Redx balance sheet worsens, but cash reserves remain strong

Revenues at Cheshire biotech company, Redx Pharma, fell significantly in the year to September 30, 2023, and losses almost doubled, but the company said it has a clear cash runway until the third quarter of 2024.

Reporting annual results today, the Alderley Park-based business revealed turnover of £4.202m, a sharp fall from the previous year’s £18.690m figure, while pre-tax losses widened from £17.804m last year to £32.788m.

The cash balance at September 30, 2023 stood at £18.1m, against £53.9m the previous year.

Post-period, Redx announced a £14.1m (gross) equity financing had been secured with existing institutional investors at market price to fund the near-term value inflection points, providing a cash runway into the third quarter of 2024.

Significant investment in research and development activities led to overall expenditure of £34m, roughly the same as the prior year.

In April, a recommended all-share business combination with Jounce Therapeutics, Inc was terminated following the withdrawal by the board of directors of Jounce of its recommendation for the combination, in favour of an unsolicited all-cash offer from a third-party.

Chief executive, Lisa Anson, said: “We are pleased to report significant progress across our pipeline of clinical and pre-clinical assets.

“Commencing our Phase 2a IPF clinical trial for our lead asset zelasudil, formerly RXC007, underscores our commitment to advancing our differentiated ROCK-inhibitor portfolio.

“During the year, we presented compelling preclinical data that demonstrate the potential of zelasudil in several other fibrotic indications that we intend to investigate further in the future.

“We are also pleased to confirm the submission of a CTA for our second ROCK asset, RXC008, for which we expect to commence a Phase 1 study early in 2024.”

She added: “Despite the ongoing challenges in the equity markets and broader economic landscape, post-period we were pleased to secure a £14.1m (£13.6m net) equity financing with existing institutional investors which extends our cash runway into Q3 2024 and will allow us to deliver multiple near-term value inflection points, in line with our refined strategic focus.

“I would like to take this opportunity to again thank our shareholders for their ongoing support, and our employees whose dedication make our achievements possible.”

Investment bank, Panmure Gordon, retained its ‘Buy’ call and increased its target price for Redx shares after this morning’s announcement.

Analysts Dr Mike Mitchell and Dr Julie Simmonds said: “Redx Pharma announces audited final results today, with the commentary reflecting a significant period of progress and the post-period fund-raise of £14.1m (£13.6m net) providing a cash runway into Q3 2024.

“We view the strategic evolution of the business to focus on its ROCK portfolio offers significant potential future value creation, while the company’s core medicinal chemistry capabilities further drive innovation in the early stage pipeline.

“We consider the industry is now demonstrating strong independent reference points for Redx’s chosen disease areas where we believe there is significant commercial potential. We update our target price today to account for additional shares in issue and the current cash position following the post-period fund-raise, moving to 125p from 155p, retaining our current Buy recommendation, while looking to update our investment thesis in due course on the back of recent progress.”

Shares in Redx Pharma dropped 6.26% in early trading this morning, from 23.05p per share to a new year-low of 22.03p, but later rallied to reach 24.97p per share by lunch time.