RXi Pharma Hopes For a Quick Breakthrough

RXi Pharmaceuticals Corporation’s (OTC:RXIID) CEO Geert Cauwenbergh recently sat down for an interview with SECFilings.com to discuss its business and upcoming catalysts from an investor’s point of view. In particular, the RNA-focused biotechnology company put its Phase I RXI-109 results into context, discussed Pfizer’s (NYSE: PFE) new antisense molecule, and outlined its upcoming plans to move into Phase II clinical trials.

1. Can you put the early results from RXI-109 into context for investors? Why did you choose to target this market? How large is the market? And, how do you plan to break into the market?

These Phase 1 results do a lot more than just confirming that RXI-109 is a safe compound for use in humans. (1) The results actually confirm that our drug indeed works through the highly selective and specific RNA interference mechanism. (2) They confirm that the compound is long acting with statistically significant and dose dependent reduction of CTGF protein 3 months after one single dose, and (4) they confirm that this reduction in protein is preceded by a dose dependent reduction in mRNA levels for CTGF. (5) Finally, these results are the first time ever that the self delivering approach that RXi Pharma has followed is effective in humans, and that it could play a significant role for the translation of the RNAi mechanism into clinical practice.

Our choice to target this market is a rational one. Hypertrophic scars and keloids are medical issues that have very few effective treatments, if any. Beneficial effects can be seen with the naked eye. Clinical studies in skin disorders are less costly than many clinical trials in internal medicine. Abnormal scarring is esthetically not very acceptable, and an important factor in an increasingly affluent society that values external beauty and cosmetic elegance.

With more than 40 million surgical procedures in the USA every year, and assuming that 20 to 25 percent of these patients could be good candidates for a compound like RXI-109, the market potential of the product could easily exceed $1 billion per annum. Breaking into this market should be relatively straight forward, as the core physician groups that would use the product are well known: dermatological and plastic surgeons. In a second wave other surgical specialties will be approached.

2. In light of your Phase 1 results, you may have noticed the results Alnylam (NYSE:ALNY) presented last week for their clinical program. Where do you place their 80 percent reduction in protein in context with your 43 percent reduction in mRNA level?

I was surprised when I noticed that some people have actually tried to compare these 2 compounds. It makes no sense, as it is like comparing apples and oranges. First of all, we have looked at protein levels of CTGF as well as the mRNA levels for that protein; and RXI-109 targets abnormal scarring of the skin. The Alnylam compound is targeting a completely different and genetically altered protein and focuses on amyloidosis in the liver. CTGF is a normal protein that is needed for wound healing, and hence complete silencing of the protein could have a negative consequence on the normal wound healing process. Consequently it is good for RXI-109 not to suppress the CTGF production completely.

In the case of TTR, we are talking about a mutated protein that is causing issues in the liver. The more you can suppress the formation of that protein, the better for the patient. Also, the doses and route of administration are quite different. The Alnylam compound is used systemically at 2.5 mg/kg. Our compound RXI-109 is used intradermally at doses of approximately 100 microgram/kg, i.e. at 25 times a lower dose. Bottom-line a comparison between the 2 does not make much sense.

3. Can you discuss some of the early indications of efficacy from the Phase I trials? It sounds like the mechanism of action has been shown to be successful, so how confident are you going into Phase II trials?

We indeed have shown that the RNA interference mechanism is the way RXI-109 works. Obviously, in Phase 1, we have treated volunteers who did not have abnormal scars. Patients with hypertrophic scars and keloids have very high elevations of CTGF, much more than normal volunteers. Hence we are certainly encouraged that we have a significant effect on the CTGF expression.

Our Phase 2 studies will tell us if such suppressive effects can also be achieved when there is significant overexpression of the protein, and what doses we will have to use in order to achieve a clinically relevant effect in these abnormal scars. The fact that a single dose of RXI-109 still had a significant and dose dependent suppressive effect on CTGF 3 months after administration gives us hope that we should have some interesting clinical observations. You are probably aware of the antisense molecule EXC-001 that blocked CTGF and that has shown nice results in Phase 2 a studies.

4. Pfizer is currently working in Phase 2 on the antisense molecule against CTGF for dermal scarring you mentioned in the previous answer. How does RXI-109 compare to this antisense product?

