Regado Biosciences Should Trade Up Over 30% within 3-5 Months

Sometimes Wall Street just needs a bit help to see all the free money around it.  The current share price of Regado Biosciences is one example of that.

As discussed in an earlier blog entry, aptamer company Regado Biosciences recently was forced to permanently hold development of their only asset to speak of, the antithrombotic Revolixys kit, aka REG1.  As a result of that, the company disclosed yesterday that it would wind down all activities associated with this program and conduct a strategic review of the company’s future which the company says ‘could maximize returns for Regado shareholders in the near future’.  

At the end of that re-organization period, projected to be at the end of 2014, the company should have $50-55M in cash and no liabilities to speak of.  The company has 34 million shares outstanding, and given its spectacular 90% drop in valuation over 6 months, there is little risk that this will be diluted much from the exercise of options and warrants.

In other words, the company will have $1.47-1.62 cash per share and is currently trading at $1.17 per share.  That is, the shares are trading at a 20-28% discount to the cash it will have when it can start over its biotech adventure with a clean slate (meaning the shares would have to rise 26-38% to equal cash on hand). 

This 26-38% upside is my base case that I am confident that RGDO will achieve over the next 3-5 months with relatively little risk- just as the result of investors realizing that the discount does not make any sense.  The upside should be much more if management and the Board could find a new biotech asset that can generate some excitement. 

The major risk to this free money scenario would be that class action lawsuits by disgruntled shareholders (who, of course, knew all about the risks involved in biotech investing) will cost the company a significant amount of cash, but in this instance it should be relatively easy to thwart off the ambulance chasers given all that had been known about Revolixys kit, including the rare acute immune reactions seen in phase II.

(Following paragraph added on Sep26, 2014)  A lesser risk (because that only happens once in a blue moon in biotech) to the numbers would be in case the company actually decided to return its cash to shareholders and close up shop.  Under that scenario, the Series F Convertible Preferred Stock Holders would claim and thereby take off $10M from the cash balance.  

You would not believe it, but with the valuations of small biotech companies being quite depressed right now, it is a buyers’ market again for numerous assets.  Given that in similar situations (lead drug has failed, pipeline otherwise weak), biotech companies like Celsion and Oncothyreon have recently opted for RNA Therapeutics assets, and not least because Regado Biosciences is already an RNA Therapeutics company, chances are that the asset will be an RNA Therapeutics one.

Maybe Marina Biotech would be an interesting shop to visit, given that it has a lot of different technologies on offer, has a history of giving away their assets for cheap, and since Marina could use some cash.  Another target might be the RNAi assets of Novartis.

Disclosure: I had been long RGDO at sub $1, but went longer still today after management provided more clarity last night on the Revolixys close-down costs.  It certainly beats the 0.2% interest you might get these days in a savings account. But remember: do your own due diligence before investing.

Regado Shock Raises Questions for Oligonucleotide Therapeutics Field

Ave biotech investor, morituri te salutant.

Last week, aptamer company Regado Biosciences imploded in a spectacular fashion after it had to permanently terminate a large pivotal phase III trial of its lead therapeutic program, REG1.   It followed notification that an unacceptable rate of serious anaphylactic adverse events had occurred.

Aptamers are oligonucleotides that recognize their protein targets based on their 3-dimensional shape, instead of sequence complementarity as is the case with most other oligo-based mechanisms of action.  

Because REG1 involves oligonucleotides and pegylation chemistry, the event warrants the close attention of the wider oligonucleotide therapeutics field.  This blog tries to summarize what is known about REG1 and the adverse events and aims to pinpoint potential safety landmines as well as suggest strategies to circumvent them for the benefit of ongoing and future oligonucleotide drug candidates.

REG1 a 2-component system for the tight regulation of hemostasis

The bane of anticoagulant drug development is that too much of it and/or inhibiting clotting at the wrong drug targets can lead to great morbidity and death due to uncontrolled bleeding.  REG1 aims to address this catch 22 by providing an oligonucleotide-based aptamer that binds and therefore inhibits a key regulator of the clotting cascade, Factor IXa, but with the twist that the inhibition can in turn be turned off at will by administering an antisense oligonucleotide that has sequence complementary to that of the aptamer.  This disrupts the 3-dimensional shape of the aptamer thus abrogating its ability to bind Factor IXa.

The aptamer (pegnivacogin) itself consists of a heavily modified 31mer oligonucleotide with lots of 2’-O-methyl and 2’-O-fluoro residues (~10kDa molecular weight).  However, the bulk of the drug is made of a 40kDa polyethyleneglycol (PEG) moiety appended to the 5’ end of the oligonucleotide.  

The antisense oligonucleotide functioning as the antidote meanwhile is an unassuming 15mer 2’-O-methylated RNA, hardly something that would catch the eye of an oligonucleotide toxicologist.

The reason why the aptamer had been modified with PEG was to extend its circulation half-life.  What otherwise would likely be a half-life of a few minutes for a simple 2'-O-methyl/fluoro oligonucleotide, obviously of little use for the intended regulation of blood clotting, could thereby be extended to over 24 hours when administered intravenously (à REG1) or an even more impressive ~1 week when injected subcutaneously (àREG2).

