Regenxbio: Flat Price Response To Key Catalysts Confirms Hold (NASDAQ:RGNX)

Investment Summary

Now that we’re well into the new year we continue to advise on underexploited names working to provide medical breakthroughs in complex disease segments. Following a deep dive on Duchenne muscular dystrophy (“DMD”) performed during our analysis on PepGen Inc (PEPG) we are pleased to note the recent developments in competing name REGENXBIO Inc. (NASDAQ:NASDAQ:RGNX) with its novel hypotheses concerning DMD. The company is making headway with its RGX-202 investigational compound for potential breakthrough in DMD, along with its RGX-314 program [developed in collaboration with AbbVie] investigating a potential treatment for wet acute macular degeneration (“wet AMD”). Recent advancements in both clinical assets have potential to create a meaningful change in both disease segments if proven successful in late-stage clinical trials. We look to these recent updates as the bedrock forming underneath the company’s DMD and wet AMD hypotheses when looking ahead.

Unfortunately, despite the plethora of updates from RGNX regarding its pipeline, the positive news hasn’t been reflected in its stock price. Instead, it’s traded flat since H2 FY22′, after a heavy selloff in August of that year. Here I’ll make a practical assessment of the recent updates and what to expect with RGNX stock looking ahead based on the market generated data. Based on the market’s price response into the back end of FY22′-date, we are more comfortable in watching RGNX from the sidelines for now. Rate hold.

RGNX recent developments

As mentioned, the recent catalysts for RGNX’s growth route are broken into two substrata: 1) RGX-202 for DMD, and; 2) RGX-314 for wet AMD.

Looking at the first component:

• First, RGNX advised it has initiated the phase 1/2 Affinity Duchenne trial looking at RGX-202 in DMD. Concurrently, it has begun enrolling patients into its Affinity Beyond trial. The former is an expansion trial designed to examine safety and efficacy of an IV dose of RGX-202, whereas the latter is an observational screening study. Per the update, “[t]he primary objective is to evaluate the prevalence of [anti-adeno-associated serotype 8] AAV8 antibodies in patients with Duchenne up to 12 years of age”. Likely, RGNX will use data obtained from the Beyond trial to identify patient candidates for future DMD studies.
• As a reminder, from our deep dive on DMD: “DMD is a rare, inherited genetic disorder, characterized by progressive muscle weakness and wasting due to a deficiency of dystrophin. The pathogenesis of DMD is thus caused by a mutation in the dystrophin gene, which is located on the ‘X’ chromosome and codes for the production of dystrophin…Without functional dystrophin, muscle cells become susceptible to damage during contraction and are unable to repair themselves effectively. This leads to recurrent cycles of muscle injury and repair, which culminate in muscle fibrosis and replacement with adipose and connective tissue [also known as scar tissue]…[this] can lead to…a shortened life span…to date, has no known prevention or cure.” Subsequently there is absolutely an unmet need in this disease segment.
• The purpose of RGX-202 is to provide a transgene encoding for a novel microdystrophin that encompasses the “functional elements” of the dystrophin C-terminal (“CT”) domain. Preclinical studies have evidenced the presence of this CT domain bolsters the recruitment of several pivotal proteins to the sarcolemma, resulting in enhanced muscular resistance to contraction-induced injury in mice studies. Moreover, the transgene design incorporates codon optimization and a reduction in CpG content. These factors are thought to augment individual gene expression, and heighten translational efficacy.
• Adding to the above, RGNX also announced a peer-reviewed manuscript that was published in the esteemed Human Gene Therapy journal. The white paper discussed the rational for an accelerated approval pathway to use microdystrophin expression levels as a surrogate endpoint in order to provide an accelerated approval pathway to advance adeno-associated vector (“AAV”) gene therapy as a platform to develop treatments for patients with DMD. Said another way, the paper calls for the FDA to use an expedited approval pathway to advance potential AAV-linked DMD therapies, in order to speed up their availability in the marketplace. This coincides with its Beyond observational study listed earlier. The submission was made to the FDA via the Pathway Development Consortium, a collaboration between RGNX and Solid Biosciences Inc. (SLDB). Seeing the paper was submitted to the FDA, this may create a meaningful inflection point for the innovation of DMD therapies.

Moving to the RGX-314 updates:

• The firm is conducting 3 trials for its wet AMD hypothesis in RGX-314. The first, its phase 2 interventional study assessed the efficacy and safety of RGX-314 in patients affected by wet AMD. The study aims to evaluate the impact of 2 distinct dosages of RGX-314 on 60 patients via subretinal administration: a) 6.4×1010 GC/eye, and b) 1.3×1011 GC/eye. The primary endpoint of the study is target protein concentration of RGX-314 in the ocular tissue at 6-months follow up. Secondary endpoints include safety and tolerability, alterations in Best Corrected Visual Acuity (“BCVA”), variations in central retinal thickness (“CRT”) and requirement for additional injections. By November last year, the data collected from 46 patients that received dosages of RGX-314 showed a robust safety profile, with no serious adverse events (“SAEs”). Important to this analysis, in the high dose cohort, common treatment-emergent adverse events (“TEAEs”) were either mild or moderate.
• The other 2 trials are pivotal trials looking at production of the RGX-314 material with the company’s NAVXpress platform process. The process has been incorporated into the Atmosphere and Ascent pivotal trials, looking at RGX-314 in wet AMD via subretinal delivery. Moreover, the production runs exhibited similar results in the company’s respective studies discussed above, measured by the concentration of target proteins in the eye. Important to the investment debate, this proves the company is one of the only companies with a cGMP facility to manufacture up to scales of 2,000 litres of material.

Collectively, both sets of momentum around its key pipeline assets are a net positive for the company’s growth route in the broad sense. Hypothetically speaking, the stock should have caught a bid on the back of these developments, yet, the price response to each of RGNX’s latest updates has been mute at best.

RGNX corresponding price action

In view of the spate of updates listed above, the market’s price reaction has been negligent [Exhibit 1]. RGNX stock has congested sideways and yet to crack previous highs. Daily volume trends also support the same view, with a lack of uptick in volume buying.

Exhibit 1. RGNX price action since November FY22′

This is despite a series of heavy inflows into RGNX equity rolling into the new year. Unfortunately, there’s been insufficient long-term demand to cause an imbalance and re-rating to the upside. What this says about the type of buyer into these inflows is paramount – if it were large, institutions/funds, the ticket sizes would have likely reflected this. Yet, there’s been no reaction in the price.

Exhibit 2. Daily money flows for RGNX equity

Subsequently, we have downside targets to $21 using the daily point and figure chart below. These are quintessential in guiding price visibility looking ahead for RGNX to understand the market’s positioning and to remove the short-term fluctuations that aren’t part of a larger directional move, plus, they remove the noise of time. You’ll see they’ve guided price action well for RGNX to date. As such, we are looking to a $21 target on the downside, and a potential $27 target on the upside – either way, there’s no asymmetry in the risk/reward calculus on either side of the trade. This tells us that we can expect further sideways activity in the RGNX price target over the coming weeks.

Exhibit 3. Downside targets to $21

In short

Despite a number of positive catalysts in RGNX’s key pipeline assets the market’s price response has been mute. Investors are doubtlessly searching for more conviction in the firm’s DMD and wet AMD hypotheses, and haven’t found it just yet. This is firmly reflected in the flat price activity since the back end of FY22′. Hence, we are more comfortable in waiting for additional catalysts to move the needle for RGNX. Net-net, rate hold.