Resverlogix: The Canadian Biotech Blockbuster

By Jim Letourneau  OCT 05, 2009 8:40 AM

Company developing the next big drug to treat cardiovascular disease.


The world's next blockbuster drug might be coming out of a company based in my hometown of Calgary, Alberta, Canada. The company is called Resverlogix and I had the opportunity to meet with the company's president, Don McCaffrey, back in February of this year. The company has been in a trading range ever since, but recent news on the safety of their lead compound, RVX-208, has created a renewed interest in the company.

Resverlogix is engaged in the development and commercialization of novel small molecules for the treatment of cardiovascular diseases (CVDs), Alzheimer's, and Inflammation. RVX-208 increases the production of plasma ApoA-I, the key cardioprotective protein in high-density lipoprotein (HDL) or "good" cholesterol. Increasing ApoA-I enhances the process of reverse cholesterol transport where cholesterol on artery walls is removed by ApoA-I lipid complexes.

The largest market for any type of drug is in cardiovascular disease (CVD) at ~$38 billion/year and Pfizer's (PFE) Lipitor, the all-star of that group has consistently had the highest annual sales ($14billion/year) of any drug on the planet.

Biotech legends are associated with Resverlogix, the most notable being Roger Newton (co-discoverer of Lipitor) who is on the Scientific Advisory Board. He was previously director but I suspect he stepped down due to potential conflicts with his reacquisition of Esperion Theraputics.

The next step in the development of RVX-208 is an IVUS (intravascular ultrasound) study, a method of measuring plaque buildup (and hopefully removal) on arterial walls. In theory, RVX-208 should naturally unclog people's arteries but IVUS measurements will provide the compelling proof if all goes according to plan. A very big "if."

An IVUS study will cost in the range of $15-25 million, and Resverlogix will need to raise some more money. However they expect they'll find suitable investors willing to participate in a non-dilutive financing. I think that Canada may rank as a bit of a biotech backwater. If Resverlogix was US-listed, it would likely be trading higher already.

Confirmation of my interest in Resverlogix comes from knowledgeable sources. Rodman & Renshaw put out a report entitled “Proposing a new way to remove the fat from our clogged arteries,” and they have a 12-month price target of C$8/share. The Rodman analyst was recently quoted on Resverlogix's phase 1b/2a trial results. It's a large sample size that was tested and it provides validation that the drug is safe to be administered in humans and it does what it's supposed to do. It's an early stage trial, but the data is very encouraging. He also mentioned that RVX-208 has the potential to be a multibillion dollar drug.

Minyan Professor David Miller mentioned Resverlogix back on March 7, 2008 when it was trading for $12.95 in an article called Biotech Beat Down. At that point, it was down from an all time high of $29.50.

Resverlogix is a nearly unknown Calgary company which just might have the perfect pill for cardiovascular disease.

The big question for me was how does a company that once traded at C$29.50 end up at C$3.00? Resverlogix was aggressively shopped around by UBS Securities in 2007 and the failure to close on any transaction led to hordes of dissatisfied investors. That combined with a couple of "death spiral" financings accelerated the demise in Resverlogix' share price. Tack on a global financial crisis and you have the makings of the biotech bargain of a lifetime. Scientific progress and public company share prices are rarely correlated, but in the case of Resverlogix, I see an extreme mismatch.
Position in RVX.TO

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