RXi Pharmaceuticals: Extreme Volatility Attracts Traders, But Long-Term Worries Persist

RXi Pharmaceuticals (RXII) is a highly volatile biotechnology stock in which the underlying company has developed a robust self-delivering RNAi-based technology platform. The robust technology platform sd-rxRNA provides a strong foundation to build a leading Immuno-oncology company, with a short-term focus using Adoptive Cell Transfer technology.

This is a development stage company, and as such as been burning cash. Still, there is promise, as sd-rxRNA offers unprecedented flexibility in targeting immunosuppressive pathways with the potential to modulate multiple checkpoint genes in a single therapeutic treatment. There are many potential applications, but the stock continues to suffer:

(Click on image to enlarge)

Source: Yahoo finance

As you can see this is one ugly chart. That said, there have been opportunities in the past month to trade this name successfully:

(Click on image to enlarge)

Source: Yahoo finance

Today the stock is getting hammered, mostly because there was little communication from management after reporting earnings. This comes despite relatively solid results financially showing far less money being burnt than anticipated. Let us discuss.

Briefly, the company doesn’t bring in a dime generally, but a key partner did acquire a $15,000 grant, so we are including this in the top line. However, bear in mind that the top-line will be zero unless there are other funding sources like grants, or product sales. However, the latter is not possible as there are no FDA approved products for this developmental stage company. Therefore, we have to watch for expenses, and then data releases. The stock has suffered as the latter has been lacking. What about expenses?

Research and development expense for the quarter was $1.2 million, as compared with $1.3 million for the quarter ended December 31, 2016. The decrease was due to lower spending on clinical trial-related expenses as subject visits in each of the company's ongoing clinical trials came to an end.

Research and development expense for the year was $5.4 million, as compared with $5.4 million for the year prior. Overall, expenses were consistent year-over-year despite an increase in direct research and development expenses due to the addition of the immuno-oncology program to the company's development pipeline in the first quarter of 2017 with the acquisition of MirImmune, which was offset by a decrease in non-cash stock-based compensation expense. This company was a privately-held biotechnology company that was engaged in the development of cancer immunotherapies.

To keep the company operational, RXi saw general and administrative expense for the year of $4.0 million, as compared with $3.6 million last year. The increase was primarily due to payroll-related expenses, including severance benefits.

When we factor in an income tax benefit of $1.6 million from the MirImmune acquisition, as well as all of the expenses, the company burnt a lot less cash than expected. Net loss for the quarter was $2.0 million, compared with $4.4 million a year ago. Total 2017 loss was $12.5 million, up from $11.1 million a year ago, mostly due to expenses associated with MirImmune.

Looking ahead, we expect more of the same in 2018, but if the company does not deliver real positive data reads, this stock is done. We do know that RXi is seeking to monetize its dermatology and ophthalmology assets through out-licensing or partnerships, but no word on progress has been given. While in 2017 and 2016 the company achieved proof of concept in clinical trials, as such demonstrating the significant therapeutic potential of its self-delivering RNAi platform, it needs more data to support the tech. We will be watching this closely in 2018.