Regado remains a huge binary bet despite share price bump
After limping onto the stock market last month in a massively discounted public offering, Regado Biosciences’ shares have hopped higher so far this week – the stock surged 66% yesterday to $7.63 and was up again this morning, at $8.74. The company’s August IPO was finally priced at $4, down substantially from a $14-$16 target range.
The shares appear to have been boosted by a slew of positive initiation notes from banks involved in the IPO, which are no doubt hoping to win more business when Regado needs to top up its coffers; the company was always going to return to the market to finish a huge phase III trial of its lead product, REG1. This study, head to head against the incumbent Angiomax and seeking to recruit 13,200 patients, enrolled its first participant today and represents a massive undertaking for such a small company – a fact that helps explain investors’ reluctance to back the flotation.
The Regulate-PCI trial that started today is an open-label superiority study in which the endpoint is blinded, and will compare the effects of Regado's REG1 to The Medicine Company’s Angiomax, or bivalirudin, in patients undergoing percutaneous coronary intervention (PCI).
Regado is hoping to show that its project is better at preventing the complications often seen with this procedure – the primary endpoint, powered to show REG1’s superiority, is based on a composite of death, non-fatal myocardial infarction, non-fatal stroke and urgent target lesion revascularization through day three after PCI.
In an attempt to show that REG1 is also at least as safe, the main secondary endpoint, powered to non-inferiority, measures major bleeding events through day three.
REG1 comprises pegnivacogin, an anticoagulant targeting factor IXa, and its specific active control agent, anivamersen. Pegnivacogin works very quickly, achieving maximum effect in five minutes, and even more uniquely it can be reversed very rapidly through administration of anivamersen. Regado maintains that these attributes allow it to achieve higher levels of anticoagulation much more safely than with other products.
Historically Lovenox or heparin have been used to temporarily thin the blood of patients before surgery, to reduce the risk of clots forming. Angiomax, which has been available for more than 10 years, has captured a substantial market share in various acute settings thanks to its own rapid onset of action and relatively short half life. Sales of the product are seen reaching $606m this year and plateauing until US generics hit the market in 2019.
With its reversibility, Regado reckons that REG1 represents a step change in this setting. The hugely ambitious Regulate-PCI trial will certainly prove whether this is the case – the efficacy endpoint is a 20% reduction in the occurrence of ischaemic events – but a key risk is that the open-label design will not ultimately be seen as sufficiently robust.
Three interim analyses have been scheduled into the trial design; the first two look at general safety after 1,000 patients and then 25% of patients have been enrolled. The third, to take place after half the patients have been enrolled and expected by the end of 2014, will represent crunch time, as it will involve an efficacy analysis.
Reports have put the cost of this huge worldwide trial at around $150m and despite two substantial fundraisings in the last nine months – eight months before its flotation Regado raised $51m in a series E round – more will be required to finish it off. The company has made no secret of this fact, and in regulatory filings ahead of the IPO said the net proceeds would be sufficient to reach only the third interim analysis.
The initial target of the IPO was $75m, but the lowered price range garnered only $47m. The efforts of five banks had to be enlisted to place the stock and these were all able to publish their equity research notes for the first time today. Unsurprisingly, all are recommending that investors buy the shares and have placed price targets of $10 to $14.
However it is not particularly surprising that the IPO struggled to reach its target. Investors were not only being asked to make a call on the risky binary outcome of this interim analysis, but were being told that if it was successful the company would be back for another cash injection.
This fact alone makes the tactic of going after a $14-16 price range look crazy, given that realistically some share price appreciation would be needed ahead of another public offering. At least starting at a $4 base makes that more likely, assuming the first interim analyses are positive.
Even in the midst of a biotech bull market, and even if all had gone according to plan, Regado was always going to be a tough sell as a small, inexperienced company running a massive head-to-head cardiovascular trial with a clear need for more funds. This stock is not for the faint-hearted.