Note: For background information on Resverlogix, please see my previously published article here.
While sitting on a potential multibilllion dollar drug candidate, RVX-208, Resverlogix (OTCPK:RVXCF) does not have the funds for running a phase III trial with RVX-208. Running a new trial with a cardiovascular disease endpoint is crucial for the success of Resverlogix. To say that the science behind RVX-208 is intriguing is a gross understatement. The best scientific journals are picking up on the drug class, BET inhibitors, and RVX-208 - in spite of being the first BET inhibitor in clinical trials - continues to receive very little attention from the investment community at large. However, the insiders of the company, i.e. the main shareholders, the board of directors and company officers, are very aware of the potential of the company and they do apparently believe in the future of Resverlogix, as they invested additional capital in the company on June 11.
The total investment amounted to CAD 2.3 million, which is nowhere near enough to run the phase III trial, but it buys time for Resverlogix, which has already cut its cash burn rate to a minimum, to find a partner to back the trial. About one-third of the capital was due to investments made by members of the board of directors or company officers, which is usually considered a massive vote of confidence in the company. Interestingly, the insider buying appears to have resulted in almost no reaction, good or bad, judging from the share price, suggesting that investors have either given up on the company or that the company is not on the investors' radar. I tend to believe that it is a combination of the two.
If insiders buying common shares in the company does not move the share price, then what could possibly move the share price over the next couple of months? The list is fairly short:
- Resverlogix reports topline results from a small diabetes study
- Resverlogix may receive a grant from NIH for an Alzheimers disease trial.
- Resverlogix finds a partner or financing for a phase IIc or phase III trial.
Diabetes trial results
The diabetes trial results are currently being analyzed and topline results are expected by mid 2014. The study is small, 20 patients, and was run as a double blind, placebo controlled, crossover study. A crossover study means that patients start on either placebo or active drug and after a while - 30 days in this case - change so that those initially taking placebo start receiving RVX-208 and vice versa.
The primary endpoint of the diabetes study is control of glucose in plasma following a defined intake of sugar. While sugar concentration in plasma is the key metric in diabetes treatments, the limited number of patients may make it difficult to show results that are statistically significant. I doubt that the news coming out from the trial - even if the trial is successful - will make for a big splash, but it could start a slow upwards climb of the share price, as such news would be a signal that the concept behind BET inhibition may apply to a pharmaceutical market as lucrative as the multibillion dollar diabetes market.
Grant from NIH
According to Resverlogix, the NIH is supposed to make a decision in June on which Alzheimers projects to support with grants. If Resverlogix receives such a grant, the share price is likely to move significantly higher. Keep in mind that the risk of investing in a cash strapped company as Resverlogix is the dual risk of the company not being able to raise the funds needed for testing their science in clinical trials and the risk of the science not working out as hoped for. If funds are brought to the company in the form of a grant, one of these risks is removed, in which case the share price will react accordingly.
Partnership or major financing
Resverlogix needs in the order of USD 25 million to run a 1000+ patient clinical trial with RVX-208 for prevention of cardiac disease in high risk patients. If Big Pharma decides to partner with Resverlogix on the development of RVX-208, it would not only mean that the funds for running the trials would be available, it would also mean that Big Pharma endorses the concept behind RVX-208. If this scenario plays out, the share price appreciation could be quite substantial. In the alternative scenario, Resverlogix is going to wait and see if the share price increases in response to the diabetes trial data and/or a possible grant from the NIH, after which they will raise the needed funds for running the cardiovascular disease trial. Again, if funds become available for such a trial, one level of risk is removed, and the share price should increase accordingly.
The next couple of months are likely to bring clarity to at least some of the above points, and it will be interesting to see how the market reacts to the development.
Disclosure: The author is long RVX.TO, Resverlogix shares traded on the stock exchange in Toronto. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.
Disclaimer: This is not investment advice. Please talk to a suitably certified advisor before making an investment in Resverlogix, as such an investment is extremely risky.