On July 3, Resverlogix (OTCPK:RVXCF) issued a press release stating that Resverlogix had secured another $30 million loan from Citibank. The loan was secured by an irrevocable "Standby letter of credit" from Eastern Capital limited. Eastern Capital already owns nearly 20% of the shares in Resverlogix, and as compensation for the securing the loan, Eastern Capital was given 5,000,000 warrants that can be exercised at a price of $0.75 /share. Thus, the actual shareholder dilution in this round of financing amounts to 5,000,000 shares, corresponding to approximately 5.9% dilution of the current shareholders.
Reduction of financial risk
In spite of a recent, small private placement - please see my previous SA article - Resverlogix did not have the funds for running a follow-up trial to the trials, from which they have reported data over the past 12 months. As stated in my previous SA article, the risk of investing in Resverlogix was the combination of investing in a company whose science might never work out as planned and investing in a company that did not even have the funds for proving that they were right. With the $30 million loan secured, Resverlogix has enough funds to run a 500-1000 patient clinical trial with heart disease as the primary endpoint. For now, the loan totally de-risks the financial aspect of investing in Resverlogix. I have no doubt that the share price would have increased far more had Resverlogix been able to partner with a big pharmaceutical company, but believe me, while such a deal might not have involved the issuance of new shares or warrants, the deal would not have been without dilution of value of the main asset of Resverlogix. In the case of Resverlogix, asset and not assets is the proper word, as RVX-208 is basically all they have. I personally think that management have done an admirable job at securing financing for the next round of clinical trials at the lowest possible price, but I realize that the market would likely have preferred to see a partnership with big pharma. That said, the bottom line is now that RVX-208 may not be the gem I think it is, but Resverlogix is at least given another chance to prove that the science behind RVX-208 is as promising as suggested in my seminal SA paper on Resverlogix.
The next clinical trial: RE-MACE
MACE stands for Major Adverse Cardiac Events and the term includes myocardial infarctions and other serious heart diseases. MACE is what heart diseases are all about, so if a drug reduces the risk of MACE, such as was the case for the cholesterol lowering drugs, such as Lipitor and Crestor, the drug is bound to become a blockbuster drug. To prove that a drug reduces the risk of MACE, a clinical trial that has MACE reduction as the primary endpoint needs to be successful. MACE reduction was not a clinical endpoint in any of the trials Resverlogix has carried out so far, but a post-hoc analysis of the data from the previous clinical trials more than suggests that RVX-208 may actually reduce MACE. To reflect that management believes that RVX-208 already has given positive results on the MACE reduction endpoint, they have previously said that they would name the new trial RE-MACE. In one of this year's webcasts, management said that a 1000+ patient clinical trial with MACE as an endpoint would cost about $25 million, in which case the new loan should be enough to see such a trial to completion. I tend to think that $25 million is in the low end for a 1000+ patient trial, but that does not matter for now. The RE-MACE trial is going to have MACE as the primary end point, and the patients are going to be high-risk patients with certain qualifiers, as described in the following.
Why should you invest in Resverlogix when Big Pharma did not?
First of all, you should not necessarily invest in Resverlogix, this is still an extremely risky investment - all we obtained with the $30 million loan was certainty that a new clinical trial can be initiated. However, I do think that there are some compelling reasons for considering an investment in Resverlogix, reasons that have to do with the mechanism of action of BET-inhibitors, a class of compounds to which RVX-208 belongs. Thus, when analyzing the patients in the completed RVX-208 clinical trials, there appeared to be a clear tendency that:
1) Patients with elevated hsCRP, indicating a state of chronic low grade inflammation, responded better to RVX-208 than patients with normal levels of hsCRP.
2) Patients with low levels of HDL responded better than patients with normal or high HDL levels. HDL is anti-inflammatory. Thus, patients with low HDL are more likely to also have high hsCRP.
3) Patients on Rosuvastatin (Crestor) fared better than patients on Atorvastatin (Lipitor). There are differences in the mode of action of Crestor and Lipitor, and this could be what causes the difference, but it could of course also just be a statistical fluke.
The patients with the above profile responded much better to RVX-208 than did the rest of the patient population. The skepticism towards post-hoc analysis is - for good reasons - ingrained in the minds of any biotech investor and Big Pharma business developer. However, the relevance of the above patient characteristics, which were (for the most part) identified in post-hoc analyses, are so nicely supported by recent publications in leading scientific journals, that it would be surprising if the patient population responding to the BET-inhibiting RVX-208 was not patients with chronic low grade inflammation. The results from the ASSURE trial on the MACE endpoint were decent when looking at the entire patient population, but when focusing on patients with chronic low grade inflammation, there was as much as a 63% reduction in the risk of MACE - which is huge. This is what Resverlogix wrote in its press release on March 31, 2014:
"In patients with signs of systemic inflammation as indicated by a high sensitive C-reactive protein higher than 2mg/L, 6.9% of the RVX-208 treated patients had a Major Adverse Cardiac Event vs. 18.9% for the placebo treated patients (p<0.02). The prevention of cardiac events is the ultimate goal of treatment."
Inflammation, inflammation, inflammation
The importance of inflammation should not be underestimated. Resverlogix has previously set out to prove that RVX-208 causes apoA1 levels to increase (apoA1 is needed for making, HDL, i.e. the "good" cholesterol). The results were not really clearly positive, although there was a trend in some of the trials, but the trend was - at least in my eyes - more or less completely absent in the ASSURE trial results. Resverlogix has also tried to prove that RVX-208 reduces arterial plaque. They had some success when looking at the above patient sub-groups, but in reality, that too proved to be an unfortunate choice of endpoint. However, when it comes to MACE in the context of chronic low grade inflammation as indicated by elevated hsCRP levels, there seems to be a unifying explanation for all the promising trends and hints from sub-group analysis that have been obtained in the clinical trials of RVX-208 so far. This, obviously, is where I place my hope and optimism for the future, and I think I have good reasons to support my optimism.
I expect to hear a lot from Resverlogix over the next 2-6 weeks. There is a shareholder meeting in August - the loan agreement needs to be approved - and there is most likely going to be some sort of update from the company in connection with that meeting. We also have not had any news on the completed diabetes trial or the potential Alzheimers grant from NIH (see my previous SA article). This information is also due now or in the very near future. I also tend think that the information we are about to get is material, as the fact that preclinical results from RVX-208 in a recently published article written by scientists from Resverlogix (the title is "A Novel BET Bromodomain Inhibitor, RVX-208, Shows Reduction of Atherosclerosis in Hyperlipidemic ApoE Deficient Mice") has not yet been deemed worthy of being mentioned in any press releases.
I remain optimistic about the future of Resverlogix, but please always keep in mind that any investment in Resverlogix is a high risk investment.
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.
Disclosure: The author is long RVXCF. 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.
Additional disclosure: I am long RVX.TO, i.e. Resverlogix shares traded on the stock exchange in Toronto.
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