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Rosetta Q1 Losses Rise on Dx Development; RXi Posts Wider Losses on IPO-Related Costs

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Rosetta Genomics this week reported a sharp increase in its first-quarter net loss amid increased research and development spending as the company advanced its microRNA-based diagnostic and therapeutic efforts.
 
The company also said that it will have three diagnostics under regulatory review this year, including a test for differentiating squamous from non-squamous non-small cell lung cancer that was submitted to the New York State Department of Health in April (see RNAi News, 4/10/2008).
 
Rosetta had previously anticipated that it would introduce all three diagnostics during 2008, but now expects only one will reach the market this year.
 
RXi Pharmaceuticals also recently reported its first-quarter financials, last week posting a significantly increased net loss on higher operating costs. The results come a little more than two months after the company began publicly trading as an independent spinout of former parent firm CytRx (see RNAi News, 3/13/2008).
 
In a filing with the US Securities and Exchange Commission, RXi noted that it expects to have sufficient capital to fund its operations through the first quarter of 2009, in part due to a $15 million investment made by CytRx last April.
 
In the future, however, RXi said it will “be dependent on obtaining financing from third parties in order to maintain our operations and to meet our obligations” to institutions, such as the University of Massachusetts Medical School, from which the company has licensed intellectual property. The company added that it currently has no commitments for such funding.
 
Rosetta Stonewalled
 
For the three months ended March 31, Rosetta’s net loss nearly doubled to $3.9 million, or $0.33 per share, from $2 million, or $0.23 per share, in the same period last year.
 

"We believe we are well positioned to achieve the key corporate milestones we have established, including entering into our first pharmaceutical partnership this year … [and making] several strategic additions to both our team and to our technology platform.”

Pushing up the loss was a doubling in research and development spending to $2.4 million as Rosetta continued work on its pipeline programs. In addition to the lead lung cancer diagnostic set to hit the market this year, the company is preparing to submit two other tests for regulatory approval in the second half of the year: one to determine the source of cancers of unknown primary origin and another for differentiating lung adenocarcinoma from mesothelioma.
 
Although the company had stated as recently as February that all three tests would reach the US market in 2008, Rosetta said it now expects that the products will only be under regulatory review this year. The company did note, however, that the review of its lead diagnostic will likely conclude within six months, allowing for a 2008 launch.  
 
Rosetta is also developing other diagnostics for undisclosed oncology and women’s health indications, as well as miRNA-targeting therapeutics including a lung cancer therapy.
 
Rosetta generated no revenues during the first quarter and as of March 31 had cash, cash equivalents, and short- and long-term bank deposits and marketable securities totaling $18.6 million. The company said it anticipates burning $10 million during the rest of 2008.
 
RXi, meanwhile, reported a jump in its first-quarter net loss to $2.6 million, or $0.21 per share, from a loss of $1.4 million, or $0.17 per share, in the same period a year earlier.
 
RXi on the Prize
 
RXi, meanwhile, reported zero revenues during the first quarter, and said its net loss swelled 86 percent to $2.6 million, or $0.21 per share, from $1.4 million, or $0.17 per share year over year due in part to the costs of becoming a publicly traded company.
 
"RXi achieved an important step toward our goal of creating a leading independent, pure play RNAi therapeutics company with the initiation of public trading of our common stock in the first quarter," RXi CEO Tod Woolf said in a statement.
 
"We believe we are well positioned to achieve the key corporate milestones we have established, including entering into our first pharmaceutical partnership this year … [and making] several strategic additions to both our team and to our technology platform,” he added.
 
Because RXi was operating as a part of CytRx during the first quarter of 2007, results for that period were carved out of that firm’s financial statements.
 
R&D spending in the quarter jumped 32 percent to $1.1 million from $824,000 year over year on higher staff-related and supply costs. General and administrative expenses surged 176 percent to $1.6 million, in part due to the expense associated with going public.
 
As of March 31, the company had around $9.9 million in cash and cash equivalents.
 
Looking ahead, RXi said that over the next 12 months it expects to spend about $4.6 million on R&D, which includes drug-development programs in neurology, metabolic disease, and inflammation, as well as about $2.9 million to support general and administrative activities.

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