Update: Rexahn Q2 Earnings - Stock Down, But My Optimism Remains Intact

Aug.15.14 | About: Rexahn Pharmaceuticals (RNN)

Summary

Rexahn reported earnings for Q2 on August 14, 2014.

I reiterate my bull thesis on Rexahn, given the progression of its core clinical programs, and a solid cash position that should provide enough runway into 2016.

Continued progression of its core clinical programs occurred as expected, and Rexahn is on track to achieve several value driving catalysts that cannot be overlooked.

In May I wrote a PRO article on Rexahn (NYSEMKT:RNN) with a thesis stating that Rexahn's novel drug candidate, RX-3117, has shown enough potential in clinic to warrant a partnership, which could drive immediate shareholder value. This expectation was aligned with management's stated goal to acquire a partner for RX-3117 around mid 2014. Admittedly, however, my initial expectation was not met because no partnership for RX-3117 has been established. Furthermore, I argued that this compound, along with Rexahn's two other primary drug candidates, Supinoxin and Archexin, diversify Rexahn's risk profile, given that each program is being advanced concordantly, and thus the risk of failure of one program could be mitigated by the success of another. After the earnings event, I see no reason to modify my bull thesis, since R&D is on track to achieve important value driving catalysts, bolstered by a strong cash position that should provide enough runway into 2016.

As reported by Seeking Alpha, some key highlights of Rexahn's Q2 earnings report are as follows:

  • Total cash position decreased $2.9 million to $38.3 million, as compared to $40.3 million for Q1 2014.
  • R&D expenses only increased $400,000 to $1.7 million, as compared to $1.3 million for Q1 2014. For the six months ended June 30, 2014, R&D expenses increased $1 million, as compared to the same period for 2013.
  • G&A expenses only increased $300,000 to $1.7 million for Q2 2014, as compared to $1.4 million for Q1 2014. G&A expenses increased $1 million to $3.1 million for the six months ended June 30, 2014, as compared to $2.1 million over the same period for 2013.
  • Earnings Per Share for Q2 was $0.00, beating analyst expectations by $0.02.

Rexahn also provided important clinical updates on its Supinoxin, Archexin and RX-3117 programs. Regarding Supinoxin, the company noted that 25, 50, 100 and 150 mg dose groups were successfully enrolled in July, and researchers have now proceeded to the 225 mg dose group. Although maximum tolerated dose (MTD) has not yet been established, management expects trial completion in Q4 2014. For Archexin, Rexahn reiterated that the Phase 2a proof-of-concept trial is progressing on schedule, with expected completion of the initial safety component in Q4 2014 or early 2015. However, what is on every shareholder's mind is the status of RX-3117. The program is currently in a Phase 1b trial, with completed enrollment in 30, 60 and 100 mg dose groups, and enrollment currently underway for 150 mg dose group. Rexahn expects completed enrollment in Q4 2014 or early 2015. In prior earnings reports, the company stated that partnership talks were underway for RX-3117, so I was slightly disappointed to hear the same statement reiterated for Q2 2014. Nevertheless, given the developments outlined above, and with a partnership announcement for RX-3117 serving as a near-term catalyst, I see no reason to change my bull thesis on Rexahn.

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