REPL's 25% Plunge: FDA Rejection and Legal Storms Trigger Biotech Turmoil

Summary
• Replimune Group (REPL) tumbles 25.2% to $5.685, erasing $200M+ in market cap
• FDA's last-minute rejection of RP1 skin cancer therapy sparks sector-wide scrutiny
• Class action lawsuits allege misleading trial disclosures and FDA internal dysfunction

Replimune Group’s stock has imploded on August 4, 2025, amid a perfect storm of regulatory setbacks and legal challenges. The biotech firm’s RP1 therapy was rejected by the FDA despite internal support, while a class action lawsuit accuses executives of overstating trial prospects. With turnover surging to 20.2M shares and the stock trading at a 64% discount to its 52-week high, investors face a pivotal moment in a sector already reeling from leadership chaos at the FDA.

FDA's Top Regulator Intervenes in RP1 Approval
Replimune’s stock collapse stems from a STAT report revealing Richard Pazdur, head of the FDA’s Oncology Center of Excellence, overruled CBER staff who had supported RP1’s approval. The drug’s rejection, despite positive internal reviews, exposed deep institutional fractures at the FDA, including leadership turnover and operational dysfunction. Legal filings further allege executives misled investors by downplaying IGNYTE trial flaws, which the FDA deemed inadequate. This dual blow—regulatory rejection and litigation—triggered a flight to safety, with traders dumping shares ahead of the August 8 expiration of key options contracts.

Biotech Sector Volatility Amid Regulatory Uncertainty
The biotechnology sector remains volatile as the FDA’s credibility faces scrutiny. While Amgen (AMGN) rallied 1.6% on a strong earnings outlook, smaller peers like Replimune face existential risks. The sector’s 39.7% RSI suggests oversold conditions, but REPL’s -1.07 MACD divergence highlights its unique bearish pressure. With the FDA’s leadership turmoil unresolved, sector-wide investor caution persists.

Bearish Options and Short-Term Hedging Plays
• 200-day average: $10.75 (well below current price)
• RSI: 39.75 (oversold but bearish momentum intact)
• MACD: -1.07 (negative crossover)
• Bollinger Bands: $5.685 near lower band (0.74) with 8.29 midband support

REPL’s technicals paint a dire picture for near-term bulls. The stock is trading 60% below its 200-day average and within 10% of its 52-week low. Key support levels to watch: $5.00 (intraday low) and $4.50 (psychological floor). Aggressive short-term traders may target the $4.00 level, while longs should monitor the $6.00–$6.50 range for potential bounces. The sector leader, Amgen (AMGN), gained 1.62% today, contrasting with REPL’s collapse.

Top Options Plays:
1. REPL20250808P5.5
• Type: Put
• Strike: $5.50
• Expire: 2025-08-08
• IV: 138.28% (elevated volatility)
• Delta: -0.361 (moderate bearish sensitivity)
• Theta: -0.015 (slow time decay)
• Gamma: 0.405 (high sensitivity to price swings)
• Turnover: 22,600 (liquid)
• Leverage: 22.98% (strong upside potential)
• Payoff at 5% Down: $0.088 per share (156% return if REPL drops to $5.40)
• Why it works: High gamma and leverage make this put ideal for a 5% drop scenario. Elevated IV ensures price remains responsive to short-term volatility.

2. REPL20250808P6
• Type: Put
• Strike: $6.00
• Expire: 2025-08-08
• IV: 131.61%
• Delta: -0.579 (strong bearish bias)
• Theta: -0.002 (minimal time erosion)
• Gamma: 0.441 (high responsiveness)
• Turnover: 71,073 (extremely liquid)
• Leverage: 11.49%
• Payoff at 5% Down: $0.579 per share (96.5% return if REPL hits $5.40)
• Why it works: High turnover and gamma make this the most liquid bearish play. The -0.58 delta ensures significant gains if the stock breaks below $5.50.

Action Alert: Aggressive shorts should prioritize REPL20250808P6 for a 5% drop scenario. Cautious traders may hedge with REPL20250808P5.5. If the $5.00 intraday low breaks, consider extending the bearish thesis into the $4.00–$4.50 range.

Backtest Replimune Group Stock Performance
Replimune Group (REPL) experienced a significant intraday plunge of -29% on August 4, 2025, which was triggered by the FDA's rejection of its skin cancer therapy RP1 and a class-action lawsuit. The stock's performance after such a dramatic drop can be analyzed as follows:1. Maximum Return during the Backtest Period: The maximum return achieved during the backtest period was 0.87%, which occurred on the date following the intraday plunge, August 5, 2025. This indicates that while there is potential for recovery, the returns may not fully recover to the previous surge level in a timely manner.2. Performance on August 5: On the day following the -29% plunge, REPL experienced a slight increase of 0.87% to $5.415. This reflects a modest recovery but still indicates that the stock faced challenges in maintaining high stock prices after such a significant drop.3. Volatility and Liquidity Challenges: The -29% intraday plunge and subsequent volatility reflect broader challenges with liquidity and investor confidence. The stock's 52-week high of $17 now seems distant, with the P/E ratio indicating a significant drop, and the turnover rate signaling a potential liquidity vacuum.In conclusion, while there is potential for recovery as indicated by the maximum return during the backtest period, the recent performance shows that maintaining high stock prices after a speculative surge can be challenging. Investors should monitor the stock's performance closely, especially the support and resistance levels, to gauge future trends.

REPL at Inflection Point: Legal and Regulatory Crossroads
Replimune’s 25% collapse reflects a critical juncture for the stock. The FDA’s internal dysfunction and class action lawsuits create a near-term overhang, while technical indicators suggest a continuation of the downtrend. Investors must monitor three key catalysts: the September 22 lead plaintiff deadline for lawsuits, the FDA’s leadership changes, and the stock’s ability to hold above $5.00. Meanwhile, Amgen’s 1.62% gain underscores sector divergence. For those willing to bet on further declines, the REPL20250808P6 put offers a high-leverage, high-liquidity play. If the stock tests $4.50, the bearish case becomes a compelling long-term short. Watch for $5.00 breakdown or lawsuit developments.