During bleak times like this in biotech, it is helpful to remember why we invest in this space. The potential for moonshot returns is always there, even in a problematic tape. The best recent example in our universe was Bright Minds Biosciences (Nasdaq: DRUG). In a January 2024 note, after Longboard Pharmaceuticals (Nasdaq: LBPH) reported encouraging Phase 2 seizure data, we wrote, “Bright Minds is a VERY speculative name. It is VERY small, 4.5mm shares outstanding (2023 consolidation), giving it a $9mm market cap, and VERY illiquid. Yet, the mechanism of 5HT2c agonism they are targeting is well validated. Their drug, BMB-101, appears to be a safe and active Phase 2-ready asset. Zogenix and now Longboard have demonstrated investor interest in the 5HT2c class and DEEs as an indication. Once Bright Minds has a cleared IND and clarifies its Phase 2 plans, could they capture investors’ attention? We can only speculate…..” Then, in October 2024, Longboard was acquired by Lundbeck for $2.6b, causing this to happen.
In an October note, we took a slight victory lap, stating, “The Longboard acquisition was unpredictable, but correlating Bright Minds’ success to its larger peer was not. The hunt begins for the next Bright Minds.” So let’s throw caution to the wind, imagine biotech sentiment isn’t bleak, that we are in a risk-on environment, and, over the coming weeks, volunteer a few highly speculative names that could offer a Bright Minds-like return.
A Quick Digression
Our regular readers will know our long history with Delcath Systems (Nasdaq: DCTH). We started writing about Delcath in 2020, but our connection to the company dates back to 2009. For those interested in October 2021, on the second episode of our now defunct podcast (interestingly, our first podcast was with Bright Minds), we cover our history with Delcath before jumping into an interview with their CEO Gerard Michel. Going down memory lane of our short-lived podcast series, later in 2021, we interview Gil Aharon of Rosalind Advisors, who discussed two of his favorite small-cap names, which at the time were Delcath and Verona Pharma (Nasdaq: VRNA). Both companies have performed well since, but Verona has done exceptionally well, up over 10x since that interview – another reminder of why we invest in biotech.
Delcath-like
Our digression down the Delcath memory lane leads us to the subject on this note, RenovoRx (Nasdaq: RNXT). We were initially introduced to Renovo a few years ago by a Delcath investor who saw parallels in their technologies. There is no denying the parallels; both are interventional oncology companies with technologies for targeted chemotherapy perfusion for difficult-to-treat tumor types. However, Delcath was years ahead of Renovo in development, and at that time, Delcath’s equity wasn’t working, so the idea of diving into a Delcath-like company didn’t hold a lot of appeal for us. Fast forward to today, Delcath’s equity is working, and Renovo is coming up on a significant clinical catalyst with violent upside potential on its near-term horizon. The company also has a nascent commercial business, which wasn’t present when we first looked at it. With a modest $35mm market cap, we figured Renovo might resonate with investors interested in a new speculative name.
Renovo is developing a drug/device technology called trans-arterial micro-perfusion or TAMP. Much like Delcath’s HEPZATO (percutaneous hepatic perfusion), TAMP is intended to deliver a targeted dose of chemotherapy to an organ while minimizing systemic exposure. However, unlike HEPZATO, which targets the liver, a well-vascularized organ, TAMP targets poorly vascularized organs. TAMP uses a double-balloon catheter (RenovoCath) to isolate a section of a vessel adjacent to an organ. The two balloons create a pressurized area, chemotherapy is infused via the catheter, and the pressure created via the dual balloons forces the chemotherapy across the arterial vessel wall, perfusing the adjacent organ with chemotherapy.
Renovo’s initial focus is on locally advanced pancreatic tumors (LAPC), using TAMP to deliver the commonly used chemotherapy gemcitabine (TAMP+gemcitabine is also referred to as RenovoGem). LAPC is a challenging cancer to treat. Anyone with a loved one diagnosed with LAPC knows this is a bleak prognosis. LAPC has also been a bleak indication for biotech investors, without any notable R&D successes. That was until Novocure Limited (Nasdaq: NVCR) announced positive Phase 3 data last year.
