Does an FDA Fast Track Designation Make Regenxbio Stock a Buy Now?

Regenxbio (RGNX 1.94%) is a clinical-stage biotech company that focuses on gene therapies based on its NAV Technology Platform. On Tuesday, the company moved a step closer with its "5x25 plan" of turning five of the therapies in its pipeline into marketed products by 2025.

The Food and Drug Administration (FDA) granted fast track designation for Regenxbio's RGX-202, a potential onetime gene therapy to treat Duchenne muscular dystrophy.

There's no known cure for Duchenne muscular dystrophy, the most common form of muscular dystrophy, which causes muscle weakness and the loss of muscle mass. The disease is caused by a genetic mutation that hurts the production of dystrophin, a protein that protects muscle fibers from breaking down. Duchenne muscular dystrophy mostly affects boys and occurs in 1 in 3,500 to 5,000 newborns, according to Johns Hopkins Medicine. 

How does the designation help Regenxbio?

There are two ways the news helps the company.

With underwhelming financials, the stock has fallen nearly 40% in the last 12 months, so positive news should lift the stock, though the news hasn't given it much of a bump yet. The designation could also save the company money. A fast track designation is meant to help speed the approval process for therapies that meet unmet needs in treating serious or life-threatening conditions. It could help Regenxbio develop the drug more quickly and potentially bring it to market sooner. RGX-202 has begun its phase 1/2 trial, with its initial trial data expected in the second half of 2023.

Regenxbio has nine programs in its pipeline, but no marketed therapies. It receives royalty payments for spinal muscular dystrophy treatment Zolgensma (which costs more than $2 million per patient), because Novartis relies on Regenxbio's NAV technology and adeno-associated virus (AAV) AAV9 vector to deliver the therapy, basically using reengineered viruses to carry new genetic instructions to cells. 

While many of the diseases Regenxbio is working on are rare, some of them have surprisingly large potential patient populations. The company receives collaboration milestone revenue from AbbVie for RGX-314, a potential onetime gene therapy for treatment of wet age-related macular degeneration (AMD) and diabetic retinopathy that the companies are partnering on. AMD afflicts more than 2 million people and there are 200,000 new cases every year in the U.S.; diabetic retinopathy (DR) is the leading cause of preventable blindness. According to a study by the American Academy of Ophthalmology, the number of people worldwide with DR was 103.12 million in 2020 and will grow to 160.50 million by 2045.

What are the concerns about Regenxbio?

The company's revenue and earnings declined last year. In the fourth quarter, the company reported revenue of $31.3 million, down from $398.7 million in the same period last year. Much of the difference was due to a $370 million milestone payment in 2021 from AbbVie.

For the year, revenue was $112.7 million, down from $470.3 million in 2021 and most of the 2022 revenue -- $101.9 million -- was Zolgensma royalty revenue.

The company lost $280.3 million last year and, as of Dec. 31, 2022, had $565 million in cash, cash equivalents, and securities, enough to fund operations into 2025, the company said. 

That's still not a huge amount of cash considering how expensive it is to bring drugs to market.

Why I still like the stock's long-term potential

The company has a unique cell-editing platform, and it has been successful in collaborating with larger companies. Besides its collaborations with AbbVie and Novartis, it is working with Rocket Pharmaceuticals on a therapy for Danon Disease, a metabolic condition that can lead to the weakening of certain muscles and an intellectual disability, and with Ultragenyx Pharmaceutical on a therapy to treat glycogen storage disease type 1a, in which there's a buildup in the body of glycogen.

It's possible that Regenexbio could keep doing what it has been doing and stay successful, using its NAV Technology Platform to help other companies find therapies for a variety of genetic illnesses. It could also be a very attractive buyout candidate considering its growing pipeline and expertise. However, if RGX-202 pans out, the company may not want to go that route.

The promise for gene-editing therapies is growing. Companies will eventually jump from single-gene mutation diseases, the low-hanging fruit of gene therapies, to more involved diseases that can be helped with genetic engineering. 

The gene-editing market is expected to have a compound annual growth rate of 14.7% between 2022 and 2030, when it should reach $19.4 billion, according to a report by Market Research Future. 

The key to investing in a company such as Regenxbio is it is a long-term payoff with significant risk. I think at the stock's current price, the risk is worth it, but it's not for every investor. The science is still in its relative infancy and research and development of gene-editing therapies can be enormously pricey, but each year biotech companies are coming up with new cell therapy breakthroughs.