WHITEFISH, MT / July 9, 2014 / RXi Pharmaceuticals Corp. (NASDAQ: RXII), a biotechnology company focused on discovering, developing, and commercializing innovative therapies addressing major unmet medical needs using RNA-targeted technologies, recently began trading on the Russell Microcap index on June 27, 2014. Membership on the index remains for one year and is based on market cap and style attributes.
"We are pleased with the anticipated inclusion on the Russell Microcap Index," said RXi Pharmaceuticals Corp. President and CEO Dr. Geert Cauwenbergh in a recent press release announcing the move onto the Russell Microcap index. "This listing provides another positive step forward, for our company and its shareholders, increasing visibility and awareness amongst institutional investors."
The Russell Microcap is an important benchmark index for micro-cap individual and institutional investors. As a subset of the larger Russell 2000 index, the Russell Microcap accounts for the smallest 1,000 securities in that index plus the next 1,000 smallest eligible securities by market capitalization. Each year, the index is carefully rebalanced to objectively reflect the companies that fit the criteria.
What It Means
Inclusion on the Russell Microcap index is important for several reasons. As Dr. Geert Cauwenbergh mentioned in the aforementioned press release, the inclusion increases visibility among individual and institutional investors that watch the index for potential opportunities. The membership signals that the company meets the criteria required and passed checks ensuring its legitimacy.
In addition, the Russell Microcap is widely purchased by exchange-traded funds ("ETFs") and mutual funds attempting to mimic its performance. These dynamics can create long-term buying for included stocks, since these funds must actually purchase the component stocks to gain exposure. In addition to supporting price, these tendencies can reduce the firm’s cost of capital over the long-term.
For example, the iShares Russell Microcap Index ETF (NYSE: IWC) is a $1 billion fund that’s required to invest in all of the components of the index. The ETF will be forced to purchase shares of RXi Pharmaceuticals when it completes its latest rebalancing in order to remain in step with the Russell Microcap index. Similar funds based on the index may be required to do the same over time.
RXi Pharmaceuticals’ inclusion on the Russell Microcap index comes at an important time in its corporate history. In early clinical trials, RXI-109 showed excellent safety and tolerability, with ascending single and multiple doses, as well as dose-dependent reductions in CTGF and the mRNA that controls CTGF. Phase II clinical trials will further evaluate the efficacy of the treatment in dermal scarring.
In the dermal scarring market, there are no FDA-approved therapeutics that are intended to reduce the formation of scars, which means that RXI-109 could fill a large unmet medical need, although Pfizer Inc. (NYSE: PFE) is targeting the same market. The treatment could be used in a variety of cases, including trauma, surgical, or burn patients, as well as scar revision therapies and inhibition of keloids.
Despite its early success, the company trades significantly lower than many other companies in the RNA space, such as Alnylam Pharmaceuticals Inc. (NASDAQ: ALNY). The company’s recent patent covering sd-rxRNA targeting CTGF for fibrotic disorders could help close the valuation discount in some ways, but ultimately, Phase II clinical trials results will be the true catalyst.
- Company Website
- Recent SEC Filings
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