Today the CEO of Rxi Pharmaceuticals (RXII) presented preliminary phase 2a data for hypertrophic scars at the Rodman & Renshaw Conference and the shares sold off.

Today's sell off was overblown: Rxi's 31% drop to $2.44 per share was not warranted by the results. We believe this is a good buying opportunity for long term investors.

Here's a link to the Rodman & Renshaw Conference webcast.

In the study, two cohorts were evaluated by an analysis called VAS. In VAS, scars were scored from a 0 (for a fine line scar) to a 10 for the worst scars.

Eleven individuals rated the severity of the scars.

Patients in both cohorts were treated with RXI-109 and placebo. Cohort 1 patients received early treatment and cohort 2 patients received delayed treatment. In the cohort 1 trial, both the median score for RXI-109 and the placebo were 2. Thus for early treatment in cohort 1, there was no difference between RXI-109 and placebo. 

In cohort 2, utilizing a delayed treatment, RXI-109 achieved a VAS score of 2. Placebo achieved a VAS score of 2.5 (p < 0.05).  These results were assessed one month after the surgery. The difference between RXI-109 and placebo was significant. 

Results for the three month assessment period will be presented in several months. 

Rxi learned from this phase 2a trial that delayed treatment produces better results for the compound. Results from later evaluations will allow the company to design a phase 2b trial possibly using a higher dosing regimen.

There are no FDA approved drugs for scarring. The three month data for RXI-109 in hypertrophic scars will be available several months from now and will provide more information about the drug's potential for success.

We believe the share price was unfairly punished today. With the current share price at $2.44 per share and a market cap of only $34 million, we think Rxi Pharmaceuticals is now very undervalued.