Investing.com -- Replimune Group shares collapsed nearly 60% in premarket trading on Monday after the U.S. Food and Drug Administration (FDA) issued a second complete response letter (RPL) for RP1, the company’s oncolytic virus therapy combined with nivolumab for advanced melanoma.

The stock sank more than 57% in the premarket trade by 05:10 ET.

BMO Capital Markets downgraded the stock to Underperform with a $1 price target, down from $11, while JPMorgan moved to Underweight from Neutral and withdrew its $10 price target entirely.

The FDA’s rejection centered on longstanding concerns about the design of Replimune’s IGNYTE trial, many of which were first raised years before the company submitted its initial application.

According to BMO analyst Evan David Seigerman, the FDA flagged as early as a March 2021 meeting that a single-arm study "would not enable identification of the contribution of each component of the combination to the overall response rate" and that it "would not recommend that the Sponsor submit a BLA based on the results of a single-arm study."

"Through the detailed CRL, we are able to more clearly see challenges FDA raised with the RP1 development plan that likely require a subsequent trial to address. Such a path will likely be long and financially challenging for Replimune and shareholders," Seigerman wrote.

The FDA’s latest letter cited an inability to assess systemic drug response given that more than half of patients evaluated for efficacy had no noninjected lesions.

Regulators also pointed to protocol provisions that allowed reinjection of lesions immediately before progression assessments, surgical procedures performed prior to tumor measurement, and histology assessments that were not centrally reviewed, all of which clouded the interpretation of the trial’s efficacy results.

Patient heterogeneity and the absence of a control arm further limited the FDA’s ability to determine how much benefit RP1 added beyond nivolumab alone.

JPMorgan analyst Anupam Rama said he had believed the totality of RP1 data warranted an approval, though he acknowledged regulatory uncertainty heading into the decision.

BMO’s Seigerman, meanwhile, said that prior resubmission efforts appeared "grounded more on hope than true alignment with FDA."

"Hope is never a winning strategy, unfortunately," he noted.

Replimune ended 2025 with less than $200 million in net cash, and analysts said significant cost cuts are likely necessary. Seigerman said the company may need to consider returning capital to shareholders or finding a larger acquirer to take over RP1’s development.