RESX: Update on Third Quarter Financials
By: David Bautz, PhD & Nisha Hirani, MD Financial Update On November 12, 2015, RestorGenex Corp. (RESX) announced financial results for the third quarter of 2015. As expected, the company did not report any revenues. Net loss for the quarter was $13.2 million, or $0.71 per share, and was comprised of $0.7 million in R&D expenses and $1.5 million of G&A expenses. The primary reason for the increase in net loss was an $11.1 million non-cash impairment of goodwill during the third quarter of 2015. Excluding this non-cash charge, we calculate the net loss for the quarter to be $2.2 million, or $0.12 per share. The company had approximately $14.6 million in cash and cash equivalents at the end of the third quarter of 2015. This should be sufficient to fund operations into the second half of 2016. Total burn for the third quarter was approximately $1.9 million and the company did not raise any money during this time period. There are approximately 18.6 million shares currently outstanding, along with approximately 3.0 million stock options (with a weighted average strike price of $4.27), and approximately 4.8 million warrants (with a weighted average strike price of $8.22). RES-529 Development Plans RestorGenex is planning to develop RES-529 as a treatment for both wet AMD and GBM. The company plans on finalizing the CMC work of the active pharmaceutical ingredient (API) so that final IND-enabling studies can be performed in 2015. This will enable the filing of the IND for both indications in the first half of 2016. RES-440 Development Plans RES-440 has a number of advantages over currently available acne therapeutics including a short half-life, an inactive metabolite (to avoid systemic side effects), a melting point very near body temperature making it possible to penetrate into the pilosebaceous unit, and its stable at skin pH. RestorGenex is planning to complete preclinical and toxicology studies to enable an Investigational New Drug (IND) application to be filed in 2016. The company will then initiate Phase 1/2 clinical trials to study the safety and efficacy of RES-440. Differin® was approved with a single 12-week study involving 653 patients, thus RestorGenex could potentially be ready to perform a Phase 3 study in 2017 and file the U.S. NDA in 2018. If all goes well, RES-440 could be ready for commercial launch in 2019. Conclusion Although the RestorGenex share price is down nearly 60% since our last update, we believe this presents investors with an even more compelling long-term investment opportunity. RestorGenex currently has a market cap of approximately $10 million. The company currently has approximately $14.7 million in cash and cash equivalents as of September 30, 2015. Since clinical trials are not likely to begin until late in 2016, we believe the current cash position will be enough to complete the requisite IND enabling studies, however the company will most likely need to raise money at some point in the first half of 2016 to carry the company beyond trial initiation and into 2017. The company’s current valuation is perplexingly low seeing as how RestorGenex is targeting three multi-billion dollar indications in wet AMD, GBM, and acne with strong preclinical data. As evidenced by the recent launch of Regeneron’s Eylea®, a successful wet AMD treatment can generate revenues in excess of $1 billion shortly after approval. With the limited treatment options for GBM, a successful therapeutic could also potentially generate over $1 billion in peak revenues, as Temodar® did before losing patent protection. Lastly, a differentiated acne therapeutic product, RES-440, is a potential $450 million opportunity. The extremely low valuation for RestorGenex is most likely due to the fact that the company will need to raise additional capital early next year. If the company raises $10 million at $0.50 per share, that will add 20 million shares to our fully diluted share count, which results in a target price of $3.50. Even with a lower target price, investors with a long time horizon have the opportunity to pick up shares in the company at a significant discount to our fair value. While an investment in an early stage biotechnology company is very high risk, with multiple high revenue opportunities, an investment in RestorGenex has an enormous potential return. Follow Nisha On Twitter @HiraniMD READ THE LATEST FULL RESEARCH REPORT HERE SUBSCRIBE TO ZACKS SMALL CAP RESEARCH to receive our articles and reports emailed directly to you each morning. Please visit our website for additional information on Zacks SCR and to view our disclaimer.
With Phase 1/2 trials set to begin in 2016, we estimate that Phase 3 studies would not begin in either indication until 2018, with an NDA filing likely in 2020 and commercial launch in 2021.
For wet AMD, two Phase 1 clinical trials have been performed with RES-529. In the first company-sponsored study (Protocol P52901), fifteen patients were injected intravitreally with varying doses of RES-529 from 0.004 mg up to 0.5 mg. In the second study (Protocol 11-EI-0066), sponsored by the National Eye Institute, five patients refractory to anti-VEGF treatment were dosed with subconjunctival injections of 2 mg once a month for three months (Dalal et al., 2013). Both studies showed RES-529 to be well tolerated with no serious adverse events. For the next step in development as a treatment for wet AMD, a Phase 1/2 clinical trial will be performed in 2016 to assess the safety, tolerability, and clinical efficacy of RES-529. In addition, the maximum tolerated dose will be established for subconjuctival administration.
For GBM, a Phase 1/2 clinical trial will be performed in 2016 to assess the maximum tolerated dose in GBM patients along with early efficacy signals. The company also has plans to initiate clinical trials in other oncology indications, most likely prostate, lung cancer, and breast cancer, using the maximum tolerated dose established in the GBM trial.
