RXi Pharmaceuticals to Write Off and Spin Out RNAi Assets

If you just blinked, you may have missed it: RXi Pharmaceuticals, now re-named Galena Biopharma, is to be a cancer vaccine company. As you may remember, when RNAi was still a hot technology in 2007, the parent company of RXi, small molecule biopharma CytRx, under the helm of corporate maverick Steven Kriegsman, acquired and then spun out RNAi assets in the form of RXi to be a pure-play RNAi Therapeutics company and cash cow for CytRx.

The financial details provided today on the transaction reveal that RXi has pretty much written off the value of its RNAi assets, chiefly among them the self-delivering RNAi trigger platform and the anti-scarring candidate RXI-109 which is about to enter clinical development, with the incoming investors taking over the lion's share of the company (83% of the shares) for their $9.5M in cash. Before RXi decided to be a cancer vaccine company, that is before the acquisition of Apthera in April, the then pure-play RNAi Therapeutics company had about 20 million shares outstanding, $10M in cash and was trading between $1.0-1.5, giving it an enterprise value of $10-20M. 5 months later, the net value of the same assets has become perhaps $2M.

On the other hand, the revaluation of the seemingly dead breast cancer vaccine candidate NeuVax was remarkably positive. From a value of essentially zero, it is now largely responsible for sustaining a market cap of ~$40M. Subtract about $20 in contributed cash, this still leaves a remarkable gain of ~100% for the asset (ignoring the value of the warrants and milestones). Having said that, it was definitely not the shareholders that profited from all that. Indeed, all these transactions make it difficult to follow where the money ended up.

For RNAi Therapeutics, there is still a hopeful message in all of this. The $9.5M in new investments is considerable. The confidence seems justified by the fact that RXi has found itself a nice niche by focusing on interesting self-delivering RNAi triggers, particularly for local and localized gene knockdown. The anti-scarring program also has potential to be an opportunity for the RNAi Therapeutics field to show relatively rapidly its clinical potential, especially since it can be measured against a promising late-stage antisense compound by ISIS satellite company Excaliard, EXC 001. So on the face of it the new investors seem to have gotten a good deal, although it is unclear how toxic the $45M in potential milestones to Galena are.

Today’s news shows how arbitrary the valuations of pre-clinical biotech assets can be and how fashion trends and promotion are often their main drivers. I’m so ready for the new season.