Xanthopoulos Steps down, Trouble Brewing for Regulus?

Regulus Therapeutics

On June 1, 2015, Regulus Therapeutics (NASDAQ:RGLS) announced that its president and chief executive officer Kleanthis G. Xanthopoulos was stepping down. The announcement came as a surprise to markets and shareholders alike, and translated to some steep downside in the company’s market capitalization during Monday’s session. The question now is whether the exit of Xanthopoulos is indicative of wider problems in the company’s pipeline, and – further – whether these problems are likely to have a material effect on Regulus going forward. So, let’s try and answer this question.

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First, let’s start off with two quotes.

Quote one:

“I am extremely proud of our achievements at Regulus and am excited about the future of the company and microRNA therapeutics as they become a new and major class of drugs. RG-101, our GalNAc-conjugated anti-miR-122, is moving rapidly into Phase II and our ‘Clinical Map Initiative’ strategy is on track to create multiple clinical programs… I am truly honored to have been a part of building this great company.”

Quote two:

“I am proud of our accomplishments at Anadys and excited about our current clinical programs and deep pipeline… I am honored to be part of that.”

The first is an Xanthopoulos quote that accompanied yesterday’s announcement reporting his departure from Regulus. The second, a comparative quote reporting his departure from biotech Anadys, a company he founded, back in 2006. The similarity is clear to see. You ask, however, why this is an issue? Both statements seem like a perfectly reasonable parting comments. Well, the reason is that two weeks after Xanthopoulos left Anadys, the company announced it had dropped one of its lead pipeline candidates – ANA975 for hepatitis C – citing an intense immune stimulation in early animal studies.

So, naturally, the concern here is that we will get a mirroring of the Anadys situation, and that Xanthopoulos is bailing out of a so-called “sinking ship”. Obviously, this is pure speculation, and at the moment, nobody really knows the reason for the Xanthopoulos step-down, but in the biotech space, speculation can be a real driver of volatility, and – as a result – Regulus is down more than 17% on its daily open for Wednesday, no doubt driven by the latest revelation.

Adding fuel to the fire is a report last month that Xanthopoulos sold a large number of shares in an insider sale of Regulus stock. On April 21, 2015, Xanthopoulos sold 200,000 shares at a per share price of $17.1, totaling the sale at $3.42 million. Subsequent to the sale, he now indirectly owns 80,216 shares and directly owns 3,705 shares, meaning he unloaded more than 70% of his shares in the sale. Again, it would be pure speculation to attempt to uncover Xanthopoulos’ motives for the sale, but in light of the recent announcement, it doesn’t look too good.

So what can we expect going forward, what does all this mean for Regulus shareholders? Well, in recent announcements we have seen the company suggest a range of its RG-101 pharmacokinetics clinical trials have been promising, with healthy volunteer testing suggesting safety and tolerance and some efficacy in mice infected with genotype 1A hard to treat a genotype 3A hepatitis C virus. While promising, and especially in light of recent events, markets will be looking for updates on these trials before any real confident buying can return to the fore.

Takeaways: the recent announcement has hit Regulus hard, and both the company’s shareholders and wider markets will be reluctant to add to any – or initiate any – positions before the dust settles on the CEO departure. Xanthopoulos has expressed his confidence in the company’s pipeline, but we have seen him do this in the past, only to then see a lead candidate dropped from trial shortly after. Further, we saw an insider sale of the majority of Xanthopoulos’ shareholding in Regulus just a few ago, and this seems to contradict his reported confidence in Regulus’ ability to expand going forward.

Disclaimer: the author has no position in any of the stocks mentioned and any inference made by the content of this article is purely speculative in nature.


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