Redx Pharma

Receipt of $4m milestone for RXC006 progress

Lighthouse | 17 June 2021

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  • Redx Pharma has received a $4m milestone from AstraZeneca reflecting continued progress with RXC006. This payment is part of a potential $17m package that will accrue until RXC006 starts clinical trials. The out-licencing agreement, struck in August 2020, is on attractive terms for such an early-stage asset. Redx Pharma could be eligible for a further $360m of clinical and commercial milestones, in addition to mid-single digit royalties on net sales.
  • RXC006 is a porcupine inhibitor in development for fibrosis indications. The Wnt pathways are critical elements in maintaining adult cell homeostasis, including wound healing and repair functions. Wnt is increasingly recognised as an attractive albeit challenging drug target, with a growing interest in these pathways. A wholly-owned and unrelated porcupine programme, RXC004, is being developed by Redx Pharma in oncology; this is completing Phase I studies and is expected to start Phase II monotherapy and combination trials in H221.
  • We believe AstraZeneca will develop RXC006 initially for IPF (idiopathic pulmonary fibrosis) as the preclinical data looked particularly promising. Assuming progress is maintained, RXC006 could initiate Phase I trials during H221. This would trigger the payment of the balance of the $17m preclinical payments. If the early IPF studies are positive, we expect AstraZeneca to broaden the development programme into other significant and commercially attractive fibrosis indications.
  • The out-licensing of RXC006 was the result of Redx Pharma’s strategy to actively manage the many development opportunities that it has. This deal, together with the agreements with Jazz Pharmaceuticals (pan-RAF and Ras/Raf/MAPK inhibitors), has de-risked Redx Pharma’s early-stage pipeline yet still retains material commercial upside if successful.

Trinity Delta view: The $4m AstraZeneca milestone is an apt reminder of the momentum being generated and the quality of the investment case. Redx Pharma has an acknowledged expertise in medicinal chemistry which underpins its discovery platform and has created, in our view, an attractive, and well balanced, clinical portfolio. The two lead in-house assets, porcupine inhibitor RXC004 in oncology and ROCK2 inhibitor RXC007 for fibrosis indications, are both in the clinic and on track to progress to key proof of concept trials. The partnered assets are also progressing towards the clinic as evidenced by partner-derived revenues such as this RXC006 milestone. A solid balance sheet with £39.9m in cash resources means Redx Pharma is funded through to end-2022; a period that covers a number of important value-inflection points. Our rNPV-based valuation, based on conservative assumptions, is £350.7m, equivalent to 128p/share (86p fully diluted).

Lighthouse

17 June 2021

Price58.5p
Market Cap£160.2m
Primary exchangeAIM London
SectorHealthcare
Company CodeREDX
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

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