Reviva Stock: Positive Results In Phase 3 But The Stock Is Back Where It Started (RVPH)

When I last wrote about Reviva Pharmaceuticals Holdings (NASDAQ:RVPH) in September, I rated it a buy ahead of upcoming results from the phase 3 RECOVER study of its antipsychotic brilaroxazine in schizophrenia. This article takes a look at the results from RECOVER-1, announced on October 30, and what lies ahead now.

Figure 1: RVPH opened at $4.69 when I wrote about the name on September 27, while the stock did rally into the high $6’s intraday on October 30 following results, and close at $5.49, it now settled back where it started.

RECOVER succeeds, mostly

Results from RECOVER, which compared 15 mg and 50 mg brilaroxazine to placebo, in 412 schizophrenia patients over four weeks, were announced by RVPH as positive. The primary endpoint was the change from baseline, on the Positive and Negative Syndrome Scale (PANSS) total score, at week four versus placebo. While I expected both the 15 mg dose, and the 50 mg dose of brilaroxazine would beat placebo on the primary endpoint, only the 50 mg dose beat placebo (-23.9 point change in PANSS total score vs -13.8 for placebo, p < 0.001). The 15 mg dose was at least numerically superior to placebo on the primary endpoint and on some secondary endpoints, such as the Personal and Social Performance scale. As such I still think the result is a positive, but the ideal result would have 15 mg brilaroxazine achieving significance over placebo.

Looking at the results, some noted that at 10.1 point beat of placebo on the PANSS total score, compared favorably to results from even Karuna Therapeutics’ (KRTX) trials of KarXT (xanomeline-trospium) in schizophrenia. KRTX’s KarXT beat placebo in terms of reductions in PANSS total score in schizophrenia patients, albeit at 5 weeks, by 11.6 points, 9.6 points and 8.4 points in the EMERGENT-1, EMERGENT-2 and EMERGENT-3 trials respectively.

KarXT works via a separate mechanism of action (it is an M1 and M4 muscarinic receptor agonist). Brilaroxazine, with affinity to D2 and 5-HT2a receptors, is more similar to second and third generation antipsychotics like Abilify (aripiprazole), of which brilaroxazine is a close chemical relative. Due to its different mechanism of action KarXT has a different side effect profile to many other antipsychotics, and so that has to be considered too when thinking about competition between antipsychotics. KRTX longs can know that their drug KarXT still has plenty of differentiation from other antipsychotics on the market or in development (like brilaroxazine).

Regarding the side effects of brilaroxazine in RECOVER, the overall rate of adverse events wasn’t that different between study arms (34.5% for the 15 mg dose, 35.5% from the 50 mg dose, and 30% in placebo). There are some adverse events of special interest worth considering (Figure 4). While was no significant change in bodyweight, there was a numerically greater increase in 50 mg brilaroxazine group than placebo (5.9% vs 2.9%).

By comparison, the 15 mg brilaroxazine group had less weight gain than placebo, again, this may only be a numerical difference, and we are only looking at weight gain at 4 weeks. Nonetheless, the idea of less than placebo weight gain, brought up by the phase 2 data with brilaroxazine, seems to be plausible, but with the 15 mg dose, which hasn’t reached the primary endpoint. Weight gain is a big issue for many antipsychotics and so offering efficacy without weight gain would be ideal, especially if weight gain happens at less-than-placebo rates.

RECOVER-2

For RVPH’s second phase 3 study, the company has elected to use 1:1:1 randomization again, but with placebo, 30 mg brilaroxazine and 50 mg brilaroxazine.

RVPH is only increasing the number of patients enrolled to 450 in RECOVER-2 from 412 in RECOVER, and so I’m glad they’re not trying again with the 15 mg dose. There is another thing working in favor of the increased lower dose, and that is the endpoint being at six weeks, rather than four weeks. I don’t expect this to jeopardize the efficacy of the 50 mg dose and perhaps it will in fact enhance it, while making sure the 30 mg dose has a better chance of beating placebo, rather than falling short like 15 mg brilaroxazine did.

What RVPH would be hoping for then, would be that the 30 mg dose of brilaroxazine offers most of the efficacy of the 50 mg dose, but with perhaps even gentler side effects, such as weight gain similar to placebo.

Financial Overview

At the time of writing, RVPH hasn’t announced any sort of fund raising effort, following the results from RECOVER. Cash and cash equivalents were $11.15M at the end of Q2’23, R&D expenses were $8.99M and G&A expenses were $3.08M in Q2’23. Net cash used in operating activities was $13.27M in the first six months of 2023 ($2.2M per month). As such RVPH appeared cashed until about the end of 2023, and not much further. I don’t expect cash burn to drop in the last quarter too much because even if RECOVER has completed, the open label study is still running and planning activities around RECOVER-2 could also result in expenditures.

The company notes that RECOVER-2 is planned to start in Q1’24 and complete in early 2025, meaning the company would need at around 15 months more cash (From the start of 2024 to the end of March 2025) on top of its current funds. Given the similar size of RECOVER-2 to RECOVER, I think the cash burn seen during 2023 (or the first six months of 2023, when RECOVER was in full swing), reflects what we would expect in 2024. At that rate then ($2.2M per month), RVPH would need to raise $33M cash for me to get close to being comfortable that the company can make it to the end of RECOVER-2.

There is the possibility of the exercise of warrants outstanding bringing in funds, for example, as of June 30, 2023, there were 1.5M shares worth of options outstanding and 15M shares worth of warrants. Notably, in Q2’23 RVPH brought in proceeds of $4.7M from the exercise of 1,976,285 shares worth of warrants. Further, at June 30, 2023, of the 15M warrants outstanding, 6,645,041 of them had an exercise price of $4.125, below the current trading price, and so it is possible some were exercised subsequent to June 30, 2023 (perhaps heading into results from RECOVER, or with a spike on results from RECOVER). RVPH had 22,650,266 shares of its common stock outstanding as of August 11, 2023, corresponding to a market cap of $106M ($4.68 per share).

All things considered then, RVPH might not need to raise $33M if the exercise of warrants has brought in additional funds, but this is something to keep a close eye on. A best case scenario might see a partnership or another similar deal bringing in non-dilutive source of cash, but there is no guarantee RVPH can secure such a deal.

Conclusions and risks

RVPH has something worth developing with brilaroxazine. While the 15 mg dose, which could have had the most gentle side effect profile, such as reduced weight gain, has fallen short of hitting the primary endpoint in RECOVER, RVPH still has a chance of showing off a best of both worlds performance with the 30 mg dose of brilaroxazine in RECOVER-2.

Despite the fact that RVPH needs to come up with some funds, I’m more confident the company will be able to do that with results from RECOVER in hand, which are overall positive, and I still rate the company a buy.

The risks of any long position are several fold, a few of which are worth discussing here. First and foremost is the risk of an offering with terms the market doesn’t like. For example, RVPH might raise under $30M, leaving investors questioning if the company can make it to the end of the next phase 3 study.

Beyond the funding issue, RVPH is open to analyst downgrades and a shift in sentiment on the RECOVER phase 3 data. We could see selling this week or in the coming weeks as institutions and even retail investors digest the data and decided it isn’t worth holding the name until the next readout.

Further, we are approaching year-end and with RVPH failing to rally and remain above the trading range it established prior to the readout from RECOVER, the possibility of tax loss selling exists.