On June 8, 2021 Redx Pharma reported that H121 results highlight continued momentum and delivery against expectations, despite COVID headwinds on clinical studies (Press release, Redx Pharma, JUN 8, 2021, View Source [SID1234583899]). The start of the Phase I study of RXC007, a ROCK2 inhibitor for fibrosis, means the company now has two distinctly different in-house assets in the clinic. Lead in-house programme RXC004, a porcupine inhibitor for genetically selected solid tumours, is completing Phase I studies and set to enter Phase II trials during H221. The solid cash position of £39.9m supports increased R&D investment through to end-2022, covering several important value inflection points. Our updated rNPV-based valuation is £350.7m, equivalent to 128p/share (86p fully diluted).
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A second in-house programme enters the clinic Redx Pharma’s acknowledged expertise in medicinal chemistry underpins its discovery platform, and its strategy to develop best-or first-in-class small molecules that address validated biological targets in oncology and fibrosis indications. Two in-house programmes are now in clinical development: RXC004, a porcupine inhibitor for genetically selected solid tumours, is completing Phase I (both monotherapy and a PD-1 inhibitor combo) and set to enter Phase II studies; while RXC007, a ROCK2 inhibitor initially in development for fibrosis, dosed the first patient in its Phase I trial earlier in June.
▪ Funded through to value inflection points Redx Pharma has a solid balance sheet with £39.9m in cash resources. Funds are earmarked to progress RXC004 and RXC007 into Phase II proof-of-concept studies. RXC004 could, COVID permitting, post Phase II monotherapy results for MSS mCRC (microsatellite stable metastatic colorectal cancer) and biliary cancer in CY22 with interim monotherapy pancreatic cancer and MSS mCRC combination data also possible. For RXC007 the Phase I safety data should be available in H122, enabling a swift start to Phase II trials during H222. Our forecasts suggest the cash runway extends to end-2022.
▪ Building a track record of delivery The value of Redx Pharma’s medicinal chemistry expertise is being harnessed with a focussed, yet ambitious, strategy. The pipeline has been de-risked through preclinical outlicensing deals, with Jazz Pharmaceuticals and AstraZeneca, whilst retaining material commercial upside. However, it is the continued progress with its innovative in-house programmes that should, if successful, be transformative for the business over the medium term.
▪ rNPV valuation of £350.7m (128p/share) We value Redx Pharma using an rNPV and SOTP methodology, with conservative assumptions. Our updated model reflects recent clinical progress and generates a £350.7m valuation, or 128p/share (86p fully diluted) vs £326.4m, or 119p/share (84p, fully diluted) previously. Update 8 June 2021 Price 66.0p Market Cap £180.8m Enterprise Value £140.9m Shares in issue 273.9m 12 month range 11.7-95.0p Free float 11.0% Primary exchange AIM London Other exchanges N/A Sector Healthcare Company Code REDX Corporate client Yes Company description Redx Pharma specialises in the discovery and early clinical development of small molecule therapeutics, with an emphasis on oncology and fibrotic disease. Typically, these are progressed through proof-of-concept studies and then partnered for further development. The strategy has been validated by several collaborations.
Redx Pharma Redx Pharma: delivering on all key objectives The key message from Redx Pharma’s H121 results is the continued delivery of management against our, and the market’s, expectations. The recently announced start of a Phase I study with RXC007, a selective ROCK2 inhibitor, means that the company now has two in-house programmes in clinical development. The lead asset, porcupine inhibitor RXC004, is completing the fifth and final cohort (3.0mg) of the Phase I dose escalation study with results expected during H221. In addition, a Phase I study of RXC004 in combination with nivolumab (Bristol Myers Squibb’s PD-1 checkpoint inhibitor Opdivo), is underway with preliminary data expected in late-H221. Several RXC004 Phase II trials, in various oncology indications, are expected to start during H221.
Redx Pharma is well funded, with ample resources to achieve multiple value inflection points. Development progress with the lead assets during H121 lifted R&D investment to £10.3m (H120: £3.2m), similarly increasing operating costs from £5.2m to £12.6m. R&D spend is set to increase further as the clinical programmes progress, with the forecast cash runway extending through 2022. The cash balance of £39.9m at end-March 2021 was a sizeable improvement on the £1.9m figure a year earlier, reflecting the company’s refinancing in summer 2020 and its most recent successful £25.7m (gross) fund raise in December 2020. During H121, £5.1m of the £22.2m outstanding loan note held by majority shareholder Redmile Group was converted into equity. The 2020 raises added specialist investors Redmile, Sofinnova Partners, and Polar Capital to the shareholder register. The involvement of these respected and supportive investors provides valuable external validation of management’s clearly defined strategy.
Acknowledged medicinal chemistry expertise
Redx Pharma is focused on developing innovative small molecule pharmaceuticals, with the aim of creating best-or first-in-class compounds. Its medicinal chemistry expertise underpins the discovery platform, which has a growing industry-wide reputation and a proven ability to generate clinically, and commercially, attractive products. Management is actively addressing complex biological pathways, for instance the Wnt/β-catenin pathway, where its insights have resulted in generating novel small molecules such as its family of porcupine inhibitors (eg RXC004 and RXC006, partnered with AstraZeneca).