Although also in this case a comparison is a little bit in the apples and oranges category, at least the disease area and route of administration are the same. There are a number of theoretical and technical reasons why an antisense like EXC-001 and an sd-rxRNA like RXI-109 could be different. The fact is that until today no direct comparisons have been done between the 2 products.

Data presented by Pfizer in a poster suggest that in human Phase 1 studies, EXC-001 was able to suppress mRNA of CGTF for about 30 to 40 percent. They have shown also that this resulted in very relevant clinical benefits for patients after scar revision surgery. We have shown more than 40 percent suppression of the CTGF protein, and have used doses that were somewhat lower than those used for the Pfizer compound. This is obviously encouraging, but I still want to see the results in the target patient population.

5. Can you discuss your commercialization strategy for RXI-109? Do you plan to partner with a larger pharmaceutical company or pursue development independently? What’s the timetable to market in broad terms?

It is early days to discuss commercialization strategy for RXI-109. Something that is quite likely to happen, is that we will look early on for one or more partners for ex-USA. RXi Pharmaceuticals is still a very young company in its current form; hence taking on the world as a market is likely best done in good partnerships with strong commercial organizations in the various geographies. When it comes to the US, co-development and co-marketing are certainly a possibility, but we would also like our shareholders to get the extra benefit in value from our own commercial activities in the biggest market in the world, the USA.

6. Can you discuss other candidates in your clinical pipeline? Aside from RXI-109, what are some other RNA-based therapeutics that you believe hold significant potential for investors?

RXi Pharmaceuticals is well positioned in the RNAi space because of its dominant position in the self-delivering technology for use of siRNAs. We call our compounds sd-rxRNA because of this self-delivering technology; i.e. no need to use various formulation vehicles to bring the compound to the site where it is supposed to act.

We have of course various therapeutic categories we could play in, but, because of the great preparatory work that has been done by our team in RXi, the ophthalmology pipeline really stands out as a unique opportunity, with some attractive developments in preclinical testing (proliferative vitreoretinopathy, macular degeneration and retinoblastoma). Now that we have been able to get RXI-109 ready for transition in Phase 2 clinical testing in patients, we should be able to focus more on advancing our ophthalmology pipeline. Considering the substantial interest the ophthalmology space has received in the last few years, also here some good partnering and co-development opportunities should exist.

7. Where do you see the value of the Opko (NYSE:OPK) assets that RXi acquired a few months ago?

The value of the Opko siRNA assets comes from the patent estate. There are several patented sequences in that estate, several of which have good underlying pharmacological data. Of course, these are predominantly naked siRNAs and as such will be limited in their capability to penetrate into the diseased tissue. The synergy with the RXi technology platform can come from the fact that these known and often potent sequences might be valid candidates for our self-delivering approach. This could further jump-start our pipeline of clinical candidates in the years to come.

8. What would you say to investors interested in buying your stock right now?

I would say that reading about our company, and digging into the understanding of our technology will help new investors to really understand why the RXi approach to delivering RNAi technology is a potential winner on a broad front of therapeutic applications. RXI-109 is a first clinical development candidate that, because of its potential activity in a highly attractive market (skin scarring) has significant potential to create a lot of value. That however is only the surface. The RXi Pharmaceuticals platform has such a broad spectrum of therapeutic possibilities that, over time, it could become a biotech blockbuster of its own. The earlier you get invested into such a company with a potentially transformational platform, the higher the return on investment could be. ?

9. We noticed the reverse split and the application to list on the NASDAQ Capital Markets. Any comments on that?

As you can imagine from the previous comments in this interview, being able to get exposure and interest from large institutional investors is key for a corporation that could become the next large biotechnology company. In order to be on the radar screen of these large institutional investors, a share price as a “penny stock” is not appealing. Our reverse split has been carefully discussed internally and with financial advisors, and the consensus was that doing it at a moment that the Company has shown great progress in their clinical development, and not just before a new financing was the right approach.

With the NASDAQ being the premier technology exchange we felt that an application in parallel with the reverse stock split would underline the intrinsic strength of RXi Pharmaceuticals and provide a clear signal that the Board and the management team of the company are strong believers in the potential of the company going forward.

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