Streamlined, focused and good value

Redx Pharma (REDX) is a clinical-stage R&D company focused on drugs targeting oncology and fibrotic disease. 2018 was a year that reset the benchmarks – new management team, restructured organisation focused on two therapeutic areas, and a clean balance sheet with £6.5m cash. 2019 should be a busy year for the company, with several major milestones expected. RXC004, is due to re-start a Phase I/IIa trial for cancer with a revised formulation and dosing schedule. RXC006 has been nominated as the first development candidate in the
anti-fibrotic programmes for progression to proof-of-concept trials.

• Strategy: REDX is focused on the discovery and early clinical development of small molecule therapeutics in oncology and fibrotic disease. Its strategy is to develop assets through proof-of-concept clinical trials and then partner them for late-stage development and commercialisation.
• 2019: Having reset the scene last year, 2019 will be characterised by the new team managing a streamlined organisation that is focused on progressing novel products in two disease areas, supported by a clean balance sheet. Both programmes are due to have value-enhancing milestones during the year.
• Valuation: REDX trades on a market capitalisation of £6.9m. The novelty and development stage of its assets suggests that the market does not fully grasp the value proposition of the company, especially given its track record of successfully disposing its pre-clinical BTK programme for $40m cash in 2017.
• Risks: REDX has emerged from fiscal 2018 in a clean position with a focused strategy. The company has enough cash until 2Q’19 but will require more capital to advance the proof-of-concept trials for both of its porcupine and ROCK inhibitor development programmes.
• Investment summary: New management is moving forward with a revised business plan that focuses cash resources on progressing its drug leads in oncology and fibrotic disease to proof-of-concept early clinical development. Big pharma has been shown to pay substantial prices for good science and novel and/or de-risked assets with clinical data, reinforcing REDX’s strategy, potentially generating good returns and enhancing shareholder value.