RXi Pharmaceuticals Could Be Much More Than Skin Wound Healing

RXi Pharmaceuticals today commenced a secondary offering setting it on course to raise ~$10M, enough to finance the company for another year while expanding its pipeline and technology.  It could thus mark a new chapter in the life of this company which had shoe-boxed itself into a single-product (RXI-109 for dermal wound healing) company following a toxic 2012 financing that gave Tang Capital Partners de facto control over the company (pro tip: when you see the likes of Tang or Deerfield getting involved, it usually is not to the benefit of common stock holders). 

The news this morning that the preferred stock overhang (àTang Capital Partners) had finally been cleared, then paved the way towards the financing (amount and pricing to be determined).  

With RXI-109 winding its way through phase II studies, it became clear that RXi had to open itself up to new opportunities enabled by its promising self-delivering RNAi platform.  The financing will initially allow RXi to develop RXI-109 also for ocular (retinal and corneal) scarring-related indications such as wet AMD and cataract surgery.  First eye-related clinical trials with self-delivering RNAi triggers are expected to commence later this year.

The eye is an interesting application of sd-RNAi technology not only for the lucrative eye disease market (both genetic and age-related of considerable unmet medical need), but also because they seem to be able to penetrate throughout the eye (see image) whereas in the skin, distribution currently is limited to areas close to the injection site barring new delivery breakthroughs (patches, creams and the like).  In addition to cholesterol, it may also be interesting to test other ligands such as Vitamin A and E for enhanced uptake into certain ocular cell types.

Lots of unexplored potential

Beyond the skin and eye, self-delivering RNAi strategies hold considerable promise for other tissue targets, both by direct/local and systemic delivery.  In terms of local delivery, I would be highly interested in the biodistribution of intrathecally administered sd-RNAi triggers in non-human primates.  This is because of their long phosphorothioated single-strand overhang and thus similarity to phosphorothioate antisense oligonucleotides which are starting to show amazing results in the clinic for CNS applications (watch out for update on the infant ISIS-SMNRx study by Isis Pharmaceuticals).

In terms of systemic delivery, sd-RNAi chemistry and structure may synergize well with conjugate-RNAi approaches, both in their simple (--> Alnylam GalNAc-type) and more refined form (--> Arrowhead DPC-type).  Even without further modification, RXi-type self-delivering RNAi has shown surprising knockdown efficacy in models of pre-eclampsia as shown by respected UMass scientists Melissa Moore and Anastasia Khvorova (formerly of RXi Pharmaceuticals).  

If RXi can get the backing from serious biotech investors and eventually a new management fit to lead a modern biotechnology company, the current $16M market valuation (for RXI-109 in the clinic for dermal scarring and soon in the eye; self-delivering platform potential; stake in MirImmune) of the company could make it an irresistible investment opportunity.  If management, however, continues to dig in their heels and refuses to listen to outside advice chances are that the financial death spiral will continue. 
   

Suspicious shorting into financing

It used to be common biotech practice that investors-in-the-know were allowed to short into financing resting assured that the offering will allow them to cover at a lower share price.  It is therefore remarkable that in the days and weeks before the financing, the short interest has sky-rocketed from virtually none to around 10% of the float and possibly much more by now due to the delays in reporting short interest.