Novocure-like
On December 2, 2024, Novocure reported positive Phase 3 LAPC data with their Tumor Treatment Fields (TTF) technology. In their Phase 3 study, titled PANOVA-3, TTF used concurrently with gemcitabine and nab-paclitaxel had a statistically significant two-month survival benefit versus gemcitabine and nab-paclitaxel alone (16.2 months vs 14.16 months). In their top-line press release, Novocure’s Chief Medical Officer stated, “PANOVA-3 is the first and only Phase 3 trial to demonstrate a statistically significant benefit in overall survival specifically in unresectable, locally advanced pancreatic cancer…”
Two months may seem inconsequential to some, but we can assure you it is not to those affected by LAPC. Nor was the >$1b increase in market cap in the days following the news inconsequential for Novocure’s investors.
Renovo is enrolling a randomized, controlled, pivotal Phase 3 study in 114 patients with LAPC. The study’s statistical analysis plan calls for two interim analyses, the first at the 26th study event (death) and the second at the 52nd. In March 2023, Renovo announced the results from the first interim with RenovoGem, demonstrating a six-month survival benefit versus standard of care (SoC), IV gemcitabine and nab-paclitaxel (21.5 months versus 15.5 months). The p-value was an encouraging p=0.051, but because this was an interim analysis, the p-value did not meet the stringent bar for significance (p<0.0001). Also encouraging was the tolerability profile for RenovoGem, with RenovoGem-treated patients experiencing 65% fewer adverse events than SoC.
The company guided that it expected the 52nd event, triggering the second and final interim, by the end of 2024 (top-line data would be available 4-6 weeks after the event). However, the 52nd event has yet to occur, which some might interpret as an encouraging sign of RenovoGem’s survival benefit. The company’s CEO, Shaun Bagai, now guides top-line data for mid-2025. The p-value for significance for the second interim is p<0.008. If the study isn’t stopped after the second interim, the final analysis will occur after the 86th event, which is expected in 2H2026.
Bright Minds-like
The six-month survival benefit for RenovoGem from the first interim is impressive, especially when compared to Novocure’s TTF two-month benefit. It is important to emphasize that Renovo’s interim results were not statistically significant, while Novocure’s were. Nonetheless, the data from the first interim create optimism for what investors might see from the upcoming second interim and, if necessary, the final analysis. We fully acknowledge that a p<0.008 is a challenging statistical hurdle for RenovoGem to hit, but given the first interim data, it is within the realm of possibility. In this scenario, the study could be stopped for efficacy, and a push for an NDA submission would begin in earnest. If Novocure added $1b in market cap with a two-month survival benefit, what would a statistically significant six-month benefit be worth to Renovo? This would be the Bright Minds-like scenario – the potential for violent, unpredictable upside.
While we want investors to embrace the possibility of Renovo hitting its interim, a more distinct possibility, and still highly favorable outcome, would be for RenovoGem to continue to show a meaningful survival benefit versus SoC with an improving p-value. The p-value for statistical significance at study completion at 86 events is p<0.048. So if in the impending second interim, RenovoGem demonstrates a survival benefit with a p-value lower than the p=0.051 from the first interim but above the p=0.008 threshold for significance, investors should be emboldened in the probability for RenovoGem’s success upon the final analysis. In this scenario, the equity should still react favorably, even with final topline data not being available for another year.
Trisalus-like
Another potential benefit from positively trending data from the second interim is for the company’s emerging RenovoCath commercial business. Initially, we were skeptical of how meaningful the RenovoCath opportunity could be. The device had been 510(k) cleared for years, yet only last year did Renovo consider a commercial launch. However, several well-respected Renovo investors suggested we look at Trisalus Life Sciences (Nasdaq: TLSI) and their recent success with their pressurized catheter as a proxy for the potential for the RenovoCath opportunity.