Serious allergic events in REGULATE PCI study

The REGULATE-PCI study that has just been terminated aimed to enroll approximately 13000 (!) subjects undergoing percutaneous (through the skin) coronary interventions (PCI) to unclog arteries around the heart.  Because things tend to clot around devices introduced into the human body and in the presence of physical stresses such as clot disruptions, such procedures have to be performed with the concurrent use of anti-clotting agents (anticoagulants).

The study was terminated when after about one quarter of the target enrolment (~3200), an imbalance in what the company described as ‘serious allergic adverse events’ in its press release was noted by the body tasked with ensuring the safety of clinical trial participants (DSMB).

Unfortunately, I was not able to retrieve a replay of the conference call held by the company to discuss the trial termination to gather more information on the nature of the adverse events.

It is, however, logical to assume that the serious allergic events are the same that had already been noted in the phase II RADAR trial.  Specifically, 3 of the ~500 subjects that received REG1 had allergic reactions ‘shortly’ after infusion of the pegnivacogin aptamer, 2 of which were considered ‘serious’ and in fact led to a stopping of the phase II trial after it was deemed that the study already had enough statistical power.  The affected patients were successfully managed with antihistamines and steroids (Povsic et al. 2013).

Immune reactions not foreign to Oligonucleotide Therapeutics

Immune stimulation, of course, is also the main safety risk of Oligonucleotide Therapeutics as a class.  We are all familiar with injection site reactions, alternative complement activations and attendant cytokine elevations, antibody generation to phosphorothioated oligonucleotides etc.  Some of them, e.g. TKM-Ebola most recently, have led to Clinical Holds or the discontinuation of drug candidates.  On the other hand, thousands of subjects have been given oligonucleotide therapeutics, some for years, with apparently acceptable safety profiles.

So is the oligonucleotide component of pegnivacogin the culprit for the ‘serious’ allergic reactions?

After reviewing the data, the safety issue is unlikely due to the aptamer itself.  A naked, in this case 2’-O-methylated, 2’-fluoro oligonucleotide alone is expected to be very safe, at least in terms of acute toxicity.  This conclusion can be drawn for example from the administration of naked, non-phosphorothioated oligonucleotides, including the systemic programs of Quark Pharmaceuticals. 

On the other hand, the reason for the apparent safety of unformulated oligonucleotides could be simply because such an oligonucleotide is rapidly excreted into urine and therefore has little chance to be toxic.  This is, however, unlikely since the allergic reactions were reported to occur shortly after drug administration, at a time when there would still be considerable concentrations of naked oligonucleotides left in circulation, therefore allowing for such a comparison.

It is interesting that only REG1 has been terminated so far, but not REG2.  Although this shoe could yet drop due to an abundance of caution, it suggests that the serious allergic events are dependent on the intravenous route of administration, a route of administration that is more generally plagued by immune-related ‘infusion reactions’ from small molecules to large biologics.

...enter Omontys...

This brings me to the topic of Omontys, aka peginesatide.  Omontys, of course, is a pegylated peptide that had to be withdrawn from the market 18 months ago following similar (rare) allergic events, including fatalities due to anaphylactic shock.  

Like pegnivacogin, the pegylation in Omontys had a molecular weight of 40kDa.

Like pegnivacogin, there were both intravenous and subcutaneous versions of peginesatide, but only the intravenous version was associated with the severe allergies that occurred shortly after drug administration.  

Like pegnivacogin, the allergies only occurred during the first administration of peginesatide (note: for pegnivacogin there is just 1 administration).

So taken together with the well-known hypersensitivity often seen in response to PEG, the evidence strongly points towards PEG as the culprit, not the oligonucleotide.

Pegylation widely used in RNAi Therapeutics

This unfortunately does not entirely exonerate oligonucleotide therapeutics.  The reason is that pegylation is a widely used tool in the biotech industry, and within Oligonucleotide Therapeutics, RNAi Therapeutics has made ample use of it and promises to support advances in delivery, especially beyond the liver. 

This raises the question of whether such problematic compounds can be spotted earlier.  If not, or if the decision is to continue development, can simple allergy tests identify the subjects that should not get the drug, or would anti-histamine and/or steroid pre-treatment be practical and acceptable?  Or is it even just a manufacturing/quality control issue or a matter of the molecular weight of PEG? I’m sure some of these questions sound familiar to the readers of this blog, and I expect that the field will learn over time if and when to use these and other strategies. 

As both fearlessness and fear can be fatal to drug development and investment returns, it is worth reminding ourselves here that numerous pegylated drugs have been approved and are being commercialized.  Also, there are various degrees of allergic events, some more serious than others.  

Finally, as a former Affymax (and Lehman Brothers in case you wanted to know) investor who lost a few feathers, I and Affymax just were incredibly unlucky.  It is my contention that Omontys would be widely used today if it had not been for the conservative market entry strategy by Omontys-distributor Fresenius Medical Care which involved the close monitoring of the first commercial Omontys patients which picked up the very rare events.  

Also, why simple strategies such as the use of anti-histamines or just going with the subcutaneous version were not attempted to salvage Omontys remains a mystery to me.  Blame it on the damaged goods theory.

  

For the sake of Regado investors and medicine, let’s hope that the parallels end here and Regado won’t follow in the footsteps of Affymax to bankruptcy and class action lawyers.