Seeking Alpha
Long only, growth, momentum, contrarian
Profile| Send Message|
( followers)

On May 29th, Rockwell Medical (RMTI) announced it had completed patient dosing in its phase III CRUISE-1 efficacy and safety study of SFP-iron (Soluble Ferric Pyrophosphate-iron). The drug is delivered via dialysate (dialysis fluid) for adult patients with chronic kidney disease (CKD) or end-stage renal disease (ESRD) requiring hemodialysis. SFP-iron is being evaluated to treat iron deficiency often seen in this patient set with a primary efficacy endpoint in this trial of change from baseline in hemoglobin levels. SFP-iron is introduced into a sodium bicarbonate concentrate which is then mixed with dialysate. Once in the dialysate, SFP crosses the dialyzer membrane (via osmosis) and enters the bloodstream where it is has been demonstrated to bind to apo-transferrin and is delivered to the bone marrow, the same means by which dietary (normally consumed) iron is processed in the human body. In current IV iron administrations, the iron may be stored in the patient's liver where it may lead to liver damage. If Rockwell Medical can prove efficacy as well as safety in SFP-iron, the company could garner a significant portion of the $600 million U.S. market, according to the company.

A 300-patient trial, topline data are expected sometime in July according to the CRUISE-1 press release. A February 4th press release announcing topline results of SFP-iron administration as a treatment to reduce the need for erythropoietin stimulating agents (ESAs) during hemodialysis could give investors insight into the possibility of favorable data in the upcoming CRUISE-1 trial results. Termed the PRIME trial, the phase III trial data decreased the need for ESAs by 37.1%. ESAs are typically given via injection to stimulate the production of red blood cells, which in turn increases the production of hemoglobin. This reduction in ESA occurred while maintaining the iron balance and maximizing iron delivery. With 52 patients receiving SFP-iron and 51 patients receiving the placebo (conventional dialysate), there were 2 withdrawals due to adverse events in the SFP-iron group, while there were 3 withdrawals in the placebo group. Rockwell Chief Medical Officer, Dr. Raymond Pratt, expressed his hope in the phase III CRUISE trial results in the PRIME press release noting: "In this study, a 37% higher ESA dose was needed in the placebo arm to maintain hemoglobin compared to the SFP arm, but in the Phase III CRUISE efficacy studies the ESA dose is kept constant, unable to be titrated, over the 12-month study period. The PRIME results support our belief that SFP will demonstrate efficacy in the Phase III CRUISE clinical studies by maintaining hemoglobin in the SFP arm while hemoglobin decreases in the placebo arm." If Dr. Pratt's opinion holds true, investors may perceive the upcoming CRUISE-1 data very favorably, although the CRUISE-2 trial would still need to be completed and indicate safety and efficacy before regulatory filings would take place.

Although Rockwell Medical announced the completion of patient dosing on May 29th for CRUISE-1, the company has not yet announced such for the CRUISE-2 trial which is also well underway. Both clinical trials, as noted on clinicaltrials.gov indicate "This study is ongoing, but not recruiting participants" which indicates enrollment is completed for both trials. Both trials, identified by clinical identifiers NCT01320202 and NCT01322347, respectively also have what appear to be accurate estimated completion dates. CRUISE-1 is noted as completing on June 2013 with CRUISE-2 noted as completing in August of 2013.

With two huge catalysts pending for the phase III CRUISE trials for SFP-iron, investor interest should start picking up for RMTI in the coming days. With promising PRIME trial data partially validating SFP-iron already, it appears that data could be positive from each of the CRUISE trials with solid upside likely for investors holding long positions in the company's stock. As a bit of protection, Rockwell's downside is protected a bit as the company already has another regulatory decision upcoming. On April 1st, Rockwell announced that it had submitted manufacturing data for Calcitriol, the company's injectable active vitamin D drug. Calcitriol is an FDA-approved generic drug intended to treat hypocalcemia in patients undergoing chronic renal dialysis. Hypocalcemia is a condition in which serum calcium levels are low in chronic dialysis patients due to parathyroid hormone (PTH) deficiency/malfunction or due to vitamin D deficiency. In chronic renal failure patients the parathyroid hormone is often ineffective and the hydroxylation of vitamin D is ineffective which causes calcium levels in the blood fall. With a regulatory decision for calcitriol now imminent, the company is likely on the cusp of competing with the already-approved drugs, Abbott Laboratories' (ABT) Zemplar and Genzyme's (of Sanofi (SNY)) Hectorol, for the approximate $350-million annual U.S. market for active vitamin D injection. Depending on how it's marketed, a 10% share of this market for Rockwell, should it be approved for Rockwell's manufacturing, could mean solid revenue for the growing company and solid upside from company's current share price.

Tuesday's closing share price of $4.01 gives Rockwell Medical a market capitalization of about $157 million. With a 52-week range of $3.16-$10.70, upside here could be substantial with renewed investor interest. Two share price dips in 2013 were direct results of stock offerings which now provide new investors with solid entries, although diluting existing shareholder interests. As of March 31st, Rockwell had cash and equivalents of about $5.8 million. However, a subsequent May 15th stock offering for $35 million priced at $3.05 shored up the company's cash position considerably. A May 16th notice that investors agreed to exercise the over-allotment option for an additional $5 million also priced at $3.05 not only provides the company with more cash, but also serves to indicate that the investors believe their return on investment is worth whatever risks are present in the company at this stage of development. Although SFP-iron should be construed as the company's lead-product candidate, Rockwell is already generating revenue from its high-quality hemodialysis concentrates sales to dialysis providers and distributors in the U.S. as well as abroad. In Q1, Rockwell had sales of $12.34 million but operated at a loss of $15.4 million primarily due to costs associated with multiple phase III trials, the calcitriol regulatory fees and other expenses. As the CRUISE trials wind down, expenses should diminish somewhat, although regulatory filing fees and manufacturing and marketing costs for SFP-iron and calcitriol will likely soon come into play, pending regulatory approvals of course. Assuming Rockwell's cash burn rate of about $15 million quarterly holds steady, it appears that the company now has enough cash to fund operations through Q4 2013, although another offering would likely be in the books sometime in latter half of this year.

With overall markets reaching what appear to be short-term bearish conditions, I believe investments in small pharmaceuticals with short-term catalysts could provide for safer investments than those with equally-promising pipelines but with significant catalyst farther into the future. Rockwell is currently adequately funded through most of 2013 which reduces the need for immediate dilutive financing somewhat. With two phase III trials winding down, upcoming data for the CRUISE trials and the regulatory decision on calcitriol manufacturing clearance should each keep investor interest strong in the upcoming weeks.

Disclosure: I am long RMTI. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Source: Multiple Pending Catalysts Should Keep Investor Interest Strong For Rockwell Medical