Sometimes the problem isn't that your drug doesn't work—it's that you haven't convinced regulators you've proven it works the right way. That's the position REGENXBIO Inc. (RGNX) finds itself in after the FDA delivered a Complete Response Letter that sent shares tumbling over 10% in premarket trading Tuesday.

The company had been seeking accelerated approval for RGX-121, a gene therapy targeting Mucopolysaccharidosis II (MPS II), better known as Hunter syndrome. This ultra-rare neurodegenerative disease affects a tiny patient population, which makes traditional clinical trials exceptionally challenging. The FDA accepted the Biologics License Application back in May 2025 under the accelerated approval pathway, and even extended its review deadline from November 9, 2025, to February 8, 2026, to give the application extra scrutiny.

Why the FDA Said No

The rejection letter doesn't question whether RGX-121 is safe—that's actually the good news here. Instead, the FDA raised concerns about the study's eligibility criteria and whether the surrogate endpoint used in the trial actually predicts meaningful clinical benefit for patients. It's a technical objection, but it's a significant one.

The FDA outlined several potential paths forward, and here's where things get tricky: the agency suggested options including conducting a new study, treating additional patients, gathering longer-term follow-up data, and using an untreated control arm. For an ultra-rare disease like MPS II, finding enough patients to run these kinds of studies borders on the impossible. You can't exactly recruit hundreds of participants when there are only a handful of eligible patients worldwide.

REGENXBIO plans to request a Type A meeting with the FDA to hash out the details and intends to resubmit the application with additional evidence from global experts to better define the neuronopathic patient population. The company's original application relied on positive biomarker, functional, and safety data from the CAMPSIITE I/II/III trial, with results extending out to 12 months showing the therapy was well tolerated across all trial phases.

What Analysts Are Saying

William Blair analyst Myles R. Minter pointed out that the rejection stems from structural trial design issues rather than safety problems related to the clinical hold that's been hanging over the program. He wrote, "While we believe the CRL should be considered in the context of the clinical hold on the program and that there is nuance here in clinical trial designs, we acknowledge that the CRL indicates the FDA is clearly being cautious on granting accelerated approvals without placebo-controlled data."

That clinical hold Minter mentions? Back in January, the FDA put both RGX-121 and the related RGX-111 program on hold after a case of neoplasm was detected in a participant treated with RGX-111. That raised questions about the safety profile of both therapies, adding another layer of complexity to the approval process.

Investors should also keep in mind that Denali Therapeutics Inc. (DNLI) is facing similar headwinds. The FDA extended the review timeline for Denali's BLA seeking accelerated approval of tividenofusp alfa for the same condition—MPS II. It seems the agency is taking a harder line on accelerated approvals in this disease area across the board.

The Silver Lining

Despite the regulatory setback, Wall Street analysts haven't completely lost faith. The stock carries a Buy rating with an average price target of $31.38—more than three times the current premarket trading price of $9.17. Recent analyst actions include some notably bullish targets: Chardan Capital maintains a Buy rating with a $52.00 target, Stifel raised its target to $45.00 in December, and Leerink Partners lifted its target to $20.00 around the same time.

The company's momentum score from market data also tells an interesting story. REGENXBIO (RGNX) scored 82.9 on momentum metrics, indicating the stock has been outperforming the broader market despite these regulatory challenges. That suggests investors see potential for the company to work through these hurdles, even if the path forward is longer and more complicated than originally hoped.

What Happens Next

REGENXBIO now faces a decision: pursue one of the FDA's suggested paths forward, which could take years and significant resources in an ultra-rare disease population, or find a creative solution that satisfies the agency's concerns about trial design and clinical endpoints. The company's ability to navigate this challenge will likely determine whether those bullish analyst price targets ever materialize.

For now, shares are absorbing the bad news, trading down 10.99% at $9.17 in Tuesday's premarket session. The regulatory journey for rare disease treatments continues to be anything but straightforward.