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RXi Pharmaceuticals Corp (NASDAQ:RXII) Should Recover On Catalysts Near Term

RXi Pharmaceuticals Corp (NASDAQ:RXII) Should Recover On Catalysts Near Term
Written by
Chris Sandburg
Published on
December 20, 2016
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RXi Pharmaceuticals Corp (NASDAQ:RXII) took a big hit at the end of last week, as the company announced the pricing of a $10 million underwritten public offering. It's a class A/B type offering, with both class of warrants allowing for exercise at a discount to market (well, that was before the offering was announced) and that's the primary reason for the decline on the news. Markets have realigned to reflect the exercise price of the warrants that comprise the offering, eliminating any discount.We see this all the time at this end of the market, but when it comes to biotechnology, things aren’t always as straightforward as they might be in another industry. Whereas in another industry, the capital from this sort of raise might take years to develop into growth for the company that puts it to use, in biotech, it can be used to fund near term catalysts that can quickly mitigate, or even totally negate, the value lost through a post-issue market sell off.That's what we've got here.RXi is down more than 50%, but it's got a flurry of catalysts set to hit press throughout 2017, and if these catalysts roll in as favorable, the 50% gap will be swallowed up by a return to the upside momentum.So what are the catalysts?Before we get specific, let's kick things off with a brief introduction to the company. RXi is a development stage biotech that employs what's called RNA interference (RNAi), which is the process through which RNA molecules inhibit gene expression or translation, to target certain rare and unmet needs. It's got two primary platforms – RXI-109 and Samcyprone – and its pipeline (and by proxy, the assets that we are looking at as catalysts next year) is rooted in these platforms.Now for the catalysts.The biggest comes from an application of the 109 platform in an asset called RXI-109-1402, which is currently under investigation as a treatment for hypertrophic scarring. This is a type of scar that forms on the back of collagen buildup. So far, data from the ongoing trial has been great. 1402 has shown improvement (as measured visually by a panel) in more than 60% of patients, at numerous time frames post surgery (up to six months as an outside measurement so far) and will read out against a nine-month post surgery evaluation during the middle of 2017. There's mid double digit growth on a positive readout on this asset alone, if the nine-month data falls in line with the sic month numbers and holds at 60% or above.The second asset is called RXI-109-1501 (as the name suggests, this one's also built on the 109 platform) and it's currently under investigation as a treatment for retinal scarring in AMD. Readers will probably be aware that this is a huge market, and if this asset proves effective, it would slot nicely into the portfolio of a big pharma that its targeting primary AMD, and wants to flesh out its offerings with a symptom target. This one's in a safety study right now – it's a little behind 1501 in terms of development time frame – and it's expected to readout during the second half of next year.Finally, we've got RXI-SCP-1502, built on the Samcyprone platform, targeting cutaneous warts. We've already got 10-week data from a prelim analysis on this one, and these prelim data showed that greater than 90% of the subjects demonstrated a sensitization response, which is a prerequisite to be able to develop a therapeutic response. With Samcyprone, the company expects to read out a first cohort release during the first half of next year, and then put out top line around mid year. Again, there's a double digit upside on this readout, weighted towards the high end.While we accept that the situation is far from perfect – readers wishing to take a look at the offering can do so here, suffice to say it doesn’t read particularly well from a dilution perspective – there looks to be enough near term catalysts to make an entry at current levels look like a potential discount opportunity. The company is also looking to uplist before the close of the year (optimistic, but it's setting its own targets here) and there's a decent chunk of value to be had if it successfully hits the NASDAQ.We're watching this one closely.We will be updating our subscribers as soon as we know more. For the latest updates on RXII, sign up below!Disclosure: We have no position in RXII and have not been compensated for this article.

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