A pending breakthrough for Diabetes patients? Resverlogix Phase III trial progressing

Resverlogix (RVX.TO or RVXCF) is a Canadian biotech company based in Calgary that has developed a compound called Apabetalone that is currently in a Phase III trial for patients with Diabetes Mellitus.

Diabetes is being called an epidemic, and in our increasingly sedentary western world experts are projecting that it will get worse.  Like cancer pretty much everyone knows of someone who is diabetic.

According to the American Diabetes Association over 29 million people in the United States had the disease in 2012 (LINK).  And the International Diabetes Federation put the global number in 2015 at 415 million,  projected to climb to over 640 million (LINK).  In Canada 11 million people are living with Diabetes or Pre-Diabetes according to Diabetes Canada (LINK).  

Thankfully Diabetes is a treatable condition due to the discovery of Insulin by Canadian Dr. Frederick Banting and his team at the University of Toronto in 1922.  But while Insulin is a treatment, it is not a cure, and Diabetics have a number of health concerns to deal with while taking insulin to regulate the level of blood sugar.

One of the biggest concerns for Diabetics, if not the biggest, is Cardiovascular Disease (CVD), especially for older individuals. 

According to the American Heart Association at least 68% of Diabetics over the age of 65 die from some form of Heart Disease and 16% from Stroke, (LINK).  Even for those who are not seniors the risk is high, with the above linked AHA site noting that among adult diabetics the risk of CVD is two to four times higher. And that is regardless of how well diabetics control their blood sugar.

Obviously Cardiovascular disease is a major concern for those with Diabetes, especially those with Diabetes Mellitus which is simply the scientific term for those with full blown insulin dependent diabetes.  Most often its simply referred to as Diabetes.

While insulin is vital in controlling blood sugar levels, the incidence of cardiac events and strokes is a huge and as yet unresolved problem.    

The occurrence of Major Adverse Cardiac Events (MACE) is what Resverlogix is attempting to address with their lead compound, called Apabetalone or RVX-208.  Based on the results from earlier trials Apabetalone demonstrated a 55% "Relative Risk Reduction" (RRR) of  "Major Adverse Cardiac Events" (MACE) in patients suffering from Cardiovascular Disease.  And in patients with Diabetes Mellitus the RRR of MACE was 77%. (LINK)

How does Apabetalone work?  Resverlogix is involved in the relatively new field of Epigenetics.  For those who aren't linguists, the word "Epi" is Latin and it means above.  Thus Epigenetics means above the genetic level and it involves what are called Readers, Writers and Erasers.  If you think of it in terms of computers, genes are the hardware and epigenetics represents the software.  

Those wanting a detailed description of how Apabetalone works, I'll invite you to watch the following video which explains it in detail.

Based on results from earlier phase II trials Resverlogix is currently running a Phase III trail called BETonMACE.  The trial has been running for almost a full year and a half now and is:  Double Blind, Randomized, Placebo Controlled and is running in multiple centers.  A full description is available at ClinicalTrials.Gov (LINK).

The trial is being tracked by an independent Data Safety Monitoring Board which has given positive recommendations for the trial to continue without modifications on three separate occasions, the most recent coming on March 17th of this year (LINK).  Of note is that no safety or efficacy concerns were identified. The trial is event based and will be deemed completed once at least 250 Major Adverse Cardiac Events have occurred.  

Obviously a breakthrough of this nature, significantly reducing the risk of Major Adverse Cardiac Events for those with full blown Diabetes, in of itself this would be a major achievement.  However Apabetalone may have application for other disease indications as well.  

The company recently reported a positive meeting taking place with the FDA for the design of a proposed Phase 2a trial for patients with Chronic Kidney Disease, or CKD for short.  (LINK)  And third parties have found potential applications for Apabetalone for a rare form of Muscular Dystrophy and Neurodegenerative Eye Disease. (LINK)

There may also be applications with diseases like Alzheimers and Thrombosis and quite possibly more.  Most of the diseases either undergoing trials right now, or with the potential for application, they lean heavily toward older individuals and with our ageing population the market would be massive if they succeed in my view.

I don't think its overstating things to say that Apabetalone has "blockbuster" potential, and that's based simply on reducing the risks of Major Adverse Cardiac Events in patients with full blown Diabetes, its a huge unmet need.  And that's to say nothing of all the other indications that might bear out in clinical trials.

Given the potential I don't think it would be unreasonable to expect Resverlogix to have a Market Capitalization (MC) in excess of $1 Billion USD.  That isn't the reality however, the company has a MC of less than $250 million and that's in Canadian Dollars, with RVX.TO having its most recent close at $2.30.  In the US the stock trades OTC under the symbol RVXCF and sits at $1.72 USD with the market cap in American Dollars coming in around $185 million.

Why so low?  There are a number of reasons in my opinion, the biggest being uncertainty.  It is said that nature detests a vacuum, well so does the market.  With stocks though its not a vacuum as such, but uncertainty.  Uncertainty that can create opportunity if successfully addressed. In my opinion there are two major reasons for the low valuation, and they both revolve around money.

The first reason is a loan with Citi-Bank for $68.8 million which is due this coming August. The company must satisfy this obligation in some manner in the next few months.  If they default the loan has been guaranteed by Resverlogix's biggest investor Eastern Capital which is the investment arm of billionaire Kenneth Dart.  The collateral provided to Eastern is the patents and intellectual property of the company.  The company's CEO Donald McCaffrey has said they are looking at several different avenues including a secondary offering, licensing/partnerships or a loan extension.

The second reason is closely tied to the first, and that is the need for money....not just to satisfy the loan but to further finance the company in order to complete the Phase III BETonMACE trial as well as clinical work on Chronic Kidney disease, and any other indications the company wishes to pursue.

If BETonMACE succeeds though its my opinion that money will no longer be a concern.

The lack of financing represents a material uncertainty, and in my opinion it is the major stumbling block to Resverlogix attaining a much higher market cap.  However it should be noted that despite these uncertainties RVX has been trending higher over the past year.  As recently as this past summer shares of RVX.TO could be bought for somewhere in and around $1.10 to $1.30 per share. Obviously those who've been buying and pushing the share price higher, they're buying in spite of the financial uncertainty.  Here is the 1 year chart which shows the stock trading close to its 52 week high.

I will end things here with a special note.  If this is the first you're learning about Resverlogix I would strongly advise against making any investment decisions based on anything written here, I wrote this blog piece for informational purposes only and as a shareholder any opinions expressed are obviously biased.  Anyone considering an investment in RVX or RVXCF, I advise verifying everything I have provided and to conduct further and extensive research. I strive to ensure that everything I provide is accurate however I can make no warranty that there are no errors.

Consulting with an investment professional is always the best course of action for those lacking the requisite knowledge and expertise.

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