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An Evolving Pipeline For Rexahn Pharmaceuticals

|About:Rexahn Pharmaceuticals Inc (RNN) Includes:Eli Lilly and Company (LLY), TEVA

A small cap biotech company we like is Rexahn Pharmaceuticals (NYSEMKT:RNN). Rexahn has been continually building upon a pipeline of oncology drugs, and thus far has expanded into different technology areas. For a biotech with such a big pipeline, we don't think it should only be valued with a market cap of only $67 million.

In terms of Rexahn having the cash on hand to run the clinical trials they won't have to raise money any time soon. As of September 1, 2013 Rexahn had $15.7 million in cash. The cash burn rate is at $0.9 million per month. With the amount of money Rexahn has they will have enough cash for about one year and a half. The cash will be needed to run all the clinical trials that are currently running now, and trials that are expected to start this quarter.

Lead Drug Candidate Archexin

Archexin is an Akt1 inhibitor, that had some amazing results for pancreatic cancer back in 2012. The trial had calculated the median survival in all patients tested. Patients were given a combination of Gemcitabine along with Archexin in the trial. The median survival demonstrated with Arechexin plus Gemcitabine was 9.1 months. The trial can definitely be seen as a positive, because the median survival of pancreatic cancer with just single agent Gemcitabine is 5.65 months. Gemicitabine is Eli Lilly's (NYSE:LLY) drug for several types of cancer, but has been used a lot as first line treatment for patients with pancreatic cancer. Gemcitabine was approved back in 1996 for pancreatic cancer.

The data is significant, and merits further investigation of Archexin against many different types of cancer. The mechanism of action for Archexin, may not only prove to be greater than Gemcitabine in terms of efficacy. We mean that Archexin, which is an Akt1 inhibitor, is not found in healthy human tissue. Think about how big this is, a drug that has greater efficacy than Gemcitabine, with a bigger safety profile for patients.

New treatments like this are needed for pancreatic cancer, as it is one of the toughest forms of cancer to tackle against. One of the big problems for pancreatic cancer is that it is difficult to identify. By the time doctors are able to find the cancer, it is already in the advanced stage.

Rexahn is going to choose an indication for Archexin in Q4 of 2013, so soon all investors will know the chosen cancer target. We would like to see pancreatic cancer as one of the chosen indications, because of the previous positive results for Archexin phase 2a in pancreatic cancer. Whatever indication is chosen we have no doubt Rexahn will do well in the next phase 2a trial.

The Fallout With Teva (NYSE:TEVA)

In August of this year Teva had decided to end the agreement with Rexahn for the development of the cancer compound RX-3117 in solid tumors. This has now led Rexahn to take back all global and commercialization rights for RX-3117. Let us reiterate that we think this was a mistake for Teva, and a big win for Rexahn.

Even with this termination of the RELO agreement between the two companies, Teva has at least submitted an IND to the FDA to start clinical trials for RX-3117. The clinical compound RX-3117 is expected to begin a phase 1 trial in the 4th quarter of 2013.

What makes this compound special, and why we think Teva made a big mistake is the outstanding results seen to date. For starters, RX-3117 is a nucleoside compound that is similar to Gemcitabine, but the difference is that it doesn't attack the healthy cells. This is one of the key differences in Rexahns' oncology compounds. They have found a way to target cancerous cells without destroying a patients healthy cells. There are still some minor side effects, but nothing compared to the terrible effects of chemotherapy current patients have to go through with treatment.

The patients in the phase 1 trial run in Europe had no safety problems with all the dose ranges that were tested. Now for a nucleoside compound that is pretty good considering. Also the drug had a great amount of bioavailability. Meaning the drug is able to get through the intestinal wall easily, and reach the liver. From there, the drug was able to easily circulate throughout the rest of the body.

Rx-3117 was able to generate anti-tumor activity in 50 human cancer cell lines. Let us put it this way, RX-3117 was able to perform better efficacy in mouse xeongraft models, than Gemcitabine. This is one compound that holds the key to future cancer therapy. It will be no surprise that Rexahn will easily be able to find a new partner to support future clinical trials of this drug.

Catalysts in 2013 And Beyond

There are a few catalysts in 2013 (minor), and other catalysts (major) in 2014. This biotech stock is not a short term play, it is a long term investment. Some of the upcoming catalysts are:

  1. Phase 2a trial initiation of Archexin (Choosing of cancer compound Rexahn will run a trial on) Q4 2013
  2. Initiate a Phase 1 trial for RX-3117 in solid cancer tumors Q4 2013.
  3. Results from Archexin phase 2a cancer compound late 2014
  4. Results from RX-3117 cancer compound late 2014
  5. Results for Supinoxin Phase 1 trial sometime in 2014
  6. Possible partnership for RX-3117

Oncology Research Risks and Conclusion

The risks with oncology biotechs is greater than other biotechnology stocks. Although, if the results are positive it could mean big rewards for investors. At the same time, some of the cancer compounds may not be effective in certain patients in late stage trials. Another key thing to note will be that the trials are going to start testing humans in phase 1 (still early, small group), so whether we see anti-tumor effects by next year remains to be seen. Also the risk of toxicity showing up in later stage trials is possible as well. All these risk factors can come at any moment.

Despite this, we think that Rexahn has many different compounds, and has diversified its risks. The fact that each compound has a different mechanism of action, makes it a less risky play. We also believe that Rexahn is currently undervalued for the patents, and compounds in its pipeline. We think that Rexahn is a good long term biotech play, that will improve upon the current toxic chemotherapy treatments that plague patients today.

Disclosure: I am long RNN. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Stocks: LLY, TEVA, RNN