NXY-059, currently Renovis’ only drug in advanced clinical development, is being studied in two pivotal trials evaluating its use in the treatment of acute ischemic stroke. The results of the first pivotal trial, SAINT-I, have been reported and we are slightly positive on the outcome of SAINT II because of SAINT I meeting its primary endpoint with supportive trends on some secondary ones. However, we believe there is a significant amount of risk associated with this trial. These risks include our concerns regarding differences in baseline characteristics of the groups in SAINT I, as well as a larger subgroup in SAINT II receiving Activase. As a result of these considerations, our current Likelihood of Approval (LOA) is 2% above that for an average phase III drug.

We currently value Renovis’s 5 and 10-year pipeline at $5.49*/share and $3.83*/share. With our relatively limited outlook for NXY-059 and the risk involved in the SAINT II trial, we currently find Renovis to be OVERVALUED by the market, though the stock will likely see appreciation should positive phase III data be reported. The company plans to announce phase III data this quarter. Because the company’s value hinges on one drug, it will have significant volatility around the data event.

Should the trial be positive and lead to an NDA filing, we would value its 5 and 10-year pipeline at $10.00*/share and $5.25*/share. Should the data be inconclusive and lead to a need for an additional trial, we would value Renovis’ 5 and 10-year pipeline at $4.00*/share and $3.00*/share.

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