RXi Takes a Untraditional Route to the Public Market, Now Working To Get Pharma to Pay The Bills
Tod Woolf’s company, RXi Pharmaceuticals, has a lot of things going for it. The CEO’s old Harvard classmate—and Nobel Prize winner—Craig Mello leads his scientific advisory board, and the company has technology, RNA interference, that big drugmakers are paying big bucks for. So could this startup make it through a traditional initial public offering in the current climate?
“We probably couldn’t,” Woolf says.
Yet the Worcester, MA-based company was able to get listed on the NASDAQ (RXII) anyway. In March, it went through sort of a back door as a spin-off from its publicly traded parent, Los Angeles-based CytRx (NASDAQ: CYTR). Then last month, in one of its first acts as a public company, RXi sold more than a million new shares to institutional investors at $8.12 a share, raising a total of $8.7 million. (No doubt some of the folks who bought shares are already grouchy, since the stock closed yesterday at $7.)
Such is life in biotech, where even one of the hottest technologies of the moment, RNAi, is swept up in the economic pessimism of the day. Sunrise, FL-based Bioheart, the one biotech company that has gone through a traditional IPO this year, had to settle for an initial share price of $5.25 in February after shooting for $14 to $16 a share. Yesterday, it closed at $3.70. Ouch.
Woolf sounds unfazed by it all. He’s meeting with pharmaceutical companies to talk about partnerships. He wants to strike a deal with enough upfront cash to pay for a lot of his research without having to sell more shares, which would dilute the value of existing ones. He’s confident that he will bag such favorable terms by year’s end.
“The pharmaceutical companies still have their war chests, and their pipelines are pretty dry,” Woolf says. “They are looking for new technologies.”
The RXi technology is something that Mello and Woolf have been developing into a second-generation form, Woolf says. The company is working to make RNAi drugs that can be more specific in turning off a disease-causing gene—and thereby prevent the toxic immune reactions that some RNAi-based treatments in development may provoke. Perhaps most importantly, the RXi is packaging its RNAi molecules in a new way that delivers them broadly across multiple tissues and keeps them from getting quickly broken in the body down like other types of RNAi molecules, he says.
RXi’s first priority is to test its technology against an inherited form of Lou Gehrig’s disease, amyotrophic lateral sclerosis, or ALS. The company is also looking to develop compounds for treating metabolic diseases and inflammation, Woolf says. RXi plans to file its first application to begin a clinical trial in 2009, for ALS.
All of which, of course, will require spending some of those Pharma dollars that aren’t yet in RXi’s pocket, but Woolf is sanguine: “There’s a very short list of pharmaceutical companies that aren’t interested.”