eXegenics Inc.: New Company; New Technology

Includes: OPK, RHHBY
by: Anthony Payne

In this article we feature a small company which is being formed as a reverse stock merger; the shell company is publicly traded eXegenics Inc. (EXEG.OB). Acuity Pharmaceuticals and Froptix, both privately owned pharmaceutical companies developing treatments for eye diseases, will merge into the shell company. The combined company will be renamed Opko Corp. and will be based in Miami. Opko intends to apply to have its shares listed on the American Stock Exchange.


Acuity is developing an RNAi agent called Bevasiranib, which is in Phase II clinical trials as a potential treatment for wet age-related macular degeneration [AMD] and diabetic macular edema [DME] both of which can lead to blindness.

In September 2006 Acuity Pharmaceuticals announced positive results from its Phase II trial for Bevasiranib sodium. The study was a randomized, double-blinded trial that included three dose levels of Bevasiranib tested in 129 patients with wet AMD at 28 sites nationwide. The study focused on patients with serious disease, classic or active minimally classic AMD, including those patients who had failed previous treatments. There was no placebo arm. The drug is injected locally into the eye, which reduces the possibility of systemic toxicities from the drug. Local injection was shown to be very safe in the study, with all doses well tolerated and most adverse events mild and related to the administration procedure. There were no systemic adverse events observed, an important consideration in an agent targeting vascular endothelial growth factor [VEGF].

AMD is formed in the eye when blood vessels form at the back of the eye sometimes resulting in blindness. VEGF is the growth factor which produces the blood vessels. By inhibiting the growth of these vessels it has been found that diseases which require blood vessel formation such as cancer and abnormally produce these vessels locally like AMD can be treated effectively by inhibiting this factor. Avastin (Private:DNA) works by this mechanism (see below).

Unlike antibody VEGF antagonists (Avastin), which neutralize VEGF that has already been produced in the eye, Bevasiranib works by shutting down the genes that produce future VEGF. As a result, there is residual VEGF remaining in the eye during the first weeks of administration of Bevasiranib, which stops production of new VEGF but does not neutralize the residual VEGF that naturally dissipates over time. Accordingly, the impact of the drug's anti-VEGF activity becomes evident only after several weeks of therapy, after the existing VEGF dissipates. This results in a lag between starting Bevasiranib therapy and observing a therapeutic effect. This would indicate that the RNAi mechanism of Bevasiranib may also be effective in combination with Lucentis from DNA, the current monoclonal inhibitor of VEGF (see below) on the market.

Bevasiranib uses RNA interference (RNAi) to silence genes that promote the overgrowth of blood vessels that lead to vision loss in wet AMD. This shuts down the production of VEGF, which has been shown to be the central stimulus in the development of wet AMD. Bevasiranib is administered directly into the eye and does not affect the patient systemically, an important safety consideration. A Phase III clinical trial which will further examine efficacy parameters, as well as dosing and dose scheduling regimens is being planned.

The former CEO and chairman of Ivax, Dr. Phillip Frost, will become chairman and CEO of Opko. The Frost Group will provide Opko with a $12 million line of credit. Proceeds from it, along with the about $16 million of cash held by eXegenics, will fund the company's upcoming Phase-III study of Bevasiranib.

Investment Analysis:

The AMD as a therapeutic market is growing in interest, especially with the approval of the VEGF antagonist from Genentech (DNA), Lucentis in mid 2006. Sales in 2006 were $380 million. The company mentioned in its recent 10K that Avastin, a VEGF inhibitor used for cancer, is also effective for this indication and is being prescribed off-label. [Seeking Alpha Editors: Please see the correction in the comment below the article on our site.] Another marketed therapeutic is Macugen, which is a pegylated aptamer (tight binding oligonucleotide) and was developed by Eyetech and licensed to Pfizer; Eyetech was subsequently purchased by OSI Pharmaceuticals. One of the scientists at Eyetech has joined eXegenics (Opko). Sales in 2006 were $103 million.

OSI have announced that it is divesting the eye business including Macugen as it believes sales of Macugen will be severely affected by the launch of Lucentis and they will concentrate on cancer and other diseases. They are attempting to obtain full rights to Macugen from Pfizer to assist in the divestiture.

Management of the new company appears experienced with a number of past successes; they are confident that there are sufficient funds to develop the molecule through Phase III. Local eye administration of oligonucleotide therapeutics has been the only route of administration for these types of compounds which have been successful so far; Macugen mentioned above, an aptamer, and Vitravene from ISIS, an antisense oligonucleotide against CMV retinitis. Finally, valuation is reasonable at present for a company with a compound going into Phase III. Although the stock has moved significantly since November we still believe it is a good investment for investors willing to take inherent biotech investment risk. It is a Company worth watching in 2007.