Redx Pharma

All that Jazz: $3m milestone boosts cash and confidence

Update | 7 September 2021

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The initiation of IND-enabling studies for Jazz Pharmaceutical’s pan-RAF inhibitor JZP815 has triggered a $3m milestone payment to Redx Pharma. This milestone provides external confirmation that this novel programme – one of Redx’s three partnership deals – continues to advance towards the clinic with the potential of earning future milestones, further solidifying Redx’s financial resources and supporting increased R&D investment in key assets through to end-2022. This cash runway covers several important value inflection points, including Phase II data for RXC004 its lead in-house oncology programme, and the start of Phase II trials for RXC007 in fibrosis. Ahead of further clinical updates, our rNPV-based valuation is £350.7m, equivalent to 128p/share (86p fully diluted).

Year-end: September 30201920202021E2022E
Revenues (£m)3.1 5.710.410.7
Adj. PBT (£m)(7.5) (9.5)(19.9)(26.2)
Net Income (£m)(4.3) (9.2)(20.5)(26.8)
Adj. EPS (p)(4.0) (5.6)(7.7)(9.4)
Cash (£m)(3.7) 27.531.89.9
EBITDA (£m)(6.2) (7.5)(20.5)(26.7)
Source: Trinity Delta Note: Adjusted numbers exclude share-based payments and exceptionals.
  • Start of IND-enabling studies triggers first milestone JZP815 is a preclinical Pan-RAF inhibitor sold to Jazz Pharmaceuticals in July 2019, in a deal that could see Redx receive up to $203m in development, regulatory, and commercial milestones, plus royalties on net sales. FDA acceptance of the IND (investigational new drug) application will trigger the next milestone. Under a separate collaboration contract, Jazz has funded research and preclinical work carried out by Redx to advance JZP815 to this stage, and this will continue to completion of IND-enabling studies.
  • JZP815 is a potential treatment for RAF-driven tumours  JZP815 is a novel chemical entity that has been designed using Redx’s acknowledged medicinal chemistry expertise to overcome resistance mechanisms associated with use of approved B-RAF selective drugs. These include treatment-emergent resistance (eg with Zelboraf use in melanoma) and tumours insensitive to B-RAF selective drugs due to mutations in other RAF-family kinases. Around one-third of cancers involve mutations that result in uncontrolled signalling in the RAS-RAF-MAPK pathway.
  • Looking through the keyhole Recent milestones from Jazz and AstraZeneca (June 2021 Lighthouse) confirm progress under the respective preclinical out-licencing deals. However, it is the continued progress of the innovative clinical stage in-house programmes, RXC004 (porcupine inhibitor for genetically selected solid tumours) and RXC007 (ROCK2 inhibitor for fibrosis), that should, if successful, transform the business over the medium term. Presentation of RXC004 Phase I monotherapy data at ESMO (17-21 September), and the Virtual R&D Day on 11 October, should provide additional insights on the status and promise of these assets.
  • rNPV valuation of £350.7m (128p/share)  We maintain our rNPV-based SOTP valuation of £350.7m, or 128p/share (86p fully diluted), based on conservative assumptions, ahead of a number of upcoming pipeline catalysts.

Update

7 September 2021

Price79.5p
Market Cap£218.5m
Enterprise Value£186.7m
Shares in issue274.8m
12 month range46.98-93.70p
Free float11.0%
Primary exchangeAIM London
Other exchangesN/A
SectorHealthcare
Company codesREDX
Corporate clientYes

Company description

Redx Pharma specialises in the discovery and early clinical development of small molecule therapeutics, with an emphasis on oncology and fibrotic disease. Typically, these are progressed through proof-of-concept studies and then partnered for further development. The strategy has been validated by several collaborations.

Analysts

Lala Gregorek
lgregorek@trinitydelta.org
+44 (0) 20 3637 5043

Franc Gregori
fgregori@trinitydelta.org
+44 (0) 20 3637 5041

Exhibit 1: Summary of financials
Source: Company, Trinity Delta Note: Redmile/Sofinnova Convertible Loan Note has August 2023 conversion date, with a 15.5p conversion price, equating to a potential 96m of new shares.

 

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