PhaseRx Inc (NASDAQ: PZRX) Has Good News…But Does It Have Cash and Time?

Shares in PhaseRx Inc (NASDAQ: PZRX), a biopharmaceutical company developing mRNA treatments for life-threatening inherited liver diseases in children, have popped 76% in the last two sessions.

The catalyst for the rally was an announcement from the company that the European Medicines Agency’s (EMA) Committee for Orphan Medicinal Products (COMP) had issued a positive opinion recommending orphan medicinal product (orphan drug) designation for PRX-ASL, for the treatment of argininosuccinate lyase deficiency (ASLD), PhaseRx’s second drug candidate to treat a urea cycle disorder (UCD).

With this development PhaseRx has received orphan drug recognition on both shores of the Atlantic for its two lead drug candidates being developed for UCDs.

PhaseRx Inc (NASDAQ: PZRX) Drug Pipeline

PhaseRx products will benefit children with inherited diseases, such as of the liver, by correcting the underlying cause of their disease by replacing missing or damaged enzymes to allow the body’s natural processes to work. This is achieved by intracellular enzyme replacement therapy (i-ERT) which targets synthesis of delivered mRNA specifically to liver cells.

“We are developing a portfolio of mRNA products for inherited liver diseases, and in 2018 we expect to achieve clinical proof of concept in the first set of therapies to treat children born with life-threatening inherited liver diseases,” says the company on its website.

PhaseRx is focussed on three urea cycle disorders (UCDs) as shown below.

PRX-OTC, its lead drug, received orphan drug recognition from the US FDA in November 2016 and from the European Medicines Agency’s (EMA) Committee in April 2017.

PRX-ASL received orphan drug designation from the US FDA in September 2017 and from the European Medicines Agency’s (EMA) Committee in November 2017, as mentioned earlier in this article.

PhaseRx Inc (NASDAQ: PZRX): Drug Development Rationale

The company’s drug development strategy is based on the following pillars:

  • It reckons it can achieve life changing impacts within a reasonable timeframe
  • Costs and risks from development will be lower because of
    • the clear understanding of the causes of the targeted diseases (inherited bad gene/defective or missing enzyme inside the liver cell)
    • the clear understanding of the action required to cure the disease (replace the missing or defective enzyme)
    • clinical proof of concept can be obtained from a trial of just 10-20 patients and product registration from 30-40 patients
  • The approvable endpoint is the lowering of blood ammonia, which can be quickly and readily measured by a blood assay.
  • The conventional enzyme replacement therapy is a $4 billion market growing 20% annually.

However, it’s drug development efforts are likely to be hamstrung by mounting cash constraints.

PhaseRx Inc (NASDAQ: PZRX): Cash Crunch Could Lead to a Sell-Out

Unfortunately, the company has had to delay the development of lead drug PRX-OTC due to a severe cash crunch. Last month it announced a reorganisation that would cut its workforce by 10 employees, including some executives.

“The Board of Directors has made a determination to conduct a restructuring of operations to reduce short-term operating costs and delay the development of its lead product candidate PRX-OTC… these efforts are aimed at preserving the company’s cash resources,” it said in a statement.

Ominously, the company also said was considering “strategic alternatives” including a “potential merger transaction.”

Last month, the company was also served a delisting notice from NASDAQ for failing to comply with the minimum stockholders’ equity requirement under listing rules. The company has appealed the notice.

PhaseRx Inc (NASDAQ: PZRX): Cash Runway

The company said in its third-quarter earnings report that it held cash and cash equivalents of $5.3 million as at September 30, 2017.

Its operating expenses for the third quarter were $2.5 million.

Cash resources are therefore equivalent to roughly six months’ operating expenses, and then some, because the company is slowing the R&D on PRX-OTC.

Clearly, apart from cash, the company is also running short on time.

However, with the restructuring, PhaseRx may meet its 2018 target of a “clinical proof of concept with an approvable end-point in 2018.”

Rather than sell shares at the current prices investors may hold and wait for further announcements, even perhaps a buyout.

Images source PhaseRx, Inc. : https://www.youtube.com/watch?v=mJYRCz5hKvM

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