Redx Pharma

Laying the foundations for further delivery in 2023

Lighthouse | 20 December 2022

Share this note

  • Redx reported FY22 results (12 months to 30 September 2022) which included revenues (largely non-cash recognition of milestone receipts) of £18.7m (FY21: £10.0m). R&D costs remained tightly controlled at £28.6m (FY21: £24.4m) despite significant pipeline progress, with G&A of £10.2m (FY21: £6.5m). This led to an operating loss of £16.3m (FY21: £19.7m) and a net loss of £18.0m (FY21: £21.5m).
  • End-September 2022 cash was £53.9m (30 September 2021: £29.6m), which includes proceeds from the June 2022 £34.3m equity placement and a total of $24m (£18.1m) in milestones received during the period, including a $5m milestone from partner Jazz Pharmaceuticals in June. These funds, plus modest risk-adjusted milestones, should be sufficient to fund planned operations through key data points across the clinical pipeline into 2024.
  • Important data readouts for lead asset RXC004 remain on track and continue to be expected during 2023. RXC004 is an innovative porcupine inhibitor for Wnt-ligand dependent cancers. Two Phase II trials are ongoing: PORCUPINE in genetically selected microsatellite stable metastatic colorectal cancer (MSS mCRC) and PORCUPINE2 in genetically selected pancreatic and unselected biliary cancer. Monotherapy data from PORCUPINE2 are expected H123 in biliary cancer and H223 in pancreatic cancer. However, the true indication of RXC004 likely efficacy will arise from combination studies with checkpoint inhibitors, with data expected H223 from PORCUPINE2 in biliary cancer (+ Keytruda) and the PORCUPINE monotherapy and combination arms (+ Opdivo) in H223. Supply of Keytruda for PORCUPINE2 has been recently secured through an agreement with MSD (Merck & Co., Inc.).
  • A greater understanding on the potential for Redx’s lead ROCK inhibitor, RXC007, should also be gleaned during 2023, with a Phase IIa trial in IPF (idiopathic pulmonary fibrosis), a severe lung condition, recently initiated and data expected during H223. Preclinical data suggest ROCK2 inhibitor RXC007 could potentially be disease altering, and these data should provide insights on its potential in IPF and other fibrotic lung diseases. Gastro-intestinal pan-ROCK inhibitor RXC008, potentially for fibrostenotic Crohn’s disease, is expected to be granted IND/CTA clearance for progression into the clinic by end-2023 with patient enrolment starting in 2024.

Trinity Delta view: FY22 was another year of delivery, with two wholly-owned Redx assets now in Phase II trials: RXC004 in solid tumours, and RXC007 in IPF, a fibrotic lung disorder. Both are expected to yield key data during 2023, notably H223, which will provide important insights into their respective positioning and commercial potential. In addition, the discovery engine continues to generate pipeline candidates and Redx is aiming to generate three INDs by the end of 2025; this includes RXC008 which is set to enter the clinic in the near-term. Cash of £53.9m at end-September should be sufficient through key value inflection points expected in H223. Our valuation is £458m (or $596m), or 138p per share.

Lighthouse

20 December 2022

Price60.0p
Market Cap£200.9m
Primary exchangeAIM London
SectorHealthcare
Company CodeREDX
Corporate clientYes

Company description

Redx Pharma specialises in the discovery and development of small molecule therapeutics, with an emphasis on oncology and fibrotic diseases. It aims to initially progress them through proof-of-concept studies, before evaluating options for further development and potential value creation.

Analysts

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

Philippa Gardner
fgregori@trinitydelta.org
+44 (0) 20 3637 5042

Disclaimer

Trinity Delta Research Limited (“TDRL”; firm reference number: 725161), which trades as Trinity Delta, is an appointed representative of Equity Development Limited (“ED”). The contents of this report, which has been prepared by and is the sole responsibility of TDRL, have been reviewed, but not independently verified, by ED which is authorised and regulated by the FCA, and whose reference number is 185325.

ED is acting for TDRL and not for any other person and will not be responsible for providing the protections provided to clients of TDRL nor for advising any other person in connection with the contents of this report and, except to the extent required by applicable law, including the rules of the FCA, owes no duty of care to any other such person. No reliance may be placed on ED for advice or recommendations with respect to the contents of this report and, to the extent it may do so under applicable law, ED makes no representation or warranty to the persons reading this report with regards to the information contained in it.

In the preparation of this report TDRL has used publicly available sources and taken reasonable efforts to ensure that the facts stated herein are clear, fair and not misleading, but make no guarantee or warranty as to the accuracy or completeness of the information or opinions contained herein, nor to provide updates should fresh information become available or opinions change.

Any person who is not a relevant person under section of Section 21(2) of the Financial Services & Markets Act 2000 of the United Kingdom should not act or rely on this document or any of its contents. Research on its client companies produced by TDRL is normally commissioned and paid for by those companies themselves (‘issuer financed research’) and as such is not deemed to be independent, as defined by the FCA, but is ‘objective’ in that the authors are stating their own opinions. The report should be considered a marketing communication for purposes of the FCA rules. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and it is not subject to any prohibition on dealing ahead of the dissemination of investment research. TDRL does not hold any positions in any of the companies mentioned in the report, although directors, employees or consultants of TDRL may hold positions in the companies mentioned. TDRL does impose restrictions on personal dealings. TDRL might also provide services to companies mentioned or solicit business from them.

This report is being provided to relevant persons to provide background information about the subject matter of the note. This document does not constitute, nor form part of, and should not be construed as, any offer for sale or purchase of (or solicitation of, or invitation to make any offer to buy or sell) any Securities (which may rise and fall in value). Nor shall it, or any part of it, form the basis of, or be relied on in connection with, any contract or commitment whatsoever. The information that we provide is not intended to be, and should not in any manner whatsoever be, construed as personalised advice. Self-certification by investors can be completed free of charge at www.fisma.org. TDRL, its affiliates, officers, directors and employees, and ED will not be liable for any loss or damage arising from any use of this document, to the maximum extent that the law permits.

Copyright 2022 Trinity Delta Research Limited. All rights reserved.