food and Drug Administration (FDA) placed a clinical hold on its experimental gene therapy for a rare childhood disease, prompting Bank of America to call the development “disappointing.”

At the time of writing, RGNX traded down 23% after paring some losses. The stock is still on track to clock its worst day since mid-May.

Analyst View On The Setback

BofA called the clinical hold on RGX-121 disappointing and a reversal of July’s progress. The hold follows unexpected spinal scan results in five patients with no symptoms. Regenxbio no longer plans to refile for FDA approval soon. The bank noted it had already given the program little value in its model and kept its Buy rating with a $15 price target.

BofA’s price target implies a 40% upside to the stock’s last closing price on Friday.

What Triggered The Hold

Regenxbio said the FDA placed the hold after spine scans showed small growths or fluid pockets in five boys treated with RGX-121 three to six years earlier. The boys have no symptoms and continue to do well, with stable or improved mental and behavioral functioning, the company said, adding that its investigators believe the growths are likely benign. No similar issues showed up in brain scans.

The company and partner NS Pharma will review additional imaging and long-term data, as well as the full FDA hold letter, before deciding on next steps, it said. Regenxbio does not plan to resubmit its application soon seeking approval. CEO Curran Simpson said the findings appear unique to this Hunter syndrome program and require longer follow-up to weigh the benefits against the risks.

Hunter syndrome, or MPS II, is a rare inherited condition that causes progressive damage to the brain and other organs. RGX-121 is designed as a one-time gene therapy delivered near the brain to address the underlying enzyme deficiency.

Longer-Term Catalysts In Focus

BofA pointed to other near-term catalysts for RGNX, including the planned start of the RGX-202 biologics license application this quarter as the next key stock-moving event. This Duchenne muscular dystrophy candidate has shown promising production of a key muscle protein and better function compared with untreated patients. Acceptance of the filing would clarify the path to faster approval and show the company is executing well, the firm said.

Regenxbio also remains focused on its retinal programs, which use a different delivery method. Topline pivotal data for its wet age-related macular degeneration candidate is expected in the fourth quarter. These efforts, the company said, stay on track and are separate from the Hunter syndrome issues.

How Did RGNX Retail Traders React?

On Stocktwits, retail sentiment around RGNX stock rose from ‘bearish’ to ‘extremely bullish’ over the past 24 hours, while message volume rose from ‘low’ to ‘extremely high’ levels.

A Stocktwits user opined that investors may now avoid RGNX stock until it receives FDA approval.

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Another voiced concerns about RGX-121's safety profile. They also highlighted that this is the second safety incident after the FDA placed a clinical hold on RGX-121 and related gene therapy RGX-111 after a child treated with the latter was observed to have an asymptomatic brain tumor in January. The partial hold on RGX-121 was lifted in April.

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RGNX stock has lost 43% year-to-date. 

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