MEI Pharma (NASDAQ:) shares are taking a significant hit Friday morning “ down as much as 60% in heavy early trading – as the company disclosed FDA’s recent feedback on the regulatory path of MEIP’s PI3K inhibitor drug candidate.

In what Stifel’s Stephen Willey calls a “surprising/bewildering FDA feedback,” the agency noted that it now requires an additional Phase 3 trial to fully access the safety and efficacy of PI3K, before any marketing authorization decision can be made. Based on data from Phase 2 TIDAL, the FDA previously anticipated an accelerated approval process for the drug. Investors as well as the company were anticipating this. According to Stifel analysts, MEIP is now rated “Hold” by Buy. The analyst also slashes the price target for shares from $8 to $2 because the FDA’s feedback “takes out any zandesilib expedited approval prospects.”

Potential approval timeframes are significantly pushed back by the need to complete a Phase 3 trial. Wells Fargo Nick Abbott (NYSE:), analyst believes that, assuming a successful trial outcome “a zib NDA file could be delayed until 2026.” Further, he notes that the company does have sufficient cash to cover enrollment. However, MEIP will still need to raise additional money to conduct COASTAL (phase 3) trial.” This suggests potential dilution. An analyst at Wells Fargo agrees with him that there is no immediate zandelisib release. He has reduced his price target from $13 to $2 and downgraded the stock from Overweight to “Equal Weight”.

Chris Howerton, Jefferies analyst, added to the downgrade boonanza. On the delay timeline delays, and the reduced likelihood of Zandelisib being launched as 2L+ therapy for FL/MZL, he lowered shares to “Hold” instead of “Buy”, and cut the price target down to $1.

Brookline Capital Markets Analyst Leah Rush Cann admits that it isn’t ideal, but she maintains an optimistic tone. Although the TIDAL data is no longer adequate for registration, she notes that these data can still be used to prove zandelisib’s ability to enhance outcomes for patients once approval has been granted. It is her conviction that Zandelisib, with the combination of other drugs in earlier treatment lines for follicular cancer, has a favorable safety profile, as demonstrated by the TIDAL Study. This could support registration.

Brookline Capital Markets maintains a Buy rating on MEIP in the face of pessimism and adjusts its price target from $20 to $15.

MEIP Stock is down nearly 60% as of Friday’s trading session.

By Vlad Schepkov