Trisalus has a single balloon pressure-enabled catheter that increases drug delivery to tumors called the TriNav Infusion System. Trisalus’s commercial focus with TriNav is predominantly on hepatic tumors. In December 2023, the Centers for Medicare & Medicaid Services (CMS) created a new reimbursement code (HCPCS 9797) for pressure-generating catheters. This code reimburses centers at a rate of $17,957 per procedure. With the introduction of the new CMS code, Trisalus grew its catheter business by over 50% in 2024 (FY2024 $29.4mm vs FY2023 $18.5mm) and has guided it to expect a similar pace of growth in 2025.
Trisalus’s success with TriNav for the liver has emboldened Renovo to do the same with RenovoCath for the pancreas. Renovo believes it can leverage the new CMS code to make RenovoCath a lucrative commercial medical device well before a potential FDA approval for the drug/device combination, RenovoGem, in LAPC. Late last year, Renovo announced receiving the first purchase orders for RenovoCath and followed that up with an announcement of additional purchase orders from “several esteemed, high-volume National Cancer Institute-designated centers” last month. In our interactions with CEO Bagai, he is confident these centers are reimbursed using the HCPCS 9797 code. Trisalus is selling TriNav for $7,750, and we expect Renovo will sell RenovoCath for a similar price. Renovo estimates the average LAPC patient would receive 5-8 procedures, translating to between $35,000 and $60,000 in RenovoCath revenue per patient. Based on these loose figures, Renovo estimates the immediate annual addressable market for RenovoCath as $400mm.
RenovoCath has been successfully used in over 500 procedures as part of Renovo’s clinical trial history. This history, combined with the provocative first interim efficacy and safety data from the ongoing Phase 3 study, drives the early commercial interest and adoption of RenovoCath. We have already painted a picture of the considerable upside potential if the company achieves statistical significance in the impending second interim. However, if the survival benefit from the second interim doesn’t reach significance but the p-value improves from the first interim, falling between 0.008 – 0.051, there could be a substantial near-term benefit for the RenovoCath business. Some investors we speak with believe that even if the survival statistics deteriorate compared to the first interim (numerical separation remains), as long as there continues to be a meaningful safety benefit versus SoC, it would still benefit RenovoCath’s commercial adoption. This could be a “soft landing” scenario, where the stock may suffer in the short term but make a healthy recovery once Renovo can provide evidence of RenovoCath’s commercial adoption.
Unlike
We’ve discussed the similarity in technologies, clinical results, commercial opportunities, and potential stock performance. So, let’s briefly discuss some of the notable differences that make Renovo “unlike” these other companies, partly explaining the current valuation discrepancy.
Unlike Bright Minds, Renovo (35mm S/O) doesn’t have a tiny float, which makes the possibility of a Bright Minds-like explosive move off positive data less likely. Unlike Delcath, Renovo still has clinical and regulatory risks on its horizon. Unlike Trisalus, Renovo has yet to establish meaningful commercial traction with its cather. Unlike Novocure, Renovo doesn’t have a plump treasury (we estimate Renovo has pro-forma $18mm) or a relevant income statement. However, unlike these companies, which have market caps between $160mm and $2b, Renovo trades at a modest market cap of $35mm, which is more than reflected in the abovementioned differences.
Speculative-like
Heading into the second interim readout, Renovo offers investors a unique set-up. It has the speculative upside that biotech investors covet. A statistically significant survival benefit from the second interim could send the stock soaring. The stock should also react favorably if the second interim demonstrates an improving statistical trend in survival, providing optimism that statistical significance can be reached in the final analysis next year. Finally, there’s a possible “soft landing” scenario if the statistics trend the wrong way for survival in the second interim, but safety remains substantially better than SoC. Maybe Renovo isn’t as speculative as we once thought; it might be more speculative-like.