MEI Pharma slumps on ending lead drug development ex-Japan, analysts downgrade stock

Shares of micro-cap biotech MEI Pharma (NASDAQ:MEIP) slumped 34.3% to $0.26 in Tuesday morning trade, as analysts downgraded the stock after the company ended its lead drug development outside of Japan and shed about 30% of its workforce.

San Diego, Calif.-based MEIP after hours on Monday said it and its Japanese partner Kyowa Kirin (OTCPK:KYKOF) would end global development of investigational cancer treatment zandelisib outside of Japan for B-cell malignancies.

The company then followed up that announcement with a restructuring that included reducing its workforce by about 30% and refocusing its clinical development on two earlier assets.

"Given today's update, we downgrade our rating from Buy to Neutral given our primary valuation driver was future revenues from Zandelisib, and await further clinical updates form early-stage pipeline assets next year," BTIG analyst Justin Zelin said in a research note on Monday.

Truist's Robyn Karnauskas downgraded MEIP stock to hold from buy.

"(MEIP and KYKOF) determined it was no longer feasible to finish drug development within a time period that supports further development," Karnauskas said in a research note on Monday, adding that MEIP "shares 50-50 cost-profits for zandelisib in U.S. and is eligible to receive milestone payments and royalty (tiered - beginning in teens) ex-U.S."

MEI Pharma (MEIP) stock has a Wall Street average rating of of buy, while Seeking Alpha's Quant system, which consistently beats the market, rates it hold.