Saturday, August 11, 2007

A Tumultuous Week for RNAi Therapeutics Companies

Credit worries, earnings calls, a new significant biodefense contract, and flu RNAi news all combined to produce a highly volatile week for RNAi Therapeutics companies, both financially and scientifically.

It all started with Nastech’s announcement on Monday morning of a Friday webinar to discuss their flu RNAi development strategy. Coupled with hedge fund troubles, margin calls and short covering, this created the perfect scenario for an impressive run-up of more than 35% run-up in Nastech’s share price at the close on Thursday. In my last blog, I cautioned, however, that the press release accompanying Nastech’s earnings call on Wednesday contained a mere reference to positive in vitro data on flu RNAi, something that had already been demonstrated by various groups before.

Flu RNAi then received some more attention on Thursday when Alnylam announced that their flu RNAi program, in collaboration with Novartis, would be delayed due to in vivo efficacy and safety issues. An IND that had been scheduled to be filed by the end of this year will now be postponed until at least 2008. Apparently, Alnylam’s own data and data from the literature suggest difficulties in obtaining sequence-specific viral knockdown with current flu animal models. This does not come totally unexpected since there has been discussion in the field on the merits of purposefully combining the innate immune responses elicited by some, particularly liposomally formulated unmodified siRNAs with the sequence-specific inhibition of viruses such as HCV, RSV, and flu.

While I fully agree with Alnylam’s decision to ensure the highest quality and safety of their pipeline at an early stage, it would be interesting to know the exact nature of the siRNAs in question (modified or unmodified), delivery methods used (formulated or naked), and the types of animal models that were used. This is particularly relevant given that the company’s most advanced clinical program for RSV targets another virus of the respiratory tract. It should be kept in mind, however, that safe and potent pre-clinical RNAi efficacy has been demonstrated for RSV. Moreover, we should not be surprised to see such differences since although both viruses infect similar tissues, the exact biological distribution and viral kinetics may significantly differ between any two viruses.

The in vivo efficacy/safety issues were compounded by the reduced support from the US government for novel treatments in preparation of a pandemic avian flu. While federal support for RNAi addressing public health threats continues to benefit the development of the RNAi Therapeutics platform in general, this demonstrates once again that due to changing political climates, the government cannot be relied upon for direct commercial benefit. However, political interest in preparing for a possible avian flu pandemic is particularly strong in some of the emerging economies in Asia, particularly China, and only yesterday a study by a Chinese group was published in an advance online article of the journal “Antiviral Research” on the in vitro and in vivo efficacy of RNAi for H5N1 (Zhou et al.: “Effective small interfering RNAs targeting matrix and nucleocapsid protein gene inhibit influenza A virus replication in cells and mice.”)

Ironically, on the same day that the delay was announced, Alnylam reported that it had been awarded another significant US government contract of $38.6M over 33 months for the development of RNAi antivirals for the treatment of hemorrhagic fever viruses. Currently, there is no effective treatment for these viruses which are perceived as a threat to national security. RNAi meanwhile has proven to be the most promising treatment in animal models so far.

This announcement on Thursday seemed to have further stoked the fantasies in Nastech shares and the whole sector which recorded significant gains in the face of a big drop in the major indexes. However, expectations were somewhat disappointed by the Nastech webinar on Friday morning which failed to uncover major breakthroughs in flu RNAi. Also, an analyst question related to sequence-specific in vivo knockdown was not directly addressed. While I certainly appreciate the educational aspect of this webinar, it left me, and probably others, scratching my head why this company went out of its way to present these data at 5am Pacific Time as if market-sensitive data were about to be disclosed. Nastech shares gave up almost 8% that day.

Here are some more interesting bits and pieces from this busy week:

1) ISIS stated that no fatty liver (steatosis) was observed in pre-clinical animal models with their apoB100 antisense compound. This should be reassuring news for ISIS’ lead compound given the concern raised by other reports of fatty liver in mice following apoB100 knockdown.

2) Alnylam’s phase II RSV studies for naturally infected patients was postponed to the first half of 2008 after phase II experimental infection data are available. These are expected by the end of this year. This certainly makes a lot of scientific sense and illustrates Alnylam’s scientific data-driven flexible pipeline management approach.

3) On the patent front, Alnylam announced the issuance of Kreutzer-Limmer I in Canada, and Tuschl I in Australia. Given the complexity in the ownership of this particular patent, especially with regard to CytRx and the University of Massachusetts, I wonder why the Press Release failed to mention UMass as a licensor for Tuschl I to Alnylam while acknowledging Max Planck Innovation Gmbh, the MIT, and the Whitehead Institute for Biomedical Research.

4) Alnylam management states continued interest by Big Pharma and biotech for a piece of the RNAi platform. More significant deals are possible, if not certain. Also, Novartis is more likely than not to exercise its adoption license for Alnylam’s IP. Such deals should strengthen the company’s balance sheet beyond their guidance of over $435M in cash at the end of this year.

What a week!

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By Dirk Haussecker. All rights reserved.

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