Phase 2 Data Met With Mixed Response (RGRX)

Phase 2 Data Met With Mixed Response

Jason Napodano, CFA

On November 4, 2011, RegeneRx Biopharmaceuticals (RGRX) reported results from the company’s phase 2 clinical trial with RGN-259 for the treatment of signs and symptoms of dry eye syndrome. The trial enrolled a total of 72 patients and tested subjects in a Controlled Adverse Environment (CAE) model over a period of 30 days. The trial was conducted by ORA, Inc., an ophthalmic contract research organization that specializes in dry eye research and clinical trials.

Results from the study show that RGN-259 was safe and well-tolerated. However, results did not meet all prespecified primary outcome measures to statistical significance. These include, corneal staining, conjunctival staining, tear film breakup time, inflammation, eye irritation (burning / stinging), and blinking rate at day 28 with RGN-259 as compared to placebo. Outcome measures that did meet statistical significance include:

• Reduction from baseline in central corneal fluorescein staining compared to placebo at the 24 hour recovery period (p = 0.0075). This is indicative of a reduction in ocular surface damage of the central cornea.

• Reduction from baseline in exacerbation of superior corneal fluorescein staining in the chamber as compared to the placebo (p = 0.0210).

• Reduced exacerbation of ocular discomfort at day 28 during a 75-minute challenge in a controlled adverse environment (CAE) compared to the placebo group (p = 0.0244). This indicates that RGN-259 can potentially slow exacerbation of ocular symptoms in patients with dry eye syndrome.

Despite missing some of the key primary outcome measures, management believes the data is encouraging, and should be enough to hold a post phase 2 meeting with the U.S. FDA. We remind investors that RegeneRx has previously completed a small pilot study in patients with diabetic vitrectomy. Results showed reduction of irritation and inflammation along with thickening of corneas (cell and flare), all indicative of corneal re-epithelialization and wound healing and consistent with known properties of Tβ4.

Where Do We Go From Here?

In our view, for RGN-259 to be a commercially viable product, it must be differentiated meaningfully from Allergan’s Restasis (TTM sales of $676 million worldwide). Restasis is indicated to help patients “natural tear production” that may be suppressed by inflammation due to chronic dry eyes. The Restasis label says nothing about reducing the signs and symptoms of dry eyes. Sign and symptom improvements are clinically relevant endpoints that we believe are necessary for future pivotal trials.

Investors often focus too greatly on statistical significance in a phase 2 trial. Missing the primary endpoints causes a negative knee-jerk reaction. But investors – as they often do – forget that the purpose of a phase 2 program is to show proof-of-concept and explore endpoints and study parameters which will be used in the phase 3 trial. Management believes all the data discussed above is clinically meaningful. It’s not a “Home Run”, but they certainly didn’t strike out either.

Until full data presentation from the above trail, we cannot say whether or not RGN-259 has the potential to achieve this differentiated label, or whether or not the U.S. FDA will allow RegeneRx to proceed into phase 3. Would the endpoints that missed above been statistically significant at high doses or a longer duration? Would they have been statistically significant if the trial was larger than 72 patients? We simply cannot answer these questions until we see the full data, and perhaps even until management meets with the FDA.

We expect RegeneRx to seek strategic partners with core-focuses on the ophthalmic market, as well as seek federal funding for expanded research with Tβ4 in this area. The global market for dry eye disorders was $1.9 billion in 2010. Restasis should post sales near $700 million in 2011. Management estimates the total market for dry eye therapeutics will hit $2.8 billion by 2017. One item worth noting, pharmaceutical companies fully understand the goal here – to move into phase 3. Partners are less concerned with statistical significance in a phase 2 exploratory program than investors. If RegeneRx was in partnership discussions before today, nothing from today’s release should end those discussions.

Background on RGN-259

RegeneRx’s is developing RGN-259, a sterile, non-steroidal, preservative-free, topical eye drop formulation of Thymosin beta 4 (Tβ4) for ophthalmic indications such as neurotrophic keratitis (NK), a degenerative disease of the corneal epithelium and stroma, and various forms of dry eye syndrome. Tβ4 has already been studied successfully in compassionate use trials for NK. Additionally, preclinical studies in an animal model of dry eye have provided a scientific rationale to study RGN-259 in human clinical trials. RGN-259 offers potentially the lowest-cost / quickest path to market for the company’s Tβ4 pipeline, which includes injectable formulations (RGN-352) for myocardial infarction and multiple sclerosis and topical formulations (RGN-137) for epidermolysis Bullosa.

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