Investment summary: Pure play on ASSURE
Resverlogix’s (RVX/RVXCF: TSX;OTC) spin-out of Zenith Epigenetics puts the investment case firmly on the outcome of the ASSURE Phase IIb study in mid-2013 of RVX-208 for atherosclerosis. While the stock gained c 20% between the 8 April spin-out announcement and mid-May, the share price has retreated c 35% since the Zenith deal completed on 3 June. The C$1.22 sell-off can partly be attributed to Zenith and the US$10m cash transfer to Zenith, but investors also appear to be adopting a more sober tone ahead of the ASSURE read-out. Positive results could therefore lead to a significant re-rating and lucrative licensing or M&A deals.
Spin-out complete; Resverlogix retains ApoA-I estate
Following the spin-out of the Zenith unit containing the epigenetics-based BETi drug discovery platform, Resverlogix retains ownership of BETi candidates that increase ApoA-I, including rights to lead candidate RVX-208. As part of the spin-out, Resverlogix also transferred US$10m to Zenith, and Zenith will be entitled to a tiered royalty of 6-12% of “Net Apo Revenue” (revenue derived from RVX-208 or any follow-on Resverlogix product that raises ApoA-I).
ASSURE top-line data expected in coming weeks
Dosing for the 26-week ASSURE (n=324) trial was completed in mid-April and results are expected in mid-2013. The primary end point is changes in plaque volume as measured by intravascular ultrasound (IVUS) – the study is powered at 85% to detect a 0.6% reduction in plaque. A significant reduction vs placebo may help pave a distinctive position for this drug in clinical practice (if future Phase III trials succeed) as currently approved cholesterol-lowering drugs for chronic use, such as statins, have at best very minor plaque-lowering effects. Part of the rationale for the Zenith spin-out was to allow Resverlogix to be structurally ready for takeover offers in the event of positive ASSURE results.
Valuation: EV of C$198m; returns hinge on ASSURE
Resverlogix had US$11m in cash at January 2013 (US$6.5m net debt) and increased its debt by C$13.8m in March. Given the US$10m transferred to Zenith, and Resverlogix’ annual c US$25m burn rate (which should decrease following ASSURE’s completion), we estimate the firm has sufficient funds on hand into Q413. The critical value driver will be results of the ASSURE study, which if positive could lead to a marked inflection in the value of the shares. This may enable the firm to secure the additional financing that may be required to complete negotiations with potential partners and/or acquirers.
To Read the Entire Report Please Click on the pdf File Below.
Resverlogix’s (RVX/RVXCF: TSX;OTC) spin-out of Zenith Epigenetics puts the investment case firmly on the outcome of the ASSURE Phase IIb study in mid-2013 of RVX-208 for atherosclerosis. While the stock gained c 20% between the 8 April spin-out announcement and mid-May, the share price has retreated c 35% since the Zenith deal completed on 3 June. The C$1.22 sell-off can partly be attributed to Zenith and the US$10m cash transfer to Zenith, but investors also appear to be adopting a more sober tone ahead of the ASSURE read-out. Positive results could therefore lead to a significant re-rating and lucrative licensing or M&A deals.
Spin-out complete; Resverlogix retains ApoA-I estate
Following the spin-out of the Zenith unit containing the epigenetics-based BETi drug discovery platform, Resverlogix retains ownership of BETi candidates that increase ApoA-I, including rights to lead candidate RVX-208. As part of the spin-out, Resverlogix also transferred US$10m to Zenith, and Zenith will be entitled to a tiered royalty of 6-12% of “Net Apo Revenue” (revenue derived from RVX-208 or any follow-on Resverlogix product that raises ApoA-I).
ASSURE top-line data expected in coming weeks
Dosing for the 26-week ASSURE (n=324) trial was completed in mid-April and results are expected in mid-2013. The primary end point is changes in plaque volume as measured by intravascular ultrasound (IVUS) – the study is powered at 85% to detect a 0.6% reduction in plaque. A significant reduction vs placebo may help pave a distinctive position for this drug in clinical practice (if future Phase III trials succeed) as currently approved cholesterol-lowering drugs for chronic use, such as statins, have at best very minor plaque-lowering effects. Part of the rationale for the Zenith spin-out was to allow Resverlogix to be structurally ready for takeover offers in the event of positive ASSURE results.
Valuation: EV of C$198m; returns hinge on ASSURE
Resverlogix had US$11m in cash at January 2013 (US$6.5m net debt) and increased its debt by C$13.8m in March. Given the US$10m transferred to Zenith, and Resverlogix’ annual c US$25m burn rate (which should decrease following ASSURE’s completion), we estimate the firm has sufficient funds on hand into Q413. The critical value driver will be results of the ASSURE study, which if positive could lead to a marked inflection in the value of the shares. This may enable the firm to secure the additional financing that may be required to complete negotiations with potential partners and/or acquirers.
To Read the Entire Report Please Click on the pdf File Below.