The past couple of days have been extremely surprising. Last week Resverlogix secured much needed funds by selling a rather small amount of shares/warrants in an overnight marketed equity offering, and now the stock price is down 25% or so. All that Resverlogix did was to successful raise a bit of much needed money, albeit at a discount, but not a steep discount Interestingly, Resverlogix seemingly went for just as much (or little) money as they would need for buying them time for something to happen. I'll return to that shortly.

Harvard Medical School scientists claim that BET inhibitors can halt progression of coronary disease

Before going on with some suggestions as to what may happen in the next 1-2 months, it is wise to revisit the core of what Resverlogix is all about. Resverlogix is all about an extremely promising drug, RVX208, based on BET inhibition as a way to treat coronary disease in patients with chronic low grade inflammation such as diabetics. Who says that BET inhibition has a role in preventing inflammation associated coronary disease? Resverlogix clearly says so, and so do James Bradner et al., as explained in the Harvard Gazette a couple of years ago: http://news.harvard.edu/gazette/story/2014/09/a-way-to-inhibit-inflammation-of-blood-vessel-linings/

Thus, there are highly recognized scientists (such as James Bradner and Jorge Plutzky from Harvard Medical School) who endorse the concept of BET inhibitors being used to treat coronary disease in the context of low grade chronic inflammation. Big pharmaceutical companies listen to these people - very much so. They listen so much that the James Bradner founded Tensha Pharmaceuticals (making BET inhibitors) was acquired by Roche in a $535M buyout (FiercePharma even talks about a "Bradner factor" http://www.fiercebiotech.com/financials/bradner-factor-roche-bags-a-bet-inhibitor-535m-tensha-buyout). I do not believe that  Big Pharma totally ignores that James Bradner and other highly recognized scientists a couple of years ago claimed that they had made BET inhibitors that “halt the progression of coronary disease”. Consequently, I also do not believe that there are absolutely no big pharmaceutical companies interested in partnering with Resverlogix. If Resverlogix should desperately want a deal, they can have a deal that would be better than shutting down the company due to lack of funds, but clearly not as good as Resverlogix hope. I'll return to the discussion of a partnering deal with big pharma, but first a mentioning of the elephant in the room.

The Citi Bank Loan

A CAD 68.8M loan in Citi Bank is due on August 28, 2017. The loan is secured by a “letter of credit” from Eastern Capital Ltd. If the letter or credit is invoked by Citibank, Eastern Capital Ltd is going to take control of the most central parts of the patent estate of Resverlogix – including patents on RVX-208. While the recently raised funds allows Resverlogix to continue its operations at least through August (my estimate), there are nowhere near enough cash in Resverlogix to pay back the loan, and negotiations with Eastern Capital Ltd have so far not resulted in an extension of the letter of credit. Thus, Resverlogix needs to raise money in one way or another.

Partnering with Big Pharma

When trying to partner up with Big Pharma, I think Resverlogix is asked two key questions: Is RVX208 safe? Does it work? Big pharma is used to taking a calculated risk on efficacy. If the market is sufficiently large and there is a promsing scientific basis to work from, big pharmaceutical companies are willing to venture into the unknown and partner with small companies on drugs that have not yet proven their efficacy. Safety, however, is also an extremely important parameter. BET inhibitors have shown promise in cancer treatment - an indication where brutal side effects are tolerated because the question is literally one of life or death. BET inhibitors are currently in various clinical trial for several types of cancer. However, in the case of atherosclerosis, a condition that is basically without symptoms until you have a heart attack, side effects are not tolerated to the same extent, and because BET inhibitors - particularly the BET inhibitors that target both the BD1 and the BD2 bromodomains - have been associated with some toxicity issues, e.g. in the intestines, most if not all big pharmaceutical companies have refrained from pursuing BET inhibitors for the atherosclerosis indication. Therefore, when Resverlogix approach these companies, I think they are met as much with the safety question as they are with the efficacy question.

Now, what are we then waiting for? I think we are waiting for the 18 months data safety monitoring board (DSMB) evaluation. It is 19 months since the BETonMACE trial started (November 11, 2015) and we have had DSMB evaluations every 3-4 months since the trial passed the 9 months mark. I think a new evaluation is coming up soon. If there is a positive recommendation to continue without changes, this is likely to be a trigger for some pre-negotiated deal. Is this unusual? Perhaps, perhaps not. When the deal with Hepalink was struck (in spring 2015), there were 20 days between Resverlogix announcing issued patents in China and the announcement of an agreement. I do not think for a minute that due dilligence and negotiations could be done in such a short time. Some of it must have been pre-arranged, and all they needed was the last piece, the issued patents in China. I think the same is happening now - a deal, probably a regional deal like the one they struck with Hepalink, is waiting for a final trigger that is coming up soon. In this light, it makes perfect sense that $10M sufficed in the recent offering, thereby limiting the dilution as promised so many times by Resverlogix' CEO, Don McCaffrey.

Back in August 11, 2016 (http://www.resverlogix.com/media/news-releases.html?article=134216#.WT8Jr4VOKCg exactly 9 months after the first patient was announced to have received dosing) Resverlogix announced that the DSMB had given a thumbs up on the trial continuation. Not long after this, Resverlogix said that they would announce a deal shortly. This deal never materialized. I think this could be due to some last minute top management (on the pharmaceutical side) decision that longer RVX208 exposure times were needed, i.e. they needed a better safety data set. After all, 9 months into the trial, very few patients had even passed the 6 months mark. Now is different - approximately 1000 patients have passed the 6 months mark, and several hundred patients have passed the 1 year mark. A select few may have made it all the way to the 1½ years mark (the estimates are not confirmed by Resverlogix).

Worst case: What if!

What if we are once again losing a deal last minute as was (apparently) the case in the fall and what if Resverlogix had relied on money from the deal to pay back the loan? Such a situation is obviously very bad, but keep in mind that Resverlogix owns the data in the BETonMACE trial. By early August, there will be data from an estimated (my rough estimate) 1000 patient years - all of them from the exact same patient population (diabetics with low HDL) that responded the best in the phase 2 trials, trials that showed a 77% reduction in the risk of major adverse cardiac events (MACE) in diabetics. The combined ASSURE and SUSTAIN trials had approximately 100 patient years in the diabetic patient population. BETonMACE is going to have roughly 10 times as much data in the target population as the combined ASSURE and SUSTAIN trials had. While the FDA is certainly not going to be pleased at all with a prematurely terminated trial, the data are the data. The primary endpoint of BETonMACE is 3 point mace, i.e. cardiovascular death, stroke and non-fatal heart attack, but there may not be enough such events for the effect to be statistically significant, which means that a 5 point mace of the type described for the phase 2 trials may need to be used. This is not ideal by any means, but it is relevant to consider this for a worst case scenario. However, if 5 point mace – of even better 3 point mace – turns out to be statistically significant, the valuation of the company is going to surge. It should be remembered that even the small number of diabetes patients in the combined ASSURE and SUSTAIN trials had a statistically significant reduction in 5 point mace events. A 10x larger data set would reproduce the effect from the phase 2 trials unless, of course, if the effect was a statistical fluke. Obviously, if terminated prematurely, BETonMACE is highly unlikely to be accepted as the basis for registration of RVX-208 as a drug, but it is a bit ironic that by sacking the most valuable asset owned by Resverlogix, the BETonMACE trial, the valuation of the company might actually increase overnight.

Disclaimer: As always, the above is not investment advice. I may have completely mis-interpreted the situation. Do your own due diligence. Talk to certified investment adviser.