PhaseRx Inc (NASDAQ: PZRX) – addressing the source of the issue


PhaseRx Inc. – high-risk but potentially high reward

PhaseRx Inc (NASDAQ: PZRX) focuses on the creation of better treatment for children suffering from inherited diseases by correcting the problem at the source. PhaseRx products attempt to replace missing or damaged enzymes, allowing the natural processes of the body to work. It is developing a portfolio of mRNA products for the treatment of inherited liver disease and expects to achieve clinical proof of concept in 2018. The current product portfolio is focused on the treatment of urea cycle disorders, which can cause cumulative and irreversible brain damage. The company believes that this technology can be applied to a significant number of other inherited liver diseases.

The company believes that the market opportunity for intracellular enzyme replacement therapy is untouched when compared to the $4 billion global market for conventional enzyme replacement therapy. The company’s approach of replacing defective enzymes within cells is expected to enable the treatment of diseases which cannot be treated with current replacement therapies. The company also expects to benefit from the FDA Orphan Drug Program, which provides economic incentives for companies developing treatments for rare diseases. The company is also addressing the key challenge with mRNA therapeutics of effective delivery by providing a sophisticated delivery solution.

The IPO and subsequent developments

The company made its debut on NASDAQ in May of 2016 and initially traded at just over $5 a share, with a peak of $ 5.64. The price declined over the next four months to the current levels of just over $ 2.57 per share as of September 30, 2016. The company has defined its lead candidate and the target, which is a condition known as ornithine transcarbamylase (OTC) deficiency, and for which the targeted treatment is a drug called PRX-OTC. In the most basic terms,PRX-OTC delivers OTC mRNA production capabilities to the liver, which can then start producing the enzyme. The proposed treatment is still in its infancy and the company only has proof of concept derived from testing mice. The company is also investigating a second drug called PRX-ASL for the treatment of Argininosuccinate Lyase Deficiency (ASLD). Both these treatments have very few current options are the market is potentially large and profitable despite the comparative rarity of these diseases.

Market prospects and risks

The FDA initiatives such as Orphan Drug Designation for rare diseases have boosted treatment development and a large amount of capital is being invested in treatments. A number of large companies are spending large amounts of money, including the likes of Sanofi SA (NYSE: SNY), and Amgen (NASDAQ: AMGN), all of which involve the use of viral vector programs. PhaseRX is seeking partnerships and licensing arrangements with large, companies and the demonstration of the efficacy of its approach could interest a number of big players. However, the major risk lies in the relative youth of the company and the fact that the proof of concept developed with mice may not easily transfer when it comes to human beings. Moreover, PhaseRX will need fresh capital to fund the necessary trials though it may be able to pick up some funding from a prospective partner.

The bottom line

All said and done, early-stage drug development treatment companies are high-risk investments And though there is a high failure rate for young companies in the biotechnology business, PhaseRX has its advantages compared to the rest of the pack. The established $4 billion global market for traditional enzyme replacement therapy suggests that whoever succeeds in alternative therapies could be looking at a large and potentially lucrative market